IPOs seem like a dime-a-dozen these days in B2B/SaaS/B2D, but Elastic was one I wanted to learn a bit more about. Many of you likely use Elastic and/or Algolia to power search on your sites and applications.
A few interesting learnings for me at least:
- TAM is What You Make It. Elastic says its initial TAM for basic search was $3b in 2012, but today, as the company has expanded into analytics and adjacent spaces, their TAM is $45 billion. Whatever it is — it’s larger now than when they started. You have to kick things off with a decent TAM, but you can grow it later. Almost everyone does, really. More on that here.
- Another Euro-U.S. Hybrid Win. Netherlands + Mountain View. I knew this, but a good reminder. Today, most of us are grabbing pieces of the Bay Area, but one way or another, we all have distributed teams.
- Growing 100% at $100m ARR, 80% at $200m ARR. Wow, another rocketship. This is the bar today. Elastic went from $88m in ’16-’17 to $160m in revenues from April 30, 2017 to 2018. Today, they are at $230m+ ARR already. Everything is so much bigger today, even than just 3-4 years ago.
- They lose money on services. Their software is 80% gross margin, but their services is about -20%. Services are only 10% of their revenue though so it doesn’t matter too much. Still, getting paid for doing services is a lot better than doing them for free. More on that here.
- Open Source -> Paid still really works, when it works. We knew this, but Elastic the product’s first release was in 2010, the commercial company incorporated in 2012, and the paid 1.0 launced in 2014. Then 4 years to $200m+ run-rate and IPO!
- Power laws are everywhere. Go long. Elastic downloads continue to accelerate, as internet projects continue to scale. Software tools is a far, far, far larger space than any of us realized a way back
- 1.8x revenue retention / growth over 2 years. 142% net expansion rate at the end of last quarter. Pretty good.
- U.S. is 60% of revenue, ROW is 40%. This likely will be you, too, over time.
- 336 employees in Sales & Marketing (vs 282 in R&D). Really, very few products sell themselves, at least not in the long run. Even developer-centric products. Even products like Elastic, that you can get going with all by yourself.
- Support is distributed across 23 countries and 24×7. Yes, it’s a pain. And yes, you have to do this, too, to be world class.
Finally, an oldie but a good, a SaaStr Annual presentation with Elastic’s VP of Marketing here on brand building at both Salesforce and Elastic: