Two $50M-ish ARR companies talk growth and plans for the coming quarters

Lost amongst all the IPO chatter of the mega-unicorns are a crop of companies reaching their stride, often flush with capital, ready with big plans, and still with some time before they go public. This group of companies are what we’re calling our $50 million annual recurring revenue (ARR) group, though we’re not too strict on that revenue figure.

Close enough will do.

A little bit ago we kicked off the series by looking at  OwnBackup and Assembly. Today we’re continuing the series, digging into SimpleNexus and PicsArt. Next up is and Synack, and we have an interview with Kaseya on deck. The latter company is a bit oversized for our cohort, but we’ll figure out what to do with our notes from that chat in due time.

As a reminder, we’re looking at startups that are around the $50 million ARR mark because our 2020 exploration of $100 million ARR companies wound up merely taking looks at companies, like Lemonade, that were going public in short order. We’ll still do the occasional piece on the group, but we’re focusing on smaller firms this year.

So, into the breach with notes on SimpleNexus and PicsArt, drawing on public information concerning their fundraising history and product, and interviews with both companies. Let’s see what we can learn from their growth!

SimpleNexus

SimpleNexus is a Utah-based technology company that provides digital mortgage software. The company most recently raised $108 million in January of this year, a Series B that we sadly lack a valuation for.

The company is growing quickly, with founders Matt Hansen and Ben Miller telling TechCrunch that they expect to scale from $30 million to $58 million in the next 12 months. That puts the the company comfortably into our new group.

SimpleNexus’s product is sold to banks and other financial institutions, helping provide a hub — a simple nexus, if you will — providing consumers a single login to manage their home-buying process from search to purchase. The software itself is sold on a SaaS basis, often white-labeled to banks.

But while SimpleNexus has seen success with its current model, claiming to touch around one in every eight mortgages, its founders told TechCrunch in a video call that they have bigger aspirations. Hansen, who is also the company’s CEO, said that in the future its service could stick with customers after they buy a home, perhaps helping them connect utilities, find appraisers, and manage their home.

TechCrunch was curious about the company’s recent capital raise, and how it may impact SimpleNexus’s ramp to nearly $60 million in revenue by January 2021. Per the company, it wasn’t looking for capital, but after receiving some inbound offers to sell its entire business, which weren’t what its founders wanted, it decided to raise more external capital instead. Insight, which led the round, was excited about their company, the founders said, thanks to its customer growth and revenue expansion.

And why not, was another reason; the market is frothy, the pair argued, so why not take on capital when the markets are favorable?

SimpleNexus has positive free cash flow today, which we reckon could slip into the negative territory if it puts its new capital to work hiring lots of new staff. But with self-described “tremendous SaaS fundamentals” — including 124% net revenue retention, it said — the company should be in good shape even if it does take up its burn for a little while.

Onto our theme of what has worked for companies of this size, and what has broken, or needed a change, Hansen said that SimpleNexus has gone through quite a lot of go-to-market (GTM) change. A recent hire has brought scaling experience to the company’s GTM work, with the company elevating her to the executive team. That hire should help it reach its revenue goals.

Hansen also said that he didn’t know where to begin when thinking about recent changes at SimpleNexus, as so much was changing all the time. Miller added that the company had already put in place the corporate infrastructure of department heads back in the 2018-2019 time period, around when SimpleNexus raised its $20 million Series A. So it has long had the bones in place to support more muscle.

Now further scaling awaits, with the startup looking to build out its sales team from seven or eight people to thirty; that’s a huge jump that will require new process, support staff, and more, we reckon.

There doesn’t seem to be a coming slowdown to change at the firm, with the founders saying that every time a company’s workforce grows by 20% everything changes; having gone through this at a previous startup job, I can attest to the sentiment’s accuracy.

Looking ahead, SimpleNexus has a year ahead of operational risk, Miller said, not financing risk; that means it has lots of cash, and now has to do a good job of putting the capital to work. But the pair seem optimistic, noting positive notes from their sales pipeline, and work scaling certain sales functions, professional services, and more.

So in SimpleNexus we see a startup that is closer to profits than most, looking to expand by a little under 100% this year, flush with new capital and a huge market to attack. Let’s see how far the company can get by this time next year; if it can double it wouldn’t be more than 18 months away from IPO scale. That would be another win for Utah and its burgeoning startup scene.

PicsArt

PicsArt is a neat company. TechCrunch has covered it for north of a half decade, including this 2015 story about it raising $15 million, several stories in 2016, notes about it reaching 100 million MAUs in 2017, and a few more stories in 2019, including that it reached 130 million MAUs that year.

You may be wondering what PicsArt is, and if you are behind. PicsArt is a mobile and desktop photo editing service, and the answer is yes. But don’t worry, I was also playing catch up when I spoke with Tammy Nam, PicsArt’s COO and CMO, about her company.

As grounding, PicsArt has raised $67.2 million to-date, including a $22 million infusion in July of 2019. That round valued the company at $345 million, according to PitchBook data. Update: Per the company, the round actually valued PicsArt at “more than $600 million.”

From that comparatively modest capital base, PicsArt has surpassed the $50 million ARR mark, and expects to reach $100 million this year. In an email the company said that it has its “sights set on an IPO in the very near future,” which we thought was exciting. So, we got Nam on horn — it was a video call, but it’s more fun to use old-timey phone references — to see what was up with the company, and what it has undergone lately in terms of changes as it has scaled.

Something new is a focus on the desktop environment, which PicsArt only more recently began to target after building a huge audience on mobile platforms. Why is the company adding desktop tooling to its mix? According to Nam, the focus is due to a rising business use case, with its software used at schools, and small organizations and companies. Those users now account for around 30% of its business, she said.

And another reason why Web-editing matters is because Nam and her company think that PicsArt is at the”epicenter” of what it calls the “digital hustler movement.” The COO clarified that this is what we’ve come to also know as the creator economy. What’s that? She explained that the market is folks using digital channels to make money, either part-time or full. And PicsArt, which helps folks edit and create digital imagery, wants to be there with tooling for those micro, small, and medium-sized businesses.

PicsArt thinks that the creator economy is set to grow rapidly. Asked why, Nam told TechCrunch about South Korean news consumption, in which traditional news broadcasts have been supplanted by creators building their own equivalents; South Korea is a harbinger for what’s to come in other areas, Nam explained. (As an esports fan, I agree.)

The company is a bet on Gen Z, then. Which is fine, as Nam said that her company “really understands” the up-and-coming human cohort. It’s one that uses media very differently than those that came before, she added.

The result of PicsArt’s mobile and desktop work and generational aptitude has been big growth. Per Nam, the her company could reach $100 million ARR in just a few quarters. The company has also been profitable at times, the lately it has focused more lately on growth; our read of that set of comments is that PicsArt is probably not burning too much cash, something we’ll be able to see when it does go public.

So, what has changed at the company as it scaled past $50 million ARR and set its targets on $100 million? Nam said that one challenge was how to grow quickly without breaking things. She also added that having the right people at the right time was critical, as not everyone is tuned to the next step of a company’s growth and needs; this is a rising theme in our $50 million ARR chats, the need for having the precisely right people at the right time.

The sentiment feels similar to the Formula 1 maxim of having the right tire on at the right time.

Summarizing, Nam said that having the right people, at the right time, focused on the right thing was what companies need. And given PicsArt rapid growth, she has some standing to make the claim.