Companies that exit grow revenue by 73% from the prior year

Strong growth is a critical component to achieving an attractive exit, but what exactly does strong growth mean? How much growth should you shoot for? To answer that question, we looked at 82 tech company IPOs going all the way back to 1995 and found that on median, tech companies had $75mm of revenue in the year prior to going public, grew 73% year over year, and had operating losses of -$11mm.  The data is below and organized by industry. 

 

      Prior Year Revenue Operating Revenue
Company Year Op. Loss/Profit Revenue Before IPO Margin Growth
             
Ecommerce            
Amazon 1996 -$5,979,000 $511,000 $15,746,000 -38% 2981%
Alibaba 2013 $1,730,000,000 $3,204,000,000 $5,553,000,000 31% 73%
             
SAAS            
Castlight Health 2013 -$62,339,000 $4,154,000 $12,973,000 -481% 212%
MobileIron, Inc. 2013 -$31,849,000 $40,890,000 $105,574,000 -30% 158%
WorkDay 2012 -$46,317,000 $54,819,000 $119,520,000 -39% 118%
Box Inc 2014 -$158,780,000 $58,797,000 $124,192,000 -128% 111%
HortonWorks 2014 -$81,040,000 $15,938,000 $33,388,000 -243% 109%
Shopify 2014 -$21,615,000 $50,252,000 $105,018,000 -21% 109%
Textura 2012 -$16,774,000 $10,514,000 $21,681,000 -77% 106%
LinkedIn 2010 $12,513,000 $80,794,000 $161,403,000 8% 100%
ServiceNow 2011 -$4,163,000 $37,944,000 $73,375,000 -6% 93%
LogMeIN, Inc. 2009 -$5,385,866 $26,998,592 $51,723,453 -10% 92%
Ultimate Softare 1998 -$16,060,000 $9,311,000 $17,592,000 -91% 89%
Zendesk 2013 -$21,833,000 $38,228,000 $72,045,000 -30% 88%
Twilio 2016 -$35,393,000 $88,846,000 $166,919,000 -21% 88%
SalesForce 2003 $4,731,000 $35,245,000 $65,970,000 7% 87%
Netsuite 2006 -$2,268,900 $36,356,000 $67,202,000 -3% 85%
New Relic, Inc. 2014 -$19,579,000 $26,146,000 $47,974,000 -41% 83%
Marketo 2012 -$34,208,000 $32,392,000 $58,413,000 -59% 80%
Appfolio 2014 -$8,559 $26,542,000 $47,671,000 0% 80%
Splunk 2011 -$8,081,000 $43,462,000 $77,761,000 -10% 79%
Jive Software, Inc. 2011 -$21,622,000 $19,247,000 $33,952,000 -64% 76%
Marin Software 2012 -$18,488,000 $24,711,000 $42,507,000 -43% 72%
Nant Health 2015 -$70,903,000 $33,921,000 $58,304,000 -122% 72%
Veeva Systems Inc. 2013 $36,157,000 $53,964,000 $92,369,000 39% 71%
Medidata Solutions 2007 -$493,000 $50,461,000 $86,274,000 -1% 71%
Instructure 2015 -$29,957,000 $18,176,000 $30,502,000 -98% 68%
BazaarVoice 2011 -$19,704,000 $38,648,000 $64,482,000 -31% 67%
Acacia 2015 $27,832,000 $105,222,000 $170,509,000 16% 62%
Demandware 2011 -$756,000 $36,690,000 $56,547,000 -1% 54%
Cornerstone 2010 -$12,840,000 $29,322,000 $43,731,000 -29% 49%
2U 2013 -$28,006,000 $55,879,000 $83,127,000 -34% 49%
Atlassian 2015 $417,000 $215,109,000 $319,521,000 0% 49%
Intralinks 2010 -$10,245,000 $25,453,000 $37,218,000 -28% 46%
Hubspot 2014 -$17,691,000 $35,076,000 $51,272,000 -35% 46%
MindBody 2014 -$24,071,000 $48,687,000 $70,010,000 -34% 44%
RingCentral, Inc. 2013 -$22,527,000 $51,814,000 $73,229,000 -31% 41%
Cvent, Inc.  2012 $7,900,000 $60,854,000 $83,474,000 9% 37%
Five9, Inc.  2013 -$28,322,000 $63,822,000 $84,132,000 -34% 32%
Athenahealth, Inc. 2007 -$259,991 $35,339,309 $46,440,326 -1% 31%
Xactly 2015 -$15,469,000 $47,220,000 $61,111,000 -25% 29%
Secureworks 2015 -$61,093,000 $205,830,000 $262,130,000 -23% 27%
Proofpoint, Inc. 2011 -$13,502,000 $46,751,000 $59,147,000 -23% 27%
RealPage, Inc. 2009 $6,929,000 $112,568,000 $140,902,000 5% 25%
SPS Commerce, Inc. 2009 $1,120,000 $22,617,000 $27,765,000 4% 23%
Lifelock 2011 $4,843,000 $162,279,000 $193,949,000 2% 20%
Benefitfocus, Inc. 2012 -$14,400,000 $68,783,000 $81,739,000 -18% 19%
Qualys, Inc. 2011 $2,906,000 $65,432,000 $76,212,000 4% 16%
BroadSoft, Inc.  2009 -$5,051,000 $61,829,000 $68,887,000 -7% 11%
Match Group 2014 $228,567,000 $803,089,000 $888,268,000 26% 11%
LivePerson Inc. 1999 -$3,562,000 $315,000 $222,000 -1605% -30%
             
Payments            
Square 2015 -$74,424,000 $309,908,000 $470,974,000 -16% 52%
Paypal 2000 -$59,356,932 $3,071,741 $34,210,332 -174% 1014%
             
Social            
Facebook 2011 $1,756,000,000 $1,974,000,000 $3,711,000,000 47% 88%
Linkedin 2010 $12,513,000 $80,794,000 $161,403,000 8% 100%
Twitter 2012 -$62,823,000 $122,359,000 $253,635,000 -25% 107%
Line 2015 $18,667,867 $825,354,000 $1,151,237,086 2% 39%
             
Marketplaces            
Priceline 1998 -$112,790,873 --- $35,236,860 -320% ---
Zillow 2010 -$6,837,000 $17,491,000 $30,467,000 -22% 74%
Groupon 2010 -$420,344,000 $30,471,000 $713,365,000 -59% 2241%
Shutterstock 2011 $22,890,000 $82,973,000 $120,271,000 19% 45%
Angie's List 2011 -$23,989,000 $27,473,000 $38,586,000 -62% 40%
Sabre 2012 $846,100,000 $2,931,727,000 $3,039,060,000 28% 4%
GrubHub 2013 $14,889,000 $82,299,000 $137,143,000 11% 67%
Care.com 2013 -$23,760,000 $32,567,000 $58,976,000 -40% 81%
Etsy 2014 -$6,251,000 $125,022,000 $195,591,000 -3% 56%
Lending Club 2014 -$15,846,000 $37,085,000 $87,323,000 -18% 135%
Opentable 2007 -$856,000 $27,168,000 $41,148,000 -2% 51%
             
Content Distributors          
Netflix 2001 -$36,867,000 $35,894,000 $75,912,000 -49% 111%
Yahoo 1997 -$23,145,000 --- $40,335,000 -57% ---
Google 2004 $342,464,000 $347,848,000 $961,874,000 36% 177%
Pandora 2010 $819,000 $31,352,000 $90,123,000 1% 187%
Yelp 2011 -$7,414,000 $32,457,000 $58,380,000 -13% 80%
Netscape 1995 -$11,241,816 --- $5,433,462 -207% ---
Excite 1996 -$44,118,000 $953,000 $14,030,000 -314% 1372%
TrueCar 2013 -$22,628,000 $79,889,000 $133,958,000 -17% 68%
             
Gaming            
Zynga 2010 $125,472,000 $121,467,000 $597,459,000 21% 392%
King Digital 2013 $714,275,000 $164,412,000 $1,884,301,000 38% 1046%
             
Hardware            
TiVo Corporation 1999 -$18,496,000 --- $8,000 -231200% ---
Garmin Ltd 2000 $67,144,000 $106,395,000 $170,540,000 39% 60%
GoPro 2014 $98,703,000 $526,016,000 $985,737,000 10% 87%
Fitbit 2015 $157,929,000 $271,087,000 $745,433,000 21% 175%
             
             
Median   -$10,743,408 $46,985,500 $74,643,500 -19% 73%

 

Median growth is definitely the right way to look at the data set, otherwise fast growers like King Digital and Amazon would skew the data set (the average is an unrealistic 182% as a result).  We also aknowledge that while looking at the growth rates of tech companies going public isn’t the best barometer for how fast your private tech company should be growing at exit, it’s an honest one.  

 

73% growth isn’t as easy to achieve as it sounds, considering the median revenue at exit was $75mm and the year prior was $47mm.  Indeed 73% growth on $47mm of revenue is phenomenal.  But, even if your business is at $1mm of revenue, if you can achieve 73% growth each year for 5 years, that compounds to $16mm.  Remember that in most industries, $5mm of revenue is where you need to be to exit, so getting anywhere close to 73% per year and maintaining it is quite an accomplishment. 

 

So in conclusion, if you can achieve 73% growth year over year, you’re in phenomenal company.  Make that your average goal, and you’ll be well on your way to an exit.  

 

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