Time flies.
It was nearly a year ago that The Exchange started keeping tabs on startups that managed to reach $100 million in annual recurring revenue, or ARR. Our goal was to determine which unicorns were more than paper horses so we could keep tabs on upcoming IPO targets.
We found that Bill.com, Asana, WalkMe and Druva were impressively large and growing nicely. Since then two of the four companies from that post have gone public.
GitLab, Egnyte, Braze and O’Reilly Media joined the club before 2019 was even closed, with two of those companies taking part in the recent Disrupt conference, talking about how they managed their historical growth.
In early 2020 we added Sisense, Siteminder, Monday.com and Lemonade to the club, wrote about ExtraHop’s path to $100 million ARR, Cloudinary’s epic growth sans external capital, Siteminder’s own records and BounceX reaching $100 million ARR while it rebranded to Wunderkind.
As the year rolled along, MetroMile, Tricentis, Kaltura and Diligent joined the club. As did Recorded Future, ON24 and ActiveCampaign. There were even more names: Movable Ink, Noom, Riskified, Seismic, ThoughtSpot, along with Snow Software, A Cloud Guru, Zeta Global and Upgrade.
Today we have three more names to add to the group: UserTesting, Udemy’s business arm and Expensify. But, more than merely adding those companies to the mix — more after the jump — I wanted to shake up our radar a bit as we head into 2021.
Yes, The Exchange will keep tabs on startups and other private companies that reach $100 million in ARR, or annual run rate, as the case may be. But next year we also want to find the startups around $50 million ARR that are growing like hell. We want to go a year or two earlier in growth histories to better watch how startups scale into nine-figure revenues, instead of hearing about it after the fact.
So, if you are a startup that is expanding aggressively and will reach the $50 million revenue mark inside the next quarter or two, please say hello. I suspect a good cut of the global unicorn market could fit this bill, and therefore might provide a window into which highly valued startups are growing into their valuations.
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It’s going to be fun. Now, let’s quickly chat about the latest members of the $100 million ARR club.
UserTesting, Expensify and Udemy’s business arm
You’ve heard of each of our $100 million ARR companies this morning, so there’s less need for prelude and introduction. Here’s the group:
Expensify
Expensify is an expense-tracking company well-known around the technology world, so it’s no real surprise that it has reached the $100 million ARR threshold, a feat it announced yesterday.
But the company did us one better than merely dropping a single data point and racing back into the shadows. Instead, Expensify also disclosed that it has “maintained profitability for years [and] recorded its highest monthly revenue ever in October.”
Impressive! Even better with just over $20 million in total raised capital and claimed “lifetime revenue eclipsing $215 million,” Expensify noted that it has generated more than $10 in revenues for every dollar that it has raised. The software company also reported that its EBITDA margins, a way of measuring adjusted profitability, are greater than 25% and improving.
With revenue growth of 283% since 2018, Expensify is an obvious IPO candidate. But, it doesn’t have to hurry because it doesn’t have hundreds of millions of dollars of capital invested into itself, demanding a quick exit. With profitability in hand, it can chart its own course.
This is a bummer, as I would love to get a look at its numbers; the company is large enough to go public now, though I wouldn’t expect it to do so for at least three quarters, even if that was its near-term goal.
Given its profitability and rapid growth, Expensify is likely due an above-market revenue multiple, meaning that it is worth around $2 billion — or a bit more — by today’s averages. Notable.
UserTesting
I have to admit that we’re late to UserTesting’s news. That’s on me, but between the election and a pileup of IPOs, things have been a bit busy. Still, no time like a few months late, so let’s talk about the news.
UserTesting reported that it passed $100 million ARR in late September, meaning that it reached the mark before the start of Q4 2020. That should give us a good timing window we can use to learn more about its growth in coming quarters.
The startup helps other companies test websites, apps, marketing or prototypes with humans to garner feedback that can then be leveraged into development and other improvements.
As Crunchbase News reports, UserTesting raised $100 million earlier this year.
Sadly, we don’t have a new valuation mark for the company’s latest round. Happily, PitchBook has data on a small early-2019 round that UserTesting raised a year before its most recent investment, which valued the company at $272 million post-money. Given that the company raised $100 million a year later and then crossed the $100 million ARR mark, we can safely say that it’s worth a multiple of that dated figure today.
How large a multiple is a riddle. It’s hard to guess a value for UserTesting as the company was somewhat scant with details about its recent financial performance, aside from adding that it is “growing rapidly year-over-year” and in “its first year, the EMEA region has seen an impressive 400% growth in its customer base” after establishing a European HQ in Scotland.
We are incredibly curious, for example, what its gross margins look like, in which direction they have been trending and how quickly. Does the company’s product requirement of having humans in the loop mean that its gross margins — a proxy for revenue quality — are less like Slack’s and more like Twilio’s? Or are they slimmer?
Insight Partners, Accel, and Kern Whelan Capital have led rounds into the company. Greenspring Associates and OpenView are also listed by Crunchbase as investors in the California-based company.
Udemy’s business arm
Finally today, Udemy. Or really, a part of Udemy.
It’s been impossible to miss the edtech boom of 2020, meaning that Udemy and its ilk have come up repeatedly on TechCrunch in recent months.
But it was to my surprise that the online course provider was so large that a portion of its operations alone could reach the $100 million ARR threshold. And yet, according to an October release, Udemy for Business grew from $1 million ARR to $100 million in five years. Udemy for Business is the company’s effort to sell its services to companies so that they can better train their staff.
Given that LinkedIn Learning — née Linda.com — another enterprise education play, is seeing rapid uptake in usage this year, it’s perhaps not surprising that Udemy’s corporate efforts are also doing well. The pandemic has boosted a host of startups this year, and it appears that Udemy is enjoying the global expansion in edtech usage and demand.
The unicorn raised $50 million at a $2.05 billion valuation earlier this year, and, after TechCrunch reported that it was in the market for another $100 million at a $3.32 billion valuation, disclosed that it raised $50 million more at a a $3.3 billion post-money valuation. It isn’t uncommon for growth-stage investments to land in two tranches, so another $50 million could be pending for Udemy.
I don’t know how to discuss Udemy’s value given that there aren’t too many market comps for edtech companies that are IPO-scale. So, we’ll hold tongue on its worth for the time being. But, if just a part of Udemy is at nine-figures of top line, then the whole company is certainly IPO-scale and should give us its numbers by going public.
It’s only fair, Udemy. TechCruch has been covering you since at your 2010 seed round — check the archives here for more — so it’s time you told us about your economics!