Learnings from a SaaS IPO — Hashicorp

Sammy Abdullah
5 min readDec 15, 2021

Hashicorp is a software company that just went public. Below are some of the highlights and learnings from their prospectus.

What they do. “Our cloud operating model provides consistent workflows and a standardized approach to automating the critical processes involved in delivering applications in the cloud: infrastructure provisioning, security, networking, and application deployment.”

Always remote first. The majority of the company’s 1650 employees have always worked from home. Employees at HQ represent less than 10% of the company.

Opensource first as well. “We are committed to an open-source model in which we maintain free open-source offerings while developing proprietary features for paid tiers of our software. These proprietary features include collaboration modules, governance and policy modules, enterprise use cases, and premium support and services”

Traditional SaaS billing and multi-year contracts. “We bill for one-year licenses upfront, and we primarily bill for multi-year term licenses annually in advance, with a multi-year payment schedule.”

They prefer usage based pricing. “Customers of our fully-managed cloud platform, HCP, can either use our offering with no minimum commitment where they pay an hourly rate, or can purchase an annual subscription contract with a minimum commitment. Customers who are on no-minimum commitment contracts are billed, and revenue from them is recognized, based on usage. Today, customers with minimum commitments are typically billed annually in advance for their subscriptions and we recognize all revenue from such subscriptions ratably over the subscription term. Over time, we intend to transition our committed contracts to a usage-based model. Our pricing schedule lists the hourly rate when deploying HCP for our various products, and actual usage is metered and calculated on a per-hour basis for increased accuracy.”

Self-service followed by inside sales is the go-to-market. “Our open-source model allows developers and individuals focused on operations, IT, and security, or practitioners, to engage with and evaluate our software in a frictionless manner, which we believe has contributed to our software’s popularity. This open source leadership and the wider ecosystem around us, compels practitioners to adopt and implement our software in the enterprise. As organizations recognize the value of our products, our inside and field sales teams can nurture leads and develop direct relationships with key stakeholders across all segments. HCP has accelerated our self-service approach, as practitioners can now quickly deploy and experiment with our paid offering with a fully-managed cloud solution and no minimum commitments. Our products were downloaded approximately 100 million times in fiscal 2021”

Self-service and usage based pricing results in great NDR. “The increased use of our platform by our customers is evidenced by our high net dollar retention rate. As of January 31, 2020, January 31, 2021, October 31, 2020, and October 31, 2021, our last four quarter average net dollar retention rate was 131%, 123%, 127%, and 127%, respectively. Our customers often expand the deployment of our products across larger teams and more broadly within the enterprise as they both do more with existing use cases and realize new use cases. At the same time, we often see customers extend to multiple products across our wider product portfolio as they realize the potential of integrating more of our products to better solve use cases.”

Cohorts also reflect the excellent expansion. “The cohort for a given year represents customers that acquired their initial subscription from us in that fiscal year. For example, the cohort for the fiscal year ended January 31, 2018, or fiscal 2018, represents all customers that made their initial subscription from us between February 1, 2017 and January 31, 2018. The fiscal 2018 cohort increased their initial ARR from $26.0 million in fiscal 2018 to $52.2 million in fiscal 2021, representing a 2.0x multiple.”

Multiple product offerings and a modular approach has driven enterprise growth. “We have proven initial success of our modular approach with multiple innovations and product launches, including the launch of HCP in fiscal 2021, and launch of Boundary and Waypoint in September 2020. We see continued adoption from our customers in our new products and innovations and, as of October 31, 2021, over 44% of our customers with $100,000 or greater ARR were licensing more than one product. Customers with $100,000 or greater ARR represented 71% and 83% of revenue for fiscal 2020 and 2021, respectively, and 82% and 87% of revenue for the nine months ended October 31, 2020 and 2021, respectively.”

International matters. “For fiscal 2021 and the nine months ended October 31, 2021, 25% and 27% of our revenue, respectively, was generated by customers outside of the United States.”

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