Hello and welcome back to our regular morning look at private companies, public markets and the grey space in between.
Today we’re taking stock of a cohort of special companies: still-private startups that have reached $100 million in annual recurring revenue (ARR). Our goal is to understand which startup companies are actually exceptional. This late in the unicorn era, hundreds of companies around the world have reached a valuation of $1 billion, making the achievement somewhat pedestrian.
Reaching $100 million in ARR, however, still stands out.
We explored the idea earlier this week, citing Asana, Druva and WalkMe as private companies that recently reached $100 million ARR. In addition to that trio, Bill.com and Sprout Social, both of which went public this week, also crossed the nine-figure annual recurring revenue mark in 2019.
After we posted that short list, four other companies either just shy of $100 million ARR, or with a little bit more, reached out to TechCrunch, touting their own successes. Given that our point was that companies which reach the revenue threshold million are neat, it’s worth taking a moment to look at the other companies joining the $100 million ARR club.
For extra fun I got on the phone with a number of their CEOs to chat about their progress. We’ll start with a look at a company that is nearly a member of the club, and then talk about a few that recently punched their membership cards.
The $100M ARR club’s up-and-comers
GitLab: Expects to reach $100M ARR in January, 2020
To be frank, I did not know that GitLab was as large as it is. Backed by more than $400 million in private capital, GitLab competes with the now-purchased GitHub as a developer resource and service. Its backers include Goldman Sachs, ICONIQ, GV, August Capital and Khosla.
GitLab became a unicorn back in September of 2018, when it raised $100 million at a $1 billion post-money valuation. Its more recent $268 million Series E raised this September pushed that valuation to nearly $2.8 billion.
It’s a good company for us to include, as it provides a good example of how far in advance a $1 billion valuation can precede a $100 million ARR business; in GitLab’s case, provided that it grows as expected, its unicorn valuation came nearly 1.5 years before reaching nine-figure ARR.
To understand more about the company’s growth, we caught up with its CEO Sid Sijbrandij (full discussion here), learning that he views the unicorn tag as a way to help a company brand itself, but something that is outside of his company’s control. Revenue, in his view, is “much more within your control.” According to Sijbrandij, GitLab is aiming for $1 billion in revenue in 2023 and has a November, 2020 IPO targeted.
GitLab is sharing its impending ARR milestone as it runs its whole business very transparently (hence why my chat with its CEO was live-streamed, and archived on YouTube). It will be super interesting to see if the company hits the ARR target on time, and then if it can also stick the landing with a Q4 2020 IPO.
The $100 million ARR club’s newest members
Egnyte: Reached $100M ARR in November 2019
Egnyte, a player in the enterprise productivity, storage and security spaces, has kept growing since its $75 million Series E it raised last October.
The company, backed by Goldman Sachs (again), GV (again) and Kleiner Perkins, has raised just $137.5 million to date. Reaching $100 million ARR on that level of funding means that Egnyte has run efficiently as a business. In fact, as TechCrunch has reported, Egnyte has occasionally made money on its path to the public markets.
TechCrunch has spoken to Egnyte’s CEO Vineet Jain a number of times, but it seemed appropriate to get him back on the phone now that his company is nearly ready to go public (at least in terms of size). According to Jain, in fresh data released to Extra Crunch:
- Egnyte passed the $100 million ARR threshold in November
- The company grew about 30% in 2019
- Egnyte expects growth to accelerate in 2020
Calling $100 million ARR a “good” and “important milestone,” Jain told TechCrunch that the unicorn boom “has created a lot of misconceptions about what success looks like.” He went on to cite Egnyte’s “[focus] on building our business through fiscally responsible milestones that revolve around key financial metrics,” contrasting his business with other technology startups.
If Egnyte can grow more quickly in 2020, it’s an obvious IPO candidate for H2 2020 or H1 2021.
Braze: Announced this morning that it has reached $100M ARR
Braze, a New York-based software company focused on the customer engagement space, announced this morning that it has crossed the $100 million ARR threshold. Backed by more than $175 million from Rally Ventures, InterWest Partners, Battery Ventures, ICONIQ (again) and Meritech Capital Partners, the company’s scale is another point on the board for Silicon Alley.
According to Crunchbase, Braze’s most recent private round valued the firm at around $850 million when it raised $80 million.
To understand why Braze decided to share its revenue scale, I got on the phone with its CEO, Bill Magnuson, to chat about the milestone. Here’s what he had to say on why his company was disclosing the metric, and his views on the importance of revenue compared to valuations:
I think it goes back to some of the things that you outlined in your article, the decoupling of valuations from real business health. And for us, when we’re looking into the future, and looking at fundraising, we’ve been disciplined in our approach to building our business the whole time, with an eye towards long term results, aligning the business with customer needs.
And so, we’re actually in a position where we have no plans to fundraise further, and we’ve now reached [the] $100 million ARR point with less than $200 million raised. We also expect to hit $200 million ARR with less than $200 million raised. So when we look at the milestones in our business, the traditional ones that get covered are the fundraising, but you know what’s better than raising money from outside people is getting paid for your product.
Magnuson went on to add that his company managed to avoid needing more external capital by having “never been the kind of company that makes short-term sacrifices” to “throw another logo on a slide.”
Add Braze to your IPO watch list.
O’Reilly: Crossed $100M ARR “in 2019 in [its] platform business”
Finally, O’Reilly Media reached out to TechCrunch, also noting that it reached the $100 million ARR mark inside of 2019. The company declined to share a more specific timeline, but did include some notes on the matter from its president, Laura Baldwin.
Responding to the unicorn phenom, Baldwin said that “the focus [there] is on the wrong vector; it’s looking at high-valuation unicorns versus companies earning revenue.” She went on to add that “buying market share through deep discounts, or spending on advertising to grow a business that’s unsustainable, are old tricks to drive market valuation for companies with the investment dollars to operate that way.”
Burn.
The company also added that it “started [its] push to $100 million in ARR back in 2015,” meaning that it managed the feat in less than half a decade, though we don’t know how much ARR it had when it began the sprint.
Go public?
Summarizing, there’s plenty of appetite in the market for a new way to determine if a startup is really an outlier or merely well-funded. Some readers wrote in saying that we should call $100 million ARR startups “centacorns,” which is pretty good. Another wrote in saying that we should focus more on unit economics and other efficiency metrics. That’s also pretty good.
There’s more to do. But that’s enough for today.
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