Learnings from a SaaS IPO (Informatica)
Informatica is a software company that went public in 2021. Below are some of the highlights and learnings from their prospectus.
What they do. “We have pioneered a new category of software, the Intelligent Data Management Cloud, or IDMC. IDMC is our AI-powered platform that connects, manages, and unifies data across any multi-cloud, hybrid system, empowering enterprises to modernize and advance their data strategies.” That’s fancy speak for cloud management.
They had to pivot to SaaS. “We have pivoted our business to focus on subscription revenue and have consequently grown our subscription revenue from $118.4 million in 2016, the year after we were taken private, to $302.5 million in 2018, to $471.7 million in 2019, and to $593.8 million in 2020.”
Well structured SaaS contracts. “Our subscription products are sold through contracts primarily with a one-, two- or three-year term, with an average contract term slightly over two years as of June 30, 2021. Substantially all of our subscription customers pay us annual fees in advance at the start of each contract year.”
Sell from the top down. “Historically, we have focused our selling efforts on executives such as chief information officers (CIOs) and chief data officers (CDOs) who are often making decisions to purchase our products for their most important business initiatives. CIOs adopt our platform as part of their cloud migration journey, application modernization efforts, and business 360 initiatives. CDOs purchase our products as part of their overall data governance, access, and security strategies in order to democratize data access for everyone across the company.”
Then land and expand. “Once customers have purchased one of our products — for example, Data Integration — they often identify additional use cases for our software and expand their use of our products accordingly. The effectiveness of our land and expand strategy is evidenced by our Subscription Net Retention Rate (NRR), which was 106%, 113%, and 114% as of the three months ended December 31, 2018, 2019 and 2020, respectively. We doubled the average subscription ARR per subscription customer from December 31, 2018 to June 30, 2021, from $98 thousand to $198 thousand.”
To get big, go global. “As of June 30, 2021, we had approximately 5,700 customers2 in a wide variety of industries located in over 100 countries and territories. Approximately 66%, 68%, 67% and 67% of our total revenues for fiscal 2018, 2019, 2020 and for the six months ended June 30, 2021, respectively, were from our North America region, which we define as the United States and Canada.”
The last month of each Q is crazy. “Purchasing patterns for our products have followed quarterly and seasonal trends that we expect to continue. We typically sell a substantial portion of our software product licenses and services in the last month of each quarter, and demand for our software products and professional services are generally highest in the fourth quarter and lowest in the first quarter of each year.”
Move down market. “We have recently added a dedicated inside sales team to our go-to-market strategy that is focused on growing adoption of our products by targeting key business personnel adjacent to technical roles, as well as small- and mid-market organizations, which represents a new addressable customer base for us.”
But focus on the big customers. “as of December 31, 2018, 2019 and 2020 and June 30, 2021, we had 27, 66, 104 and 116 customers individually with over $1 million in Subscription ARR each, respectively.”
Excellent gross retention. “For example, in 2020, we achieved a subscription renewal rate3 of 92%, and a maintenance renewal rate4 of 95%.”
Strategic partners need to be part of growth plan. “Our business and results of operations will also be significantly affected by our success in strengthening our relationships with strategic partners, including cloud hyperscalers, including AWS, Google Cloud Platform, Microsoft Azure, cloud partners such as Snowflake and Databricks, global system integrators, including Deloitte, Accenture and Cognizant, and value-added resellers and distributors. We believe further developing these key strategic relationships will help us scale and enhance co-selling of our products and services with these partners.”
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