So there’s lot of debate on social media of just how big you need to IPO in SaaS and Cloud these days. All 4 of the IPOs since 2021 were at $500m+ ARR: Klaviyo, Rubrik, OneStream and Sailpoint.
What's the real bar to IPO today? per @MeritechCapital:
1⃣$400M+ ARR
2⃣Growth of 30% or higher YoY (50-60% is even better)
3⃣A valuation between $3-5B
4⃣Net revenue retention of 110-120% (and trending up)
5⃣Strong SaaS gross margins
6⃣Clear path to profitability pic.twitter.com/k5xxnGISpj— Jason ✨👾SaaStr 2025 is May 13-15✨ Lemkin (@jasonlk) February 19, 2025
But you can IPO at lower levels. It’s just, if nothing else, it’s much tougher to get attention if you do. Many institutional investors avoid IPOs at less than a $3 Billion valuation to avoid illiquidity issues.
And so small IPOs can happen, but they are tougher in many ways. Similarweb is one good example. They IPO’d at $190m ARR and today are at:
- $260m ARR
- Growing 16%
- 112% NRR
- 11% Free Cash Flow Margins
- And trading at $841m … or about 3.2x ARR
- Today it’s worth half of what it was at IPO in 2021 ($1.6 Billion)
$841,000,000 is a big success by any standard! But … it’s trading at just 3.2x ARR and is growing at sub 20% rate at that scale. And so the markets don’t love it.
It’s also a reminder that being more efficient alone isn’t enough. The markets want efficient growth, but they value growth more than efficiency. At least 2x more. At least.
5 Interesting Learnings:
#1. Growth is Modest, But is Re-Accelerating
Similarweb’s growth isn’t the 25%+ that Wall Street likes to see at this size, but it is re-accelerating, from a low of 11% in Q4’23 to 16% today.
#2. Growing Net New Customer Count as Fast as Revenue (17%)
Similarweb is keeping net new customer growth at almost 20%. That positions it well for a good run of growth in the future. Too many mature SaaS companies these days that are at lower growth rates get almost all their growth from the base. From price hikes and more. Similarweb is still earning its new customers.
#3. Deal Sizes Coming Down, Which Pressures ARR Growth
While customer count growth is strong, and NRR is good (101% for smaller customers, 112% for $100k+ deals), the overall deal size is down. This is in part due to more smaller customers, but likely also in part due to contractions. $100k+ deals are still growing in number and ACV (next point). But the smaller customers are smaller and smaller, leading to 16% net growth in revenue.
#4. $100k+ Deals a Big Push
This is true almost across the board, from Monday to HubSpot to Asana and more.
#5. CAC Elevated, Acquisition Costs Up From Historical Norms
Similarweb has gotten a lot more efficient, but not by driving down CACs. Right now CACs are at 21-22 months, up from 15-16 months historically.
And a few other interesting learnings:
#6. Like Many, Radically More Efficient Than Just 2 Years Ago
In 2022, Similarweb had -33% non-GAAP operating margins. Today? +6%. That’s a huge swing toward efficiency. And it came by cutting costs in every department.
And a great recent deep dive at SaaStr Annual with Meritech Capital on what it really takes to IPO today:
