From Bessemer Venture Partners, Partner Mary D'Onofrio releases the definitive benchmarking report on how cloud companies grow operationally efficient businesses and scale to $100 million in ARR (and beyond).
2. Scaling to
$100
Million
The 5 Lessons of
ARR (or CARR) is the North Star
1
Work towards high growth rates. Strong net and gross
retention can drive growth endurance.
2 Win by Wide Margins
Optimize for high gross margins and try to create
operating leverage over time, driving towards
profitability.
Know Your Worth
3
Seek financing knowing the multiple you deserve and use
round size and dilution as structuring levers.
5 (Bonus) Run the “Public Playbook”
5
Eye the public markets at $100MM+ of revenue and when
you have sight to profitability.
4 The TL;DR – Plot Your Way to the Next
Milestone
Understand what is ahead and always be working
towards the next milestone.
5. 0%
40%
80%
120%
160%
200%
0% 50% 100% 150% 200%
Last Year’s Growth
Growth Endurance
Lesson 1: ARR is the North Star
Growth
Endurance
Current
Year’s
Growth
*Outliers and values for companies with <$1M ARR are not included
y= ~0.7x
Growth Endurance = Current Year’s Growth Rate /
Last Year’s Growth Rate
6. DECAY CURVE
BEST
80% growth
endurance
BETTER
75% growth
endurance
GOOD
70% growth
endurance
The Good, Better, and Best of Growth Endurance
Implications for growth deceleration
0%
50%
100%
150%
200%
250%
300%
350%
1 2 3 4 5 6 7 8 9 10 11 12
Growth Rate
Years
$1MM ARR
$100MM ARR
$100MM ARR
$100MM ARR
7. $100MM+
$50-100MM
$25-50MM
$10-25MM
$1-10MM
Lesson 1: ARR is the North Star
Retentions by ARR Scale
*All values in the above table are rounded to the nearest 5% for clarity
85% 85%
90% 90% 90%
140%
120% 120% 120% 120%
80%
90%
100%
110%
120%
130%
140%
150%
Net
Retention
Gross
Retention
Top Quartile Net
Bot Quartile Net
Average Gross
Average Net
Top Quartile Gross
Bot Quartile Gross
Net Retention = Beginning ARR + Expansion ARR - Churned ARR
Beginning ARR
Gross Retention = Beginning ARR - Churned ARR
Beginning ARR
10. $100MM+
$50-100MM
$25-50MM
$10-25MM
$1-10MM
Lesson 2: Win by Wide Margins
Margin Structure
by ARR Scale
*All values in the above table are rounded to the nearest 5% for clarity
% of Revenue
Top Quartile
Bot Quartile
G&A
R&D
S&M
0%
20%
40%
60%
80%
100%
120%
140%
29. LTM Revenue
Growth
LTM
Revenue ($MM)
Net
Retention
Gross
Margin
S&M
% Revenue
R&D
% Revenue
G&A
% Revenue
FCF
Margin
Average
65% $170 120% 70% 55% 30% 20% -20%
Top
Quartile
85%+ $170+ 135%+ 75%+ <35% <20% <15% 0%+
Bottom
Quartile
<40% <$80 <110% <60% 65%+ 35%+ 25%+ <-30%
The Public Playbook
*Public Playbook companies include all previous and current BVP Nasdaq Emerging Cloud Index companies at time of
IPO. Data manually taken as of most recent FY provided in S-1. Example companies are within 5% of averages.
30. Scaling to $100 Million
bvp.com/scale
@BessemerVP
@mcadonofrio