It can be hard to grok just how powerful compounding revenue is
A SaaS company at $10m ARR growing at 100% YoY has a decent chance to hit $1B in ARR in 10 years if you can find a way to keep it up
— Jason ✨Be Kind✨ Lemkin (@jasonlk) December 4, 2021
One of the very first SaaStr-isms was that while $0-$1m ARR is Impossible, and getting from $1m-$10m ARR is Unlikely … that getting from $10m to $100m ARR is Inevitable.
Let’s take a look at a version of that basic math.
Today, the very best SaaS companies are scaling faster than ever. Often 200% or even 300% at $10m ARR. Look at Zoom, Slack, Datadog, UiPath, Snowflake etc. Snowflake is growing 110% at $1B in ARR (!). That can feel like quite a hurdle to hit.
But what if you are “just” growing 60% at $10m ARR? It turns out, as long as you have positive revenue retention, and keep at it, you’ll do just fine over time.
Here are a few scenarios with initial growth rates at $10m ARR, with a growth decay factor baked in:
The hyper-growth company really can get to $100m ARR fast. UiPath did it. But you know what? They didn’t start there. UiPath actually was founded in 2005!! Mailchimp in 2001. Similarly, there are others like Smartsheet that have grown to unicorns without ever having a Zoom-like year.
In fact, if you can get to 60% growth, maybe even just 50% growth at $10m ARR, and keep your net revenue retention over 120%-130% … you will get there.
It may take 8-9 years after you put in the time to get to $10m ARR. But UiPath is on Year 16 and is now worth $24 billion.
Do you have something better to do?
A quick look at some growth rates at IPO from Alex Clayton. These numbers are obviously at scale. But they do sort of reinforce the point. Yes, the best are growing faster than ever, and that’s a challenge to you. Don’t settle.
But also quietly know that if your growth is just “pretty good” at $10m ARR, and you don’t quit, and your keep your customers happy and NRR high … you can get there. You can build a unicorn.
Lots of companies at $10m ARR never hit $100m ARR
But I don't personally know any with 80%+ growth and 100%+ NRR at $10m that didn't get there eventually
If that's you at $10m ARR .. Go Long
— Jason ✨Be Kind✨ Lemkin (@jasonlk) August 31, 2023
A bit more here:
(note: an updated SaaStr Classic post)