If you are in the SaaS startups game, by now you should have come across Tomasz Tunguz of Redpoint. He is known (at least to me) for nerding out on data and turning it out into nice blogs with R graphs (Which I have failed to learn.. yet).
At SaaStr 2016 he presented an analysis of the ‘exceptional’, fast growing SaaS companies over the preceding 3 years. In particular, he benchmarked the revenue, growth rates and fundraising size characteristics of them at Series A. There are some great insights and heuristics to take note of. I highly recommend reading his original post.
- First year MRR: 10k to 93k in MRR (first year of commercialization)
- Second year MRR: 413k of ending MRR
- Series-A raise: On average, they raise $9.5M. Range from smaller rounds of $3M to rounds >$20M.
- Average round size growth: Increasing by 11% annually.
- MRR at A is bigger: Companies who raised in 2014 had $50k, that has grown 80% CAGR, and for the investments closed in early 2016 at $163k.
- More MRR at S-A: Larger seed round sizes enable startups to raise later (hence more MRR) and greater expectations in market given larger check sizes sought by founders.
- No revenue startups get S-A: 27% raise Series A with $0k MRR (before commercialisation). It’s all hope!
- S-A pricing has no correlation to MRR: indicates S-A market pricing is based on irrational investors and founders ability to sell the dream (bullshit them) to get VCs competitive