The question of how fast revenue growth should be for a SaaS company is what founders often have to ask themselves. Good looks like X, but Y might also work. Discover the triple double-double SaaS in this post.
Many factors come into play when considering how fast revenue growth should attract investors and potential acquirers. A reasonable body of research can provide some guidance on the subject, but it is different for every business.
One of the best predictors for company valuation is its revenue growth. This has to do with how much investors value high-growth companies over low-growth ones.
A unicorn is a company that has reached $1 billion in valuation, and the term comes from Neeraj Agrawal, who coined it four years ago.
This article describes the process of how a SaaS company can reach $144million in ARR within five years. The basic premise is that if a business finds product-market fit, gets to around $2 million, and then grows by 3x every year for five years – they will achieve this goal.
Several studies have looked at this. The first is from SaaS Capital – a provider of venture debt for private software companies, who compiled data from around 950 such businesses in 2017.
This average may be skewed because the best and worst performers are omitted, but it can still help set a baseline for comparison. So, what is triple double-double SaaS?
‘The long, slow SaaS ramp of death’
The SaaS Capital study also found that the median time for a company to reach $1million in ARR is six years. This may surprise you if you have read about companies who reached this milestone within just one year of being founded, as many articles focus on these success stories.
Video: The “long, slow SaaS ramp of death” was coined by the former CEO of Constant Contact, Gail Goodman. This is a difficult phase in any business because it can be hard to get recurring revenue going, and many companies fail at this point.
The KeyBanc Capital Markets (formerly Pacific Crest Securities) conducted a study in 2018 that showed the companies with ARR less than $25million were growing at around a 100% rate, while those above $75 million had only 23%.
The data shows that the common belief is wrong – companies with Annual Contract Values (ACV) below $50,000 showed a median growth rate of nearly 50 percent. In contrast, those with an ACV more significant than $250 000 show only 23% average annual growth.
In triple-double SaaS, one of the most exciting things about this survey is that it found up-sell and cross-sell are essential to driving new ARR bookings. This was also proven in a study by Price Intelligently, which showed improvements in acquisition, monetization (up-sell and cross-sell) led to a 3% increase overall.
The study found that, on average, people work about 32 hours a week for 12.7 dollars an hour and 6 cents per hour.
The study showed that 72% of the companies had a higher bottom-line performance than their counterparts.
In triple double-double SaaS, one study found that companies who grow past the Mendoza Line (named after Mario Mendoza, a baseball player with an average below .200) are more likely to continue growing. The authors called this phenomenon’ growth persistence’.
How the law of large numbers is used to show how, over time, percentages tend to even out and grow more slowly.
When it comes to triple-double SaaS, there is a term in North American baseball called the Mendoza Line, which refers to the batting average below which players are not worth hiring for major league teams. The study looked at SaaS companies that went public with an ARR of $100 million or more and growth rates of 25%+ over one year – these sorts of businesses are attractive targets for venture investors.
The report includes an illustration to show how successful IPOs by these types of companies are aligned with this ‘Mendoza line,’ which can be used as a guideline.
According to a port from Ernst and Young, it’s not impossible to outgrow the GFP in triple double-double SaaS. Two companies have been able to do so: Box and Exact Target.
All this information helps us understand what a successful SaaS company looks like. We know that growth is good and more change is better, but we also have an idea of the type of expectations for these companies. That’s it for the triple-double SaaS.