5 Interesting Learnings from Momentive at $500,000,000 ARR

So we first checked in with Momentive (then SurveyMonkey) as they went to IPO, after being founded in 1999 (!).  Fast forward to today, they are now crossing $500,000,000 in ARR, growing modestly but consistently at 14% Year-over-Year:

They’re also a case study of sloooowly going upmarket from the original PLG SurveyMonkey self-serve days to a sales-driven motion and product.  SurveyMonkey famously was almost a solo employee startup for a long time, and bootstrapped, until years later it raised later-stage capital and IPO’d.

5 Interesting Learnings:

#1.  Sales-assisted sales now at $165m ARR, and growing 32% (vs 14% overall and just 7% for self-serve).  A lesson on the benefits of eventually moving from self-serve to a hybrid self-serve and sales-assisted model.  If Momentive / SurveyMonkey had stayed 100% self-serve and low end, it likely wouldn’t be growing much at all, with self-serve revenue now only growing 7%.  Fast forward to today, 1/3 of its revenue is sales-driven, but it’s the core growth driver, up 35%.

#2.  2,100 of 345,000 customers are $25k+ deals, revenue now 64% self-serve and 35% sales-assisted revenue.  A different way to look at the prior point.  There are ~13,700 sales-assisted customers, of which 2,100 are $25k+.  Less than 1% of their customers are $25k+ deals, but that 1% accounts for ~35% of revenue.  Talk about a long tail!

#3. 91%+ of customers pay annually.  This probably is as much an artifact of the fact that there is a lot of seasonality in surveys, with recent pricing changes pushing more and more customers to annual plans. It’s not always best to force annual payments.  But it also helps mask churn, especially for a product like their Surveys that isn’t always used consistently across the entire calendar year.  In any event, SurveyMonkey is an example of pushing folks to annual plans.  Zoom, by contrast, until $3B ARR had almost half its customer base pay monthly.  But of course, a core Zoom customer might be using the app 3-4 hours a day.

#4. 7.5% growth in ARPU accounts for a lot of growth at scale.  Without driving up ARPU, SurveyMonkey’s growth also would be limited.  Incremental ARPU gains don’t always move the needle when you are growing 100%+, but when growth slows to the teens, it can account for a large portion of your growth.

#5.  Free cash flow inching up.  Operating margins are inching up to positive, and free cash flow in 2021 was 11%.  On its way to the 20% that’s the ultimate goal for most SaaS companies at scale, although not there yet.

And a few other interesting leanings:

#6.  100% blended NRR by domain.  Given that there are so many self-serve customers for SurveyMonkey, and so many that come and go with using the tool, that 100% NRR isn’t bad.  But it also makes growing at scale just harder.  The entire customer base is just staying “even” each year.  If NRR was even 110%, SurveyMonkey would be growing far faster.  But lower NRR generally comes with SMB customers, at least to some extent.

#7. 700 of the 2,100 $25k+ sales-assisted customers use multiple products.  So again, being multi-product is just key at scale.  We see this across the entire series, from Datadog to Box to Amplitude to Samsara to FreshWorks.  You just have to be multi-product at scale, probably before $100m ARR.

Quite a journey for Momentive / Survey Monkey!  Happy 23 years old!! We’ll check back in by $1B in ARR!

 

 

Published on May 25, 2022

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