Attributes of a successful SaaS business – Forgerock


What does a successful SaaS business look like? Forgerock is a great example (NYSE: FORG). Market cap stands at $1.8bln and the stock is actually up year to date. We dug through Forgerock’s latest quarterly filing and below are some of the structural and business practices that make them valuable.

What they do. Founded in 2009 and HQ’d in San Francisco, Forgerock is a modern digital identity platform transforming the way enterprises secure, manage, and govern the identities of customers, employees and partners, APIs, microservices, devices, and Internet of Things. They went public in September 2021.

Clean contracts and subscription-heavy mix. 95% of revenue is from subscriptions. 5% is professional service. 0.2% is perpetual license which has been reduced over time. Contracts are typically non-cancelable and non-refundable, and are largely billed annually upfront. Our pricing is generally based on the deployment method (SaaS or selfmanaged), products purchased, identity type (consumer, workforce, or IoT and services), and number of identities managed. 41% of revenue is international.

They know the ideal customer and target persona. Our go-to-market strategy is primarily focused on selling to large global enterprises, who are consistently investing in identity as a top priority. We focus our sales efforts on decision makers with a purview across the enterprise such as Chief Information Officers, or CIOs, Chief Information Security Officers, or CISOs, Chief Digital Officers, or CDOs, and Chief Technology Officers, or CTOs. We are also increasing our focus on line-of-business owners and developers as core stakeholders.

Direct sales team is close to the customer with plenty of marketing channels. We primarily sell subscriptions through our direct sales teams located in geographic regions near our customers. Our sales and marketing organizations work closely to attract and drive awareness and engagement with prospective customers to help them understand our leadership in identity and our product differentiation, and to convert prospects into customers. Our marketing organization engages with prospective customers across physical and digital channels and provides them with solution guides, whitepapers, webinars, presentations, and other content to accelerate their understanding of our platform and drive greater adoption.

Channel partners provide leads, but do not directly sell. We also have a strong network of strategic global channel partners that both source and influence opportunities for us — providing leverage and execution capabilities across the globe. These strategic global channel partnerships not only provide us with a significant source of lead generation but also a global network of certified and trained implementation professionals.

~500 customers, with high ACV’s requiring real customer buy-in. We define a large customer as a customer with $100,000 or greater ARR as of a measurement date. As of September 30, 2022 and 2021, we had 431 and 369 large customers with $100,000 of ARR or greater, respectively, representing 92% and 89% of our total ARR as of such dates. For the three months ended September 30, 2022, no single customer accounted for more than 10% of our total revenue or 4% of our total ARR. No customer accounts for more than 3% of ARR.

New products/modules drive customer growth, not users. For example, we have developed and released our SaaS offering (ForgeRock Identity Cloud), Autonomous Identity and Governance in the past two years and both new and existing customers have adopted these offerings. we enable customers to purchase one or more product modules for their initial deployment and expand into new modules for additional functionality over time. Net dollar retention stands at 111%.

Financials. For the three months ended September 30, 2022 and 2021, ARR was $212.8 million and $164.0 million, respectively, representing a year-over-year growth rate of 30%. Net dollar retention stands at 111%. Operating loss in Q3 was -$12.7mm meaning ARR/net loss is a healthy 4.3x, especially given the growth.

Sammy is the Managing Partner and Co-Founder of Blossom Street Ventures. Visit us at blossomstreetventures.com and email directly at sammy@blossomstreetventures.com. We invest in companies with run rate revenue of $3mm to $30mm, with year over year growth of 20% to 100%+ 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, cap table clean up, and extensions. We can commit in 3 weeks and our check is $1mm to $4mm. Also visit https://blossomstreetventures.com/metrics/ for always up-to-date SaaS metrics.