The growth needed for a SaaS exit
Sammy is the Managing Director and Cofounder of Blossom Street Ventures. Connect on LinkedIn or email him directly at email@example.com, especially founders at all stages.
How fast do you need to grow prior to exit? We looked at the last 36 SaaS IPO’s going back to MongoDB’s IPO in October 2017. The data is below.
On median, these companies grew revenue 48% from the prior year, while the average was 55%. Median overall revenue was $180mm while the average was $331mm (that average is skewed by names like McAfee which had $2.6bln of revenue). A few other observations.
The fastest growers were triple digit. The fastest growers had triple digit year over year growth. Snowflake led the way with 174% YOY growth followed by Livongo at 122%. Snowflake’s growth was especially impressive since it IPO’d with $265mm in revenue (Livongo had $68mm). Livongo’s revenue was the lowest of the group.
For an IPO, revenue needs to be $100mm+. Only Livongo ($68m) and ON24 ($89mm) had revenue below $100mm at the time of IPO.
Slow growth is allowed. You can grow slowly and still go public. SurveyMonkey grew only 6%, McAfee grew only 9%, and ON24 grew 8%. Granted, the revenue of these businesses is sufficiently large, and their revenue multiples are quite low relative to peers.
Comparison to privates. Is it fair to compare public IPO to private M&A exits? Not really, but public data is the most transparent and honest data available. We also see similar dynamics in venture: respectable exits happen when sufficiently large companies ($8mm+ of ARR) are growing 30%+ YOY.