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2021 Review: SaaS IPOs

By 

Alex Clayton

Jan 10, 2022

2021 was another record year for SaaS companies entering the public markets. The following post looks at all the metrics and KPIs of the 2021 cohort of IPOs. The list of 27 companies was picked based on business model, funding, revenue growth rates and valuation. It doesn't include companies that have filed but have not yet traded. Last year’s post had 16 total companies.

The chart below shows the number of SaaS IPOs by month in 2021 and the associated logos.

Source: Company filings

For the 2021 group of companies, the following looks at each company’s P&L (profit and loss statement), SaaS KPIs that are reported and calculated, funding history, CEO ownership, geography, current valuation and other metrics.

Just as the previous post did for the 2020 cohort, this post will cover benchmarking and descriptions of the stats and KPIs that should give you a picture of what you would have needed to make it public as a SaaS company in 2021. For deeper dives into specific companies, see other S-1 breakdowns here. To see many of these same metrics and more for all current public SaaS companies, click here. 2021 was the best year ever for SaaS companies going public and these 27 companies raised over $15B in total capital from the public markets and cumulatively represented almost $225B in total market capitalization at their respective IPO price. As you'll notice throughout the post, while each chart looks at the medians, there are wide disparities across companies and metrics - each company operates in their own end market and has unique market dynamics, and while benchmarking across them is helpful in summary, each company has created value in their own way. For example, Alkami offers a cloud banking suite and focuses on very large financial institutions so they spend very little on sales and marketing compared to others. Toast is a 20% gross margin business as they sell hardware at a negative gross margin and make money through payments. Expensify has a freemium GTM (go-to-market) and runs their business with very few headcount and high profit margins. These companies are all unique.

In summary – these are the median metrics for the 2021 select cohort of SaaS IPOs.

  • Founded 11 years ago.
  • Raised almost $400M in venture funding and burned almost $200M.
  • $225M of implied ARR (annualized revenue run-rate) and ~$185M of LTM revenue.
  • Growing implied ARR by almost 55% year-over-year.
  • Added $25M of net new implied ARR in the last quarter.
  • 74% LTM non-GAAP gross margin.
  • 46% LTM non-GAAP Sales and Marketing spend as a % of revenue.
  • 22% LTM non-GAAP Research and Development spend as a % of revenue.
  • 17% LTM non-GAAP General and Administrative spend as a % of revenue.
  • Still losing money with a (9)% LTM non-GAAP operating margin.
  • 119% net dollar retention rate.
  • LTM magic number of 0.8 and implied payback period of 20 months (definitions later in post).
  • $40B TAM (total addressable market).
  • Implied ACV or revenue per customer of $52K.
  • Almost 950 FTEs (full-time employees) with $220K of implied ARR per FTE and $212K of LTM revenue per FTE.
  • Raised $450M in an IPO and are worth almost $6B in equity value at pricing.
  • Sold 7% of the company to public investors.
  • Closed with almost $500M of cash on the balance sheet.
  • As a CEO, you’re 44 years old and priced the IPO with an almost $400M stake and your stock is up 13% from IPO price as of 31-Dec-2021.

Now that we’ve been through the summary, the following charts will dive into each company’s associated metrics. The table below shows each company's name and respective tickers to make it easier to follow (unless of course you know all the tickers already).

*Meritech Capital is an investor in UiPath, Amplitude, Braze and ForgeRock.

(1) Financial Metrics and SaaS KPIs

Implied ARR at IPO Quarter ($M)‍

For simplicity and consistency, we define ARR as annualized revenue run-rate, which is calculated as total quarterly revenue * 4. However, for a few companies, we use their reported “ARR” (annual recurring revenue) where appropriate (for example, Toast). The median is $223M.

Source: Company filings

LTM (last-twelve-months) Revenue at IPO Quarter ($M)‍

Revenue scale is varied among this group. The median LTM revenue is $186M.

Source: Company filings

% Year-over-year Implied ARR Growth Rate at IPO Quarter

This is a fast-growing group of companies. The median growth rate at IPO quarter is 54%.

Source: Company filings

‍Implied Net New ARR at IPO Quarter ($M)‍

The chart below benchmarks how much net new implied ARR each company added during the last reported quarter in their filings before IPO. The median net new implied ARR added is $25M.

Source: Company filings

LTM (last-twelve-months) non-GAAP Gross Margin‍

The median LTM gross margin for this group is 74%.

Source: Company filings

LTM (last-twelve-months) non-GAAP Sales and Marketing as a % of Revenue

The median LTM sales and marketing as a % of revenue for this group is 46%. Sales and marketing is generally the highest operating expense line item for SaaS companies.

Source: Company filings

LTM (last-twelve-months) non-GAAP Research and Development as a % of Revenue

The median LTM research and development as a % of revenue for this group is 22%.

Source: Company filings

LTM (last-twelve-months) non-GAAP General and Administrative as a % of Revenue

The median LTM general and administrative as a % of revenue for this group is 17%.

Source: Company filings

LTM (last-twelve-months) non-GAAP Operating Margin

As expected, almost every company is losing money on a non-GAAP operating income basis and only 7 made money in the preceding 4 quarters of their respective IPOs. The median LTM non-GAAP operating margin was (9)%.

Source: Company filings

Net Dollar Retention at IPO Quarter

Retention and expansion are critical KPIs for SaaS companies and while some of these businesses have slightly different definitions, they’re benchmarked below. The median is 119% for the companies that disclose it. Note that Knowbe4, Toast, Expensify, Procore, and Squarespace did not disclose this metric at IPO.

Source: Company filings

LTM (last-twelve-months) Magic Number

The following looks at magic number, which is a metric used to quantify the efficiency of sales and marketing spend. It is defined as LTM net new implied ARR / LTM sales and marketing spend starting in the prior quarter. The median is 0.8.

Source: Company filings

LTM (last-twelve-months) Implied Months to Payback

It’s hard to benchmark precise customer acquisition costs across companies since most companies don’t report new customer adds per quarter, but it’s possible to standardize and find the months to payback using the inverse of a CAC ratio (LTM implied net new ARR * LTM gross margin / LTM sales and marketing spend starting in the prior quarter), which is outputted below for each company. The median is 20.3 months.

Source: Company filings

LTM (last-twelve-months) Average Revenue per Customer or Average Annual Contract Value at IPO Quarter ($000s)

Public companies typically don’t report detailed customer segment information so it’s hard to know exactly how much all of their customers are paying, but we do have averages in most cases. The below benchmarks annualized total revenue divided by total customers at IPO quarter -- as you can see the ranges are quite wide. The median is $52K.

Source: Company filings

Total Full-time Employees (FTEs) at IPO Quarter

The scale of revenue varies widely in this group and so does the employee base. The median is 940 full-time employees.

Source: Company filings

LTM (last-twelve-months) Revenue per Average Full-time Employee ($ in 000s)

While the number of employees is helpful to assess scale, revenue per employee is a good proxy for efficiency. Of course, each company has a different product, market, delivery model, price, and end-customer, so this metric may not be perfectly comparable across the group but is still interesting to evaluate. Expensify really stands out ($803K) and the company only had 140 FTEs at IPO quarter. The median is $212K.

Source: Company filings

Implied ARR per FTE ($000s)

Here is the same look but using implied ARR. Again, Expensify really stands out. The median is $221K.

Source: Company filings

Implied Cash Burn to IPO ($M)

This chart represents the implied net cash burn (inclusive of total equity capital raised, debt and any acquisitions) to try and approximate how much these companies burned to get to IPO. Pitchbook is the source for total equity funding and the rest of the metrics are pulled from the S-1. Also represented on the chart is the implied ARR scale at IPO. Not surprisingly, companies that are larger at IPO burned more money on the path to IPO. The median net burn to get to IPO for this group was $(167M). Note Qualtrics was not included as they were spun out of SAP.

Source: Pitchbook and company filings

Implied ARR over Cumulative Net Burn to IPO

The following looks at the ratio of each company’s implied ARR at IPO quarter to their implied net cash burn (inclusive of total equity capital raised, debt and acquisitions). The median is 1.1 but some companies like Olo, SEMrush and Amplitude* had significant positive ratios.

Source: Company filings

(2) IPO and Other Company Metrics

Years from Founding to IPO

How long did it take to IPO? The below chart has years from founding to IPO year -- the median is 10.7 years.

Source: Company filings

Geography by Company Headquarters

Less than 40% of the SaaS IPOs in 2020 were based in Silicon Valley and that trend has continued in 2021 with only 33% in the Bay Area. At Meritech, many of our investments are based outside Silicon Valley and we expect to see many more IPOs from non-Silicon Valley companies.

Source: Company filings

Founder as CEO at IPO

Some companies have new CEOs but as the chart below shows, 70% of companies had a founder as the CEO at the time of IPO.

Source: Company filings

Total Equity Capital Raised ($M)

This group of companies raised over $12B from investors in the private markets -- this chart represents the total. The median is $384M.

Source: Pitchbook

Lead Left Banker or Advisor

Investment banks underwrite traditional IPOs and “advise” in Direct Listings with the coveted spot being the lead left on the cover of the S-1. Morgan Stanley and Goldman Sachs usually take the left lead slots for technology companies and this group of companies is no different. Morgan Stanley was the leading underwriter and advisor with 52% of the lead position mandates from this group.

Source: Company filings

Dual-Class or Multi-Class Share Structure

Dual-class share structures have become increasingly common for fast-growing SaaS companies. It makes sense – as a founder of a company that’s performing well you are afforded the ability to create a class of shares to control the voting i.e. have control of the company. This was quite common in 2021 and of this group 70% had dual-class or multi-class share structures.

Source: Company filings

TAM (Total Addressable Market) ($B)

While the TAM analysis in S-1’s are not an exact science they are still helpful to look at in aggregate. The median TAM is massive at $40B.

Source: Company filings

IPO Size ($M)

Each company also raised significant dollars from the public markets. The median offering size was $450M and this includes both primary and secondary shares. Two of the group did not raise capital since they utilized a direct listing (Amplitude* and Squarespace).

Source: Company filings. Does not include greenshoe

Dilution in IPO

Given IPOs are financing rounds, companies sell new primary shares to public market investors. The median dilution from IPO for this group of companies was 7%. Again, given Amplitude* and Squarespace went public through direct listings they did not issue new primary shares.

Source: Company filings

Equity Value / Market Capitalization at IPO ($B)

The median market cap at IPO pricing was almost $6B.

Source: Company filings

CEO Ownership at IPO

CEOs and employees at venture-backed companies usually take a significant amount of dilution as companies raise more equity capital to fund their growth. The median CEO ownership pre-offering was 9.1% for this group of companies. Red columns below denote founder CEOs and not surprisingly, CEOs who are founders own more of their respective companies at IPO. The median for founder CEOs is 10.6% and the median for non-founder CEOs is 2.2%. Weave and Qualtrics are not included as at the time of IPO the CEO's vested shares were <1% and not reported.

Source: Company filings. Does not include unvested equity and includes equity as reported at time of IPO.

CEO Age at IPO

The median age at IPO for a CEO was 44 years old.

Source: Company filings

Implied Value of CEO Equity at IPO / Reference Price ($M)

The following chart shows the value of the CEO’s shares at IPO and/or reference price. The median is $370M.

Source: Company filings. Qualtrics and Weave not included as CEO vested equity was <1% and not reported.

Valuation / Multiples

Companies do not release projections in S-1’s and while most companies have forward estimates today, the following looks at enterprise value at IPO price / reference price divided by LTM revenue as to include all companies. The median multiple is 22.9x.

Source: Company filings. Enterprise value figures are fully-diluted

This chart looks at enterprise value over implied ARR. The median multiple is 19.8x.

Source: Company filings. Enterprise value figures are fully diluted

Post-IPO Performance

While many of these companies were up significantly from IPO / reference price, the past 8 weeks in the public markets has not been favorable for SaaS companies. As of 31-Dec-2021, the median increase from IPO price was 13% and 11 out of 27 companies -- 40% -- were trading below their IPO / reference price as of 31-Dec-2021. As of the same date, WalkMe, Blend Labs, Squarespace, and UiPath were also below their last reported private round valuation.

Source: Company filings and public market data

These 27 companies raised over $15B which is up from $11B from 2020. 2022 is likely to be another strong year for SaaS IPOs. While the public SaaS market is down significantly over the past 2 months, given the massive pipeline of companies 2022 has the potential to look similar to 2021.

*Meritech Capital is an investor in UiPath, Amplitude, Braze, and ForgeRock.

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Special thanks to Aimee He, Anthony DeCamillo and Dan Knight for their help on this post.

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