Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.
Today we’re adding a few names to the $100 million annual recurring revenue (ARR) club. The new entrants come after we kicked off 2020 with a previous four new members. So far in January, we’ve also highlighted SiteMinder’s $70 million ARR and expected ramp to $100 million, Cloudinary’s $60 million ARR sans venture capital and Seattle’s ExtraHop, which expects to reach $100 million ARR this year.
The $100 million ARR club, in case you’re just joining us today, is a list of yet-private companies that have either reached the $100 million ARR mark, or are close to reaching it and have plans to crest the threshold in short order. The goal of writing and publishing the list is to provide a non-valuation lens through which we can view the private market’s leading constituents. Revenue milestones matter more than valuation bumps.
This morning we’re digging into MetroMile, Tricentis, Kaltura and Diligent (with a caveat). Let’s begin!
MetroMile
MetroMile, a car insurance play, reached the $100 million ARR milestone in Q1 2019, it disclosed to TechCrunch this week. The milestone’s timing means that MetroMile reached $100 million in annual recurring revenue earlier than Lemonade, another venture-backed insurance firm that has posted strong growth in recent quarters.
As a private company, MetroMile has raised $293 million in known venture capital, according to Crunchbase data. The startups final known round was a $93 million investment that it raised in July of 2018.
When we added Lemonade — focused on renters’ insurance while MetroMile focuses on automobile insurance — to the $100 million ARR club, there was a question as to whether it belonged. Should we count insurance premiums as ARR? Earlier in January, TechCrunch caught up with MetroMile CEO Dan Preston and asked him about how he thinks about his company’s revenue — is it ARR?
Here’s what he had to say (condensed and edited):
ARR is just revenue that’s recurring, that you don’t need to then go and reacquire. So, in our view, insurance premiums can be viewed for our businesses as ARR in a technical sense, because we’re not reacquiring those customers. It looks like a subscription product.
Preston did note that in the common conception, ARR is a software result that sports high gross margins. Insurance income generates lower gross margins. Preston also said insurance margins can be more variable than software margins.
Still, as we said about Lemonade, its revenue is top line that mostly recurs, so it fits inside the bucket, even if, yes, it does look different than enterprise B2B SaaS ARR.
Tricentis
Austria-based Tricentis grew 66% last year and claims to be a “$100+ million privately held SaaS company” when talking to TechCrunch. That’s an impressive growth rate for a company of Tricentis’s size, especially when we consider how efficient its growth has proven.
Before we get to that, however, what does it do? Enterprise software testing is a big market, but Tricentis does a bit more than that, including load testing and some robotic processing automation work (that was a hot category a little bit ago). According to the firm, it added 200 customers in 2019 from the largest 2,000 global public companies.
Tricentis CEO Sandeep Johri told TechCrunch that his company’s growth has come on the back of modest spend, saying that it has been “careful with [its] burn from the start,” helping it get to “over $100 million ARR with only $83 million of primary capital.” According to Crunchbase, Tricentis has raised $172 million to date, so presumably it has some left.
I asked Johri about what changed at his company as it scaled from $50 million ARR to $100 million ARR, a period of corporate time that I’m working to learn more about. In response, he highlighted marketing and sales process upgrades at the firm; at first I found the response surprising, but then realized that as a company grows it would need to squeeze inefficiency out of its go-to-market motion so that it can keep its ARR expansion high in year-over-year percentage gain terms.
Turning to a possible public offering, Johri told TechCrunch that while Tricentis is “focused on growing the business and delivering a superior customer experience” today, given its “hyper growth and scale, an IPO is something to consider in 2021.”
Hype.
Kaltura
New York-based Kaltura works with video. If your company uses digital video in any shared capacity, Kaltura probably makes a tool that you could use. LMS video plugins? Sure. Live streaming? Yep. You get the idea. (TechCrunch covered some Kaltura product news last July, reporting that it had “announced the launch of an advanced analytics platform for its enterprise and educational users.)
The company, founded in 2006 and with $166.1 million in known capital raised, according to Crunchbase, has passed the $100 million ARR mark and is profitable on an EBITDA basis. The company, however, declined to share when it crossed the nine-figure ARR threshold.
Despite being coy about that particular data point, Kaltura told TechCrunch that it has gross margins in the mid-60% range and is growing about 25% on a year-over-year basis. So, we can forgive the lack of temporal specificity as we have other data points that paint the picture of an interesting company.
Kaltura last raised known capital in 2016, adding $50 million to its accounts in a single-investor round led by Goldman Sachs. Next step? How about an S-1?
Diligent
And finally, today’s wildcard entry. Briefly, Diligent meets our criteria. It is a private company that has ARR of $100 million or greater. Indeed, Diligent crossed that mark in January of 2016, it told TechCrunch. More recently, the company crossed the $300 million ARR mark in July of 2019 and is profitable today on an EBITDA basis.
Diligent also claims 16,500 customers for its board software service (literally a software service for boards). So, why quibble about including Diligent in our list? Well, it used to be a public company (Diligent went public on the New Zealand Exchange in 2007 for a local $1 per share; its shares fell to $0.14 according to the New Zealand Herald. It later recovered sharply.) Then it was sold to Insight Partners for $624 million. It’s still owned by the group.
So, yes, it is a private-ish company that has over $100 million ARR. Check. But it’s owned by a private-equity-cum-venture-capital shop and has been for years. It will get spun out, we’re sure, but while we can’t not include it in our list, we can’t fully include it either, given its history. Not that that’s a knock; $300 million ARR and EBITDA profitability mean that Diligent is worth a lot. It’s just that we’re trying to highlight companies that are growing toward a major liquidity event. Diligent is, sure, but its eventual IPO will be its third such event.
And that’s that! Four more in the bag. If people keep emailing in companies the series will continue. If not, we’ll take a break.