How fast does a SaaS business need to grow prior to exit/IPO? To answer that question, we looked at the revenue of 76 SaaS companies according to their S1’s (a securities filing filed prior to going public). The median revenue level was $89mm at the time of exit/IPO, having grown 55% from the year prior to going public. The data as well as a few observations are below.
-The range of growth was wide: the minimum level of growth was 12% by Blackbaud, while the highest growth rate was Horton Works at 587%. Many of these companies raised very large rounds in the year prior to going public/exiting, with the intent of spending on sales & marketing to spike revenue growth. You very well may do the same, but if you do, an analysis needs to be done looking at whether the dilution of a round is worth the incremental growth.
-The median level of revenue needed to go public has increased over time. For companies that filed their S1 in 2017, 2016, and 2015, median revenue levels each year were $134mm, $128mm, and $129mm. Alternatively, the median levels in 2012, 2011, and 2010 were only $87mm, $81mm, and $45mm. The bar to go public/exit is rising.
-On median, it took 4 rounds (through the Series D) to get to exit. The most number of rounds required went all the way to Series H (8 rounds) and some companies got to IPO with only a Series A (1 round).
While 55% growth may not seem like much if you’re a Series A/B company, when you’re at the Series D and median revenue is in the $10’s of millions of dollars, it’s very impressive. While strong growth isn’t a pre-requisite to exit, it certainly helps with valuation and can even get you to the promised land (IPO), as it did with these companies. If you can manage to sustain 55%+ at these revenue levels, you’ll be well on your way to joining this list.