5 Interesting Learnings from PagerDuty at $250,000,000 in ARR

When we last checked in with PagerDuty, they were IPO’ing at $125m in ARR.  Fast forward to today, and like every SaaS company, they’re just that much further along.  Like clockwork.  Indeed, today PagerDuty is now at $250m in ARR, growing almost 30% year-over-year!

5 Interesting Learning:

#1.  PagerDuty’s biggest change has been in going upmarket and more enterprise.  That segment is growing 44%!  At IPO, PagerDuty’s ACV and core customer had been a pretty consistent mix of small accounts, SMBs, and some larger customers.  At $125m ARR, PagerDuty still only had ~200 customers paying more than $100k.

Since then, a lot has changed.  Growth since IPO though has been fueled by $500k+ ACV customers … a big change that mostly came after $100m+ ARR.

Fast forward to today, and its biggest growth is from $1M+ customers, up 44% — versus 29% growth overall.  Its “digital operations” segment is a rough proxy for its enterprise customers and now is over 20% of its ARR.

It’s also an interesting contrast to Zoom, Zendesk, and Slack, which recently have seen enterprise and SMB growth be about equal post-Covid.

#2.  NRR is up after going more enterprise, but not as much as you might think.  PagerDuty’s NRR of 121% remains very impressive but is basically the same as 4-5 quarters ago.  Covid brought a bit of a dip, but then NRR returned to 120%.  This is top-tier NRR for a product with many SMB customers.  But it’s interesting that it didn’t go up, despite the largest growth being in $500k and $1m+ customers.  NRR at IPO was actually 139% mainly from SMBs.

#3.  95% renewal rate, even with 10,000+ SMBs.  Even with 10,000+ SMB customers out of 13,800 total, PagerDuty sees an incredible 95% renewal rate.  This is far higher than many products that sell to small businesses.  It’s a testament to the ROI in PagerDuty.  And also a challenge to those selling to SMBs to do as well, and not accept low renewal rates.  Or at least, to drive them up over time.

#4.  8th straight quarter where at least 33% of its enterprise customer accounts expanded.  This is an interesting way to see NRR presented and maybe a good KPI to track, i.e. what % of your customers each quarter have grown?  At PagerDuty, it’s been 33%+ for 8+ quarters.

#5.  Expanding beyond its core product is key to growth.  We’ve seen this time and time again after $100m ARR, and we’re seeing it again here.  PagerDuty’s core product is incident response.  But customers who also use it for security grew 56%, and customers who also used it for customer service grew 40%.  You probably don’t need a second or third product in the early days.  But as we’ve seen in this series, you almost certainly will need one after $100m+ ARR to really scale quickly.

An incredible run for PagerDuty!  We’ll check in again — at least by $1B in ARR!!  With 30% growth at $250m ARR, it’s just a matter of time.

 

Published on April 13, 2021

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