How fast do you need to grow prior to exit? We looked at the last 67 SaaS IPO’s going back to MongoDB’s IPO in October 2017. The data is below.
On median, these companies grew revenue 42% from the prior year, while the average was 50%. Median overall revenue was $185mm while the average was $298mm (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 one of the lowest of the group.
For an IPO, revenue should generally be $100mm+. Only 8 companies had revenue below $100mm at the time of IPO. BackBlaze was the lowest ($54mm), although we’d note that is a very well run company.
Slow growth is allowed if you’re big. You can grow slowly and still go public. SurveyMonkey grew only 6%, McAfee grew only 9%, Informatica was 1%, 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.
Visit us at blossomstreetventures.com and email me directly at firstname.lastname@example.org. All founders and funds welcome! We invest in companies with run rate revenue of $2mm 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, extensions, and founder secondary. We can commit in 3 weeks and our check is $1mm to $2mm. Email us!