Logan Bartlett, Managing Director at Redpoint Ventures recently shared the Market Overview Report they presented to their Limited Partners in March '24 at their AGM event at the Chase Center in San Francisco. Ray "Growth" Rike and Dave "CAC" Kellogg review the key insights during this episode.

Insights that Dave and Ray discussion include:

• Enterprise Valuations - a return to 2019
• Growth Rate trends - a return to a time long ago in a land far away
• The value of Growth vs Profitability - the trends and the facts
• Down Rounds, Shut Downs and No Rounds

Click here to get the report and to follow along Dave and Ray's conversation - as they sometimes go off the deep end!

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Rubrik, a cloud industry cybersecurity company went public on April 25th - Dave "CAC" Kellogg and Ray "Growth" Rike break down the key metrics that Rubrik used as the foundation to their S-1 and Initial Public Offering. Those metrics include:

• Annual Recurring Revenue Growth
• Revenue (GAAP) Growth
• Net Revenue Retention
• Sales and Marketing Expenses as % of Revenue
• Free Cash Flow versus Net Income

The Metrics Brothers also discuss the Rubrik transition to a recurring revenue model and the two-tier stock structure used to ensure voting control remains with the founders and early investors.

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Dave "CAC" Kellogg and Ray "Growth" Rike discuss how a "growth rate" endures for a SaaS company trend over time!

Topics covered during the conversation include:

• T2D3 Growth Model and Mantra from 2015
• "56789" Growth Model from Metric Brother Dave "CAC" Kellogg
• The Impact of Growth Endurance decreasing to 65% in 2023 versus 80% in 2021

Growth Endurance is the measure of how a company's growth rate endures over time: GE = current year’s growth rate / last year’s growth rate.

At an 80% Growth Endurance (2021 value) says that a companies growth rate in the next year will be 80% of the current years growth

- example: 70% growth this year would predict 56% growth next year

Growth Endurance has decreased over the last two years and is NOW ~ 65% (2023)

- example: 70% growth this year would predict 45.5% growth next year

Growth Endurance decreasing from 80% to 65% may not sound that bad but let's look at the impact over 5 years at a $10M ARR company today but...

• 80% Growth Endurance = $189M ARR in Five Years (starting at $10M ARR)
• 65% Growth Endurance = $122M ARR in Five Years (starting at $10M ARR)

Using a 6.5x "Enterprise Value to Revenue" multiple that projects a material decrease in Enterprise Value 👇

• 80% Growth Endurance = $1.23B Enterprise Value in Five Years
• 65% Growth Endurance = $793M Enterprise Value in Five Years

The change in Growth Endurance translates into a $437M decrease in EV (at the same 6.5x multiple)

🤷‍♂️ If Growth Endurance has decreased by 15% over the past two years and Customer Acquisition Cost & Growth Efficiency have not improved materially over the past 7 quarters it might be time to change ...

The "T2D3" Growth Model suggests the below ARR growth for a B2B SaaS company

• Get to $2M
• Next year: Triple to $6M
• Next year: Triple to $18M
• Next year: Double to $36MNext year: Double to $72M
• Next year: Double to $144M

The "56789" Growth Model suggests the below ARR growth for a B2B SaaS company

• Year 5: $10M
• Year 6:$20M
• Year 7: $50M
• Year 8: $75M
• Year 9:$100M

If you are a fan of B2B SaaS and have a desire or need to stay on top of the most recent trends this episode is a great listen!

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