5 Interesting Learnings From Snowflake at $850,000,000 in ARR

Snowflake was one of the hottest IPOs in Cloud ever in 2020, rocketing to an $85B+ market cap today!

It’s earned it.  While ARR is still “only” $850m, the growth numbers seem to justify the incredible revenue multiple: 110% YoY growth at $850m ARR (wow!) and 162% NRR (wow!):

Ok, so we can’t all be Snowflake.  But what are 5 interesting things we can learn, and take away:

#1. 93% of Snowflake’s revenue is consumption-based … yet it still has a SaaS multiple.  This is super-important and interesting.  We’ve seen the other day New Relic move back toward consumption pricing, we’ve seen it with Datadog, we’ve seen some it with Fastly, and a lot with Shopify.  Net net, if your customers want to buy in a consumptive vs. recurring fashion … let them.  As long as the NRR is just as high as a subscription model, Wall Street says That’s A-OK today.  Again, the key is the 162% NRR.  Investors and Wall Street are saying they don’t really care how you get there.  Subscription or consumption.

#2.  Snowflake now has software-type margins (60%+), but it took its time getting there.  Snowflake, as a data lake, has significant costs associated with it.  We also saw Palantir take its time to get to 60% gross-margins, not even getting close until the IPO.  Snowflake also took its time to get to 60%+ gross margins.  The lesson is it’s OK if you have fixed costs like Twilio, Snowflake, etc. to not hit software-like margins until just before your IPO.  But you may need to hit 60%+ gross margins as you IPO.

#3. NRR has come down a bit, but still world-class.  This is a trend we’ve seen with so many Cloud leaders.  NRR sometimes does dip a bit as you approach $1B ARR.  We saw Slack’s decline a bit at $1B ARR.  But it doesn’t mean NRR doesn’t still stay high.  So no excuses for your NRR dipping.

#4.  Slow to go global, but becoming material now.  We’ve seen many SaaS leaders go quite global in their footprint early.  Snowflake waited until it was ready.

#5.  3,500+ Customers, But 100 $1M+/year Customers.  Snowflake shows a similar interesting “Enterprise Cloud” distribution to Fastly and Twilio.  Its top 100 customers pay $1M+, and are growing the fastest.  But it has a pool of 3,500 customers trying, using, and loving the platform.  Both segments are growing quickly.  But while overall customer growth is 84% YoY, the “whales” are growing 110%:

Pretty impressive.  Maybe you can do it all.  Go very enterprise, but keep 3,500 customers happy.  Start small, but still have 160%+ NRR.  Growing 100%+ at $600m in ARR. Well, we can’t all do this.  But it can inspire us to dream bigger.  And to accept fewer excuses.

And a few other great ones in this series:

Published on January 8, 2021

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