Learnings from a SaaS IPO — UserTesting

Sammy Abdullah
4 min readAug 1, 2022

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UserTesting 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 video-first, enterprise-grade software-as-a-service (SaaS) platform that enables organizations to see and hear the experiences of real people as they engage with products, designs, apps, processes, concepts, or brands.”

Long journey, with a revenue model pivot 5 years in. “Over the past 14 years, we have grown from a pay-as-you-go website to an enterprise SaaS company with customers and employees around the world. We generate revenue primarily from the sale of subscriptions to our platform, which accounted for over 90% of our total revenue. We offer two primary subscription pricing plans — a seat-based subscription plan and a flex-based subscription plan.” Seat based is 76% of subscription revenue.

The Flex plan launched in Q4 2020, is now 20% of subscription revenue. “Customers utilizing the flex-based subscription pricing plan typically enter into an annual contract that covers access to the platform and the pricing is based on expected annual committed utilization of the platform’s features. Customers who exceed their contractual limits, are able to purchase either additional committed usage or on demand usage. The pricing plan and related utilization is determined based on the activity the customer processes within the platform, including the number and type of CxNs generated, and type of audience targeting used.”

Standard annual SaaS contracts, billed in advance. “The substantial majority of our subscriptions are for a one year, non-cancelable term, with some large, multi-year subscriptions ranging up to three years and some small, short-term subscriptions of less than one year. Our contracts are typically billed annually in advance and we generally recognize subscription revenue ratably over the contract term.”

Direct selling is the way. Channel partners are new and unproven. “We primarily sell through a direct selling motion, with field sales representatives who focus on enterprise customers and an inside sales organization which sells to mid-market and small and medium-sized business (SMB) customers. We have also started investing in creating channel partnerships and relationships with resellers, distributors, and strategic partners to broaden our reach.”

Unprofitable, 33% YOY growth. “For the years ended December 31, 2019 and 2020, our total revenue was $76.6 million and $102.2 million, respectively, representing period-over-period growth of 33. As we have grown our business, we have made significant investments in sales and marketing and research and development. As a result, for the years ended December 31, 2019 and 2020, our net loss was $19.6 million and $34.0 million, respectively,”

ACV’s are growing. “our average ARR per customer increased from approximately $57,000 as of December 31, 2019 to approximately $67,000 as of September 30, 2021. We had 279 customers with at least $100,000 of ARR as of September 30, 2021, reflecting growth of 58% from September 30, 2020. We believe that our rapidly growing number of customers with at least $100,000 of ARR reflects the value of our platform to enterprise customers. We also had nine customers with at least $1 million of ARR as of September 30, 2021.”

Enterprise sales allow you to cross-sell to other teams. “We have demonstrated a strong track record of expanding seats and users through cross-selling across organizations and upselling higher tiers of platform editions. Once a current team within an organization shares a CxN or summary output from our platform, it increases the visibility of our platform within that organization and creates opportunities for us to cultivate additional users. We expect that over time, a significant portion of our revenue growth will come from our existing customers adding seats or expanding their use of our platform. As of September 30, 2021, our net dollar-based retention rate was 119%.”

New products are also driving the expansion. “the average and median ARR of our top 30 customers as of September 30, 2021 were approximately $1.3 million and $820,000, respectively, which reflect a meaningful expansion as compared to the average and median ARR of approximately $70,000 and $50,000, respectively, at each customer’s initial purchase. We believe that our newly launched flex-based subscription pricing plan will provide further flexibility for our enterprise customers to add additional users and use cases. We released 25 new product features in 2020.”

International matters and is nice upside. “International revenue represented approximately 15% of our total revenue in 2020 and approximately 18% of our total revenue for the nine months ended September 30, 2021.”

Visit us at blossomstreetventures.com and email me directly at sammy@blossomstreetventures.com. All founders and funds welcome! We invest in companies with run rate revenue of $3mm to $30mm, with year over year growth of 20% to 50%+ depending on revenue. We lead or follow in growth rounds and special situations like inside rounds, small rounds, rushed rounds, corralling investors with our term sheet, bridges, inbetweeners, cap table clean up, and extensions. We can commit in 3 weeks and our check is $1mm to $4mm. Also visit https://blossomstreetventures.com/metrics/ for always up-to-date SaaS metrics.

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Sammy Abdullah

co-founder at Blossom Street Ventures. Email me at sammy@blossomstreetventures.com

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