Learnings from a SaaS IPO – Samsara

Samsara is a software company that just went public. Below are some of the highlights and learnings from their prospectus.

What they do. Samsara “allows businesses that depend on physical operations to harness IoT data to develop actionable business insights and improve their operations. Using our Connected Operations Cloud, customers can visualize their physical operations in real-time. Our ability to capture, aggregate and analyze IoT data is our key differentiator.”

SMB customer base. “As of October 30, 2021, we had over 13,000 Core Customers, who are customers with subscriptions to our Connected Operations Cloud representing over $5,000 in ARR. And we believe there is still significant room for growth. we processed over 38 billion minutes of video footage in 2020”

Unprofitable. “We were founded in 2015 and have achieved significant growth since our inception. For our fiscal years ended February 1, 2020 and January 30, 2021, our revenue was $119.9 million and $249.9 million, respectively, representing year-over-year growth of 108%.”

SaaS model in IoT, priced per device. “we generated approximately 98% of our revenue from subscriptions to our Connected Operations Cloud, which today includes Applications for video-based safety, vehicle telematics, apps and driver workflows, equipment monitoring, and site visibility. We price our subscriptions on a per asset, per application basis. For example, one vehicle using two Applications (video-based safety and vehicle telematics) would count as two subscriptions.”

Really long contracts. “long contract lengths, which typically span three to five years. We bill monthly, quarterly, annually, or in advance, depending on the specifics of each contract.”

Direct sales is core. “We primarily sell through a direct sales force, which focuses on landing and expanding large enterprise and mid-market customers with numerous physical assets.”

The ideal customer pays over $5k annually. “As of October 30, 2021, we had more than 13,000 customers representing over $5,000 in ARR, or Core Customers, and approximately 93% of our ARR came from Core Customers, in part due to our increasing focus on this customer set.”

International is still small, but industries are diverse. “we have a growing international presence, with approximately 10% of our ARR generated from outside of the United States. Our industry-agnostic approach and the horizontal applicability of our solution have enabled us to deploy our platform to a diverse set of industries”

Multi-product leads to expansion. “Our key focus is multi-application adoption. Customers may land with large-scale, multi-application contracts, or land with one application within one division and expand their adoption over time. Regardless of how our customers land, we focus on expanding their usage of Connected Operations Cloud and encourage full-scale rollouts across their geographies and divisions. We measure expansion within our existing customer base by dollar-based net retention rate, which was over 115% as of October 30, 2021. As of October 30, 2021, the dollar-based net retention rate for customers representing over $100,000 in ARR was over 125%, and approximately 44% of our ARR came from customers representing over $100,000 in ARR. As of October 30, 2021, approximately 52% of our over 25,000 customers used two or more Applications.”

LTV is strong. “We calculate the lifetime value, or LTV, of our customer relationships as of a measurement date by dividing (i) the product of our adjusted gross margin for the trailing twelve months, which excludes stock-based compensation expense, compensation resulting from tender offers, and restructuring and related charges, and the difference between our Current Period ARR and Prior Period ARR by (ii) the weighted average of the percentage of our ARR that did not renew in each quarter over the trailing four quarters. We calculate our customer acquisition costs, or CAC, as our adjusted sales and marketing expense, which excludes stock-based compensation expense, compensation resulting from tender offers, and restructuring and related charges. We estimate that for each of the last eleven fiscal quarters, our LTV:CAC ratio was at least 8x, which we believe is indicative of the state of our business and unit economics for the foreseeable future.”

Integrations and product innovation matter. “Our ecosystem includes over 125 third-party integrations in the Samsara App Marketplace, a portal through which customers can connect our Applications to external applications. We have a culture of innovation, which is evidenced by our release of more than 200 features in the past fiscal year.”

Easy adoption is key. “Our solution is typically self-installed, and can be fully deployed and configured in as little as one hour. Our simple user experience and clean user interface make it easy for users to get up and running on Samsara, from back office administrative teams to field workers and drivers.”

Customer feedback drives the roadmap. “By leveraging our customer-centric innovation flywheel, we are able to continuously build new Applications and release new features for our customers based on their direct feedback.”

Free trials drive sales. “Our go-to-market and sales efforts are strengthened by our free-trial sales model. Prospective customers are invited to test our Connected Operations Cloud for their use case during a trial period at no cost.”

$25mm Series A and nearly $1bln of equity. Welp, that’s one way to do it.

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