A little while back, a VC asked me what I thought of a prospective mid/late stage investment. I was/am reasonably familiar with this company as it is adjacent to EchoSign.
My answer was, well, I’d probably pass — certainly at the valuation (12x+ ARR). I said the product was ooooold and the platform dated, the UX/UI was inferior and difficult to update due to legacy users, and that the team was pretty good but full of a lot of mercenaries and new hires, with little founder DNA left. To me it was a B+ deal at an A- valuation.
His answer back was he didn’t care about any of that. He acknowledged the product was pretty bad by 2013 standards. He acknowledged it wouldn’t likely get much better, and that half the management team might cycle out in the next six months. He didn’t care at all. He didn’t care about the competitive landscape, not much, either. His point was this SaaS Company, at $40m ARR, had Sufficient Momentum. It wasn’t going to be stopped. All he really cared about (the VC) was the absolute market size and dynamics, which he was vague on and which I was able to be somewhat helpful with.
And he made the investment.
I thought about this again the other day when Adobe announced that EchoSign and the Adobe Document Services had hit $64,000,000 in ARR.
And that VC, he had a point. I can see it now, so clearly. From a $64,000,000 perch at least.
There’s a point where if you get a SaaS product large enough, and keep funding it — then until the paradigm changes on you, which may take a decade or more — the question is just about how much you grow in a given year. 40%? 70%? 90%? Add in oligopical (vs. perfect competition – more on the difference here) market dynamics, and you can just keep going and going and going as long as you have a dedicated team.
My only learning and insight is if you’re post-Initial Scale … squint and see Unstoppable. That’s your next hill. And it is different there. That may be $20-$30m in ARR, maybe a little less if your ACV is low, maybe toward the high end if your ACV is high.
>> Unstoppable is achieved in fact at far lower ARR terms than you might think.
Once you’re there, it may not feel real yet. In fact, I can almost guarantee it won’t feel truly real yet. Your pipeline may be lumpy, and that CYE growth target may seem rather challenging. I recently met with a good friend of mine who is almost doing $20m in ARR after < 36 months, and he still felt the leads, the revenue, were unpredictable. But put that aside for long-term planning purposes. You don’t have to see the IPO yet or anything intimidating like that as the next stage. Just get to Unstoppable.
Momentum builds on momentum. Get to where you have a real brand, and 1000s or 10,000s of customers, treat them well, keep investing, and $20-$30m in ARR and … Then it will be different. Not easy per se — SaaS never is easy — but different. It will all come together. Even if your product isn’t perfect, even if the competition is all over you, even if you haven’t even done a new release in a year, even if your sales efficiency is going down, even if Salesforce or Google or whomever builds the world’s most awesome competitive app … even if almost anything. So long as you get to Unstoppable. You can be slowed still. But you can’t be stopped.
It will take time. It will take years. It will be hard to see. But all that matters is you get to Unstoppable, not when. Just write off whatever pain and time it took you to get to your current point. It doesn’t matter. SaaS is a 7-10 year journey, after all.
(Cross-posted @ saastr)