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Mary D’Onofrio, Partner
Scaling to $100 Million
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.
Lesson 1: ARR is the North Star
$100MM+
$50-100MM
$25-50MM
$10-25MM
$1-10MM
0%
50%
100%
150%
200%
250%
230%
100%
135%
40%
110%
45%
80%
40%
80%
35%
Lesson 1: ARR is the North Star
The YoY Growth Rate Trends by ARR Scale
*All values in the above table are rounded to the nearest 5% for clarity
YoY
Growth
Rate
Top Quartile
Bot Quartile
Median
Average
200%
115% 95%
60% 60%
160%
75% 80%
50%
50%
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
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
$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
Lesson 2: Win by Wide Margins
$100MM+
$50-100MM
$25-50MM
$10-25MM
$1-10MM
70% 70%
65% 65%
70%
40%
50%
60%
70%
80%
90%
100%
Lesson 2: Win by Wide Margins
Gross Margins
by ARR Scale
*All values in the above table are rounded to the nearest 5% for clarity
Gross Margins
Top Quartile
Bot Quartile
Average
$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%
$100MM+
$50-100MM
$25-50MM
$10-25MM
$1-10MM
95%
70% 70%
60%
50%
95%
50%
45%
30%
35%
70%
40%
30%
20% 20%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Lesson 2: Win by Wide Margins
Average Margin
Structure by
ARR Bucket
*All values in the above table are rounded to the nearest 5% for clarity
% of Revenue G&A
R&D
S&M
15
MONTHS
24
MONTHS
20
MONTHS
21
MONTHS
Average CAC Payback by ARR Bucket
30
MONTHS
$100MM+
$50-100MM
$25-50MM
$10-25MM
$1-10MM
CAC Payback = Prior Quarter S&M Expense / (Net new MRR) * Gross Margin)
Lesson 2: Win by Wide Margins
$100MM+
$50-100MM
$25-50MM
$10-25MM
$1-10MM
Lesson 2: Win by Wide Margins
FCF Margin of Revenue by ARR Scale
*All values in the above table are rounded to the nearest 5% for clarity
FCF
Margin
-230%
-80%
-65%
-40% -35%
-300%
-250%
-200%
-150%
-100%
-50%
0%
Top Quartile
Bot Quartile
Average
-270%
-65%
-115%
-90%
-50% -50%
-20%
-25%
-35%
-35%
$100MM+
$50-100MM
$25-50MM
$10-25MM
$1-10MM
Lesson 2: Win by Wide Margins
Cash Conversion
Score by ARR
Scale
Cash Conversion Score
0.5x 0.5x
0.6x
0.8x
1.0x
0.0x
0.2x
0.4x
0.6x
0.8x
1.0x
1.2x
0x
Average
Cash Conversion
Score =
ARR______
Total Capital Raised to Date – Cash
Lesson 3: Know Your Worth
$100MM+
$50-100MM
$25-50MM
$10-25MM
$1-10MM
Lesson 3: Know Your Worth
Cloud Valuation Multiples by ARR Scale
Valuation
Multiple
39.0x
26.0x
19.0x
16.0x
18.0x
19.0x
14.0x
14.0x
12.0x
13.0x
31.0x
17.0x
17.0x
13.0x
14.0x
0.0x
5.0x
10.0x
15.0x
20.0x
25.0x
30.0x
35.0x
40.0x
45.0x
0x
Top Quartile
Bot Quartile
Median
Average
12.0x
8.0x
9.0x 9.0x 9.0x
33x
29x
27x
22x
20x
18x
15x 15x
10x
Average
Lesson 3: Know Your Worth
Cloud Valuation Multiples by Industry
* Companies with ARR <$1MM have been excluded
Fintech Security
Data/
Infrastructure
Developer S&M/CX Vertical
Design/
Collaboration/
Productivity
Finance/
Legal
Communications
0.0x
10.0x
20.0x
30.0x
40.0x
50.0x
60.0x
70.0x
80.0x
90.0x
0% 50% 100% 150% 200% 250% 300% 350%
Growth Rate
Lesson 3: Know Your Worth
2020-2021 Company Growth vs Valuation
*Data through 1H21
ARR
Valuation
Multiple
y = ~20x
R² = ~0.7
Lesson 3: Know Your Worth
Average Round Size by ARR Bucket
$100MM+
$50-100MM
$25-50MM
$10-25MM
$1-10MM
20
30
55
150
75
$100MM+
$50-100MM
$25-50MM
$10-25MM
$1-10MM
20%
15% 15%
10%
5%
0%
5%
10%
15%
20%
25%
30%
Lesson 3: Know Your Worth
Dilution
Percentage
by ARR Scale
Dilution
All values in the above table are rounded to the nearest 5% for clarity
Top Quartile
Bot Quartile
Average
Lesson 4: The TL;DR
Plot Your Way to the Next Milestone
Lesson 4: The TL;DR – Plot Your Way to the Next Milestone
Average Benchmarks by ARR Scale
*All margin and growth rate values in the above chart are rounded to the nearest 5% for clarity
$1-10MM $10-25MM $25-50MM $50-100MM $100MM+
ARR Growth Rate 200% 115% 95% 60% 60%
Net Retention 140% 120% 120% 120% 120%
Gross Retention 85% 85% 90% 90% 90%
Gross Margin 70% 70% 65% 65% 70%
S&M % Revenue 95% 70% 70% 60% 50%
R&D % Revenue 95% 50% 45% 30% 35%
G&A % Revenue 70% 40% 30% 20% 20%
CAC Payback (Mos) 15 24 20 21 30
FCF Margin -230% -80% -65% -40% -35%
Cash Conversion Score 0.5x 0.5x 0.6x 0.8x 1.0x
ARR
Growth
Net
Retention
Gross
Retention
Gross
Margin
S&M
% Revenue
R&D
% Revenue
G&A
% Revenue
FCF
Margin
Average 200% 140% 85% 70% 95% 95% 70% -230%
Top
Quartile
230%+ 145%+ 95%+ 85%+ <45% <40% <30% -65%+
Middle
50%
100-
230%
105-
145%
85-
95%
60-
85%
45-
140%
40-
135%
30-
75%
-270-
-65%
Bottom
Quartile
<100% <105% <85% <60% 140%+ 135%+ 75%+ <-270%
Benchmarks for $1-10MM of ARR
*All values in the above chart are rounded to the nearest 5% for clarity
Benchmarks for $10-25MM of ARR
*All values in the above chart are rounded to the nearest 5% for clarity
ARR
Growth
Net
Retention
Gross
Retention
Gross
Margin
S&M
% Revenue
R&D
% Revenue
G&A
% Revenue
FCF
Margin
Average 115% 120% 85% 70% 70% 50% 40% -80%
Top
Quartile
135%+ 135%+ 95%+ 80%+ <50% <30% <20% -35%+
Middle
50%
40-
135%
100-
135%
85-
95%
60-
80%
50-
90%
30-
65%
20-
45%
-115-
-35%
Bottom
Quartile
<40% <100% <85% <60% 90%+ 65%+ 45%+ <-115%
Benchmarks for $25-50MM of ARR
*All values in the above chart are rounded to the nearest 5% for clarity
ARR
Growth
Net
Retention
Gross
Retention
Gross
Margin
S&M
% Revenue
R&D
% Revenue
G&A
% Revenue
FCF
Margin
Average 95% 120% 90% 65% 70% 45% 30% -65%
Top
Quartile
110%+ 130%+ 95%+ 75%+ <50% <35% <20% -35%+
Middle
50%
45-
110%
105-
130%
85-
95%
55-
75%
50-
85%
35-
55%
20-
30%
-90-
-35%
Bottom
Quartile
<45% <105% <85% <55% 85%+ 55%+ 30%+ <-90%
Benchmarks for $50-100MM of ARR
*All values in the above chart are rounded to the nearest 5% for clarity
ARR
Growth
Net
Retention
Gross
Retention
Gross
Margin
S&M
% Revenue
R&D
% Revenue
G&A
% Revenue
FCF
Margin
Average 60% 120% 90% 65% 60% 30% 20% -40%
Top
Quartile
80%+ 135%+ 95%+ 80%+ <45% <25% <15% -25%+
Middle
50%
40-
80%
105-
135%
85-
95%
60-
80%
45-
70%
25-
35%
15-
25%
-50-
-25%
Bottom
Quartile
<40% <105% <85% <60% 70%+ 35%+ 25%+ <-50%
Benchmarks for $100MM+ of ARR
*All values in the above chart are rounded to the nearest 5% for clarity
ARR
Growth
Net
Retention
Gross
Retention
Gross
Margin
S&M
% Revenue
R&D
% Revenue
G&A
% Revenue
FCF
Margin
Average 60% 120% 90% 70% 50% 35% 20% -35%
Top
Quartile
80%+ 125%+ 100% 80%+ <35% <25% <15% -20%+
Middle
50%
35-
80%
105-
125%
90-
100%
60-
80%
35-
65%
25-
35%
15-
25%
-50-
-20%
Bottom
Quartile
<35% <105% <90% <60% 65%+ 35%+ 25%+ <-50%
Bonus Lesson 5: Run the Public Playbook
LTM Revenue
Growth
LTM
Revenue ($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.
Scaling to $100 Million
bvp.com/scale
@BessemerVP
@mcadonofrio

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Scaling to $100 Million

  • 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.
  • 3. Lesson 1: ARR is the North Star
  • 4. $100MM+ $50-100MM $25-50MM $10-25MM $1-10MM 0% 50% 100% 150% 200% 250% 230% 100% 135% 40% 110% 45% 80% 40% 80% 35% Lesson 1: ARR is the North Star The YoY Growth Rate Trends by ARR Scale *All values in the above table are rounded to the nearest 5% for clarity YoY Growth Rate Top Quartile Bot Quartile Median Average 200% 115% 95% 60% 60% 160% 75% 80% 50% 50%
  • 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
  • 8. Lesson 2: Win by Wide Margins
  • 9. $100MM+ $50-100MM $25-50MM $10-25MM $1-10MM 70% 70% 65% 65% 70% 40% 50% 60% 70% 80% 90% 100% Lesson 2: Win by Wide Margins Gross Margins by ARR Scale *All values in the above table are rounded to the nearest 5% for clarity Gross Margins Top Quartile Bot Quartile Average
  • 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%
  • 11. $100MM+ $50-100MM $25-50MM $10-25MM $1-10MM 95% 70% 70% 60% 50% 95% 50% 45% 30% 35% 70% 40% 30% 20% 20% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Lesson 2: Win by Wide Margins Average Margin Structure by ARR Bucket *All values in the above table are rounded to the nearest 5% for clarity % of Revenue G&A R&D S&M
  • 12. 15 MONTHS 24 MONTHS 20 MONTHS 21 MONTHS Average CAC Payback by ARR Bucket 30 MONTHS $100MM+ $50-100MM $25-50MM $10-25MM $1-10MM CAC Payback = Prior Quarter S&M Expense / (Net new MRR) * Gross Margin) Lesson 2: Win by Wide Margins
  • 13. $100MM+ $50-100MM $25-50MM $10-25MM $1-10MM Lesson 2: Win by Wide Margins FCF Margin of Revenue by ARR Scale *All values in the above table are rounded to the nearest 5% for clarity FCF Margin -230% -80% -65% -40% -35% -300% -250% -200% -150% -100% -50% 0% Top Quartile Bot Quartile Average -270% -65% -115% -90% -50% -50% -20% -25% -35% -35%
  • 14. $100MM+ $50-100MM $25-50MM $10-25MM $1-10MM Lesson 2: Win by Wide Margins Cash Conversion Score by ARR Scale Cash Conversion Score 0.5x 0.5x 0.6x 0.8x 1.0x 0.0x 0.2x 0.4x 0.6x 0.8x 1.0x 1.2x 0x Average Cash Conversion Score = ARR______ Total Capital Raised to Date – Cash
  • 15. Lesson 3: Know Your Worth
  • 16. $100MM+ $50-100MM $25-50MM $10-25MM $1-10MM Lesson 3: Know Your Worth Cloud Valuation Multiples by ARR Scale Valuation Multiple 39.0x 26.0x 19.0x 16.0x 18.0x 19.0x 14.0x 14.0x 12.0x 13.0x 31.0x 17.0x 17.0x 13.0x 14.0x 0.0x 5.0x 10.0x 15.0x 20.0x 25.0x 30.0x 35.0x 40.0x 45.0x 0x Top Quartile Bot Quartile Median Average 12.0x 8.0x 9.0x 9.0x 9.0x
  • 17. 33x 29x 27x 22x 20x 18x 15x 15x 10x Average Lesson 3: Know Your Worth Cloud Valuation Multiples by Industry * Companies with ARR <$1MM have been excluded Fintech Security Data/ Infrastructure Developer S&M/CX Vertical Design/ Collaboration/ Productivity Finance/ Legal Communications
  • 18. 0.0x 10.0x 20.0x 30.0x 40.0x 50.0x 60.0x 70.0x 80.0x 90.0x 0% 50% 100% 150% 200% 250% 300% 350% Growth Rate Lesson 3: Know Your Worth 2020-2021 Company Growth vs Valuation *Data through 1H21 ARR Valuation Multiple y = ~20x R² = ~0.7
  • 19. Lesson 3: Know Your Worth Average Round Size by ARR Bucket $100MM+ $50-100MM $25-50MM $10-25MM $1-10MM 20 30 55 150 75
  • 20. $100MM+ $50-100MM $25-50MM $10-25MM $1-10MM 20% 15% 15% 10% 5% 0% 5% 10% 15% 20% 25% 30% Lesson 3: Know Your Worth Dilution Percentage by ARR Scale Dilution All values in the above table are rounded to the nearest 5% for clarity Top Quartile Bot Quartile Average
  • 21. Lesson 4: The TL;DR Plot Your Way to the Next Milestone
  • 22. Lesson 4: The TL;DR – Plot Your Way to the Next Milestone Average Benchmarks by ARR Scale *All margin and growth rate values in the above chart are rounded to the nearest 5% for clarity $1-10MM $10-25MM $25-50MM $50-100MM $100MM+ ARR Growth Rate 200% 115% 95% 60% 60% Net Retention 140% 120% 120% 120% 120% Gross Retention 85% 85% 90% 90% 90% Gross Margin 70% 70% 65% 65% 70% S&M % Revenue 95% 70% 70% 60% 50% R&D % Revenue 95% 50% 45% 30% 35% G&A % Revenue 70% 40% 30% 20% 20% CAC Payback (Mos) 15 24 20 21 30 FCF Margin -230% -80% -65% -40% -35% Cash Conversion Score 0.5x 0.5x 0.6x 0.8x 1.0x
  • 23. ARR Growth Net Retention Gross Retention Gross Margin S&M % Revenue R&D % Revenue G&A % Revenue FCF Margin Average 200% 140% 85% 70% 95% 95% 70% -230% Top Quartile 230%+ 145%+ 95%+ 85%+ <45% <40% <30% -65%+ Middle 50% 100- 230% 105- 145% 85- 95% 60- 85% 45- 140% 40- 135% 30- 75% -270- -65% Bottom Quartile <100% <105% <85% <60% 140%+ 135%+ 75%+ <-270% Benchmarks for $1-10MM of ARR *All values in the above chart are rounded to the nearest 5% for clarity
  • 24. Benchmarks for $10-25MM of ARR *All values in the above chart are rounded to the nearest 5% for clarity ARR Growth Net Retention Gross Retention Gross Margin S&M % Revenue R&D % Revenue G&A % Revenue FCF Margin Average 115% 120% 85% 70% 70% 50% 40% -80% Top Quartile 135%+ 135%+ 95%+ 80%+ <50% <30% <20% -35%+ Middle 50% 40- 135% 100- 135% 85- 95% 60- 80% 50- 90% 30- 65% 20- 45% -115- -35% Bottom Quartile <40% <100% <85% <60% 90%+ 65%+ 45%+ <-115%
  • 25. Benchmarks for $25-50MM of ARR *All values in the above chart are rounded to the nearest 5% for clarity ARR Growth Net Retention Gross Retention Gross Margin S&M % Revenue R&D % Revenue G&A % Revenue FCF Margin Average 95% 120% 90% 65% 70% 45% 30% -65% Top Quartile 110%+ 130%+ 95%+ 75%+ <50% <35% <20% -35%+ Middle 50% 45- 110% 105- 130% 85- 95% 55- 75% 50- 85% 35- 55% 20- 30% -90- -35% Bottom Quartile <45% <105% <85% <55% 85%+ 55%+ 30%+ <-90%
  • 26. Benchmarks for $50-100MM of ARR *All values in the above chart are rounded to the nearest 5% for clarity ARR Growth Net Retention Gross Retention Gross Margin S&M % Revenue R&D % Revenue G&A % Revenue FCF Margin Average 60% 120% 90% 65% 60% 30% 20% -40% Top Quartile 80%+ 135%+ 95%+ 80%+ <45% <25% <15% -25%+ Middle 50% 40- 80% 105- 135% 85- 95% 60- 80% 45- 70% 25- 35% 15- 25% -50- -25% Bottom Quartile <40% <105% <85% <60% 70%+ 35%+ 25%+ <-50%
  • 27. Benchmarks for $100MM+ of ARR *All values in the above chart are rounded to the nearest 5% for clarity ARR Growth Net Retention Gross Retention Gross Margin S&M % Revenue R&D % Revenue G&A % Revenue FCF Margin Average 60% 120% 90% 70% 50% 35% 20% -35% Top Quartile 80%+ 125%+ 100% 80%+ <35% <25% <15% -20%+ Middle 50% 35- 80% 105- 125% 90- 100% 60- 80% 35- 65% 25- 35% 15- 25% -50- -20% Bottom Quartile <35% <105% <90% <60% 65%+ 35%+ 25%+ <-50%
  • 28. Bonus Lesson 5: Run the Public Playbook
  • 29. LTM Revenue Growth LTM Revenue ($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