5 Interesting Learnings from RingCentral at $2 Billion in ARR

So we took a look at RingCentral early in this series at $1B in ARR.  RingCentral is a very interesting case study in SaaS of starting very SMB, way in the early days of SaaS in 1999, keeping at it … and then tilting upmarket to going much more enterprise post-IPO.

Fast forward to today, they are 27% SMB and 63% Mid-Market and Enterprise at $2B in ARR growing 33%.  And the real growth is all in bigger deals.

5 Interesting Learnings:

#1.  RingCentral gets almost half its revenue through channel partners — and it’s their fastest-growing segment.  While the slide below is one quarter dated, it still illustrates the point that RingCentral gets almost half its revenue from channel partners — and it’s growing 50%, far faster than overall growth.  This is fairly common in the enterprise when you have complex deployments, and an important playbook to learn early if that’s you.  The one with the deepest channel relationships often wins in many enterprise segments, and even some SMB ones (e.g., HubSpot and Shopify).  Channel partners really have to align on 1 vendor to push the most to their customers.  It’s just too hard to juggle more than other and go really deep on what they do.

#2.  Video is their multi-product.  While it’s not clear how many truly buy RingCentral for their Zoom competitor, what is clear is it’s helpful to have both products integrated.  42% of their customers now use Video + Phone.

#3.  Slow to go international (telecom is harder here), but now finally getting there — at $2B in ARR.  It’s harder to go global in telecom than in pure software, so it’s taken RingCentral all the way to almost $2B in ARR for international revenues to be material.  But they are now.

#4.  Slow and steady march upmarket.  Today 63% of RingCentral’s revenue is from $25k+ deals, and almost half is from $100k+ deals.  And that segment is growing 46%, vs. 33% overall.  But it took a while to grow from its SMB roots.  In 2018, only 45% was from $25k+ deals.  And that also means that even today, 27% of RingCentral’s customers are still SMB.

#5.  Generating real free-cash flow, but not epic amounts (8%).  RingCentral is generating non-GAAP free cash flow at about a $160m run-rate, or 8.2% of revenue.  That’s good to see, but they still haven’t hit the magic number of 20% or so that SaaS companies look to hit at scale.  It can take a while.

A big congrats to Ring Central for hitting $2B ARR a still-young  age 23!!

A deep dive on how the got there here:

Published on May 18, 2022

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