The current list of venture-backed private companies we expect to go public — and the number of companies that might say yes to a SPAC-led debut — underscore just how many large startups there are in the market.
After years of rising venture capital investment and a wave of huge rounds, many startups and unicorns could leave the private markets this year or the next.
Last year, The Exchange wrote about former startups that had scaled to around the $100 million annual recurring revenue (ARR) mark, or had revenues that were roughly equivalent if they didn’t sell software. But that wound up being a bit less interesting than we’d hoped, as companies that have reached that scale tend to be fully baked by the time we got them on the phone.
So, we’re shooting for the $50 million ARR range this year. Our goal is to see what we can ferret out from companies that are moving from the middle-late startup years and into the unicorn realm.
The Exchange explores startups, markets and money. Read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.
What broke during the last year? Which teams have they doubled down on? How has hiring gone? We have questions. And, happily, companies have raised their hand. Today, we’re talking about OwnBackup and Assembly. Next week, it’s SimpleNexus and Kaseya. And we have Picsart on deck as a company somewhat in between our two target revenue bands.
But before we start, a final note. The following bits of journalism are more exploratory than hard-hitting. But as private companies tend to share nothing other than the occasional press release strained of personality and flavor, I’m working to bring more raw data points and observations to you even if they do not constitute the grittiest reporting you’ve ever read.
Let’s get into our first two $50 million (or around there) ARR companies.
OwnBackup
OwnBackup is a company you might have heard of as it raised a $50 million round last July, an event TechCrunch covered. The company reached out regarding our $50 million ARR series by noting that its growth had accelerated since that round, so we decided to find out more.
The Exchange spoke with CEO Sam Gutmann and CMO Jamie Grenney about OwnBackup’s recent growth.
According to the execs, OwnBackup is around $50 million ARR today. The company, as its name hints, provides cloud backup services to other companies. And it’s built atop the Salesforce platform, a service that had a good 2020 when nCino, another company that leverages the service, went public to great effect. (That debut led to TechCrunch reporting on the trend of building atop someone else’s software to IPO scale.)
And OwnBackup has lots of room to grow inside of its current platform home. It thinks it has around 2% penetration of the Salesforce ecosystem, meaning that its current 100% yearly growth pace can continue for quite some time without a material change in strategy.
Asked if OwnBackup was worried about platform risk, Gutmann and Grenney said they weren’t. Not only is Salesforce Ventures an investor, the execs noted, but the Salesforce platform is a huge SaaS ecosystem; it’s not something that could be switched off like a Google web product and consigned to the ash heap of the internet.
Turning to product, if cloud backup sounds like a broad category, that’s because it is. But according to OwnBackup, it’s largely a greenfield market, as most companies presume that their data is secure in the cloud. Sure, it’s safer to save your data in the cloud than a local hard drive, but there’s more to it than just that. Backing up data as insurance against accidental deletion for example, is smart. And OwnBackup helps companies handle data recovery after suffering a data loss or other issue, a task that can be quite complicated.
The business plan has been lucrative for OwnBackup, which told TechCrunch that it has burned around $1 million per $1 million of ARR that it is generated. For modern SaaS companies, that’s rather efficient. OwnBackup cited its inside sales model and focus on SaaS metrics — CAC payback, and so forth — as keys to its success so far.
And underhiring, to some degree. Gutmann said that the company has lagged its headcount plan for years, only seeking to hire people whom they consider the best. The result of underhiring was more cash on their books, and, we presume, more work for fewer hands.
The company is now spending more. When asked how they scaled the company from $25 million in ARR to $50 million, the CEO noted that OwnBackup’s general and administrative spend is set to triple this year, and that it built out its executive lineup in the last six months.
So, you can put off hiring CXOs for a while, but somewhere between $25 million and $50 million ARR it won’t work any more. I would have guessed the limit was earlier.
Finally, how does OwnBackup approach the growth-profit tradeoff? Gutmann said that because his company has good retention metrics — how much more customers spend on its service over time — it is more focused on net new revenues than profits. OwnBackup is conscious, he said, of both logo and dollar retention and is redoubling its investments on enterprise sales, hoping to grow its average contract size over time. That means growth over profits, even if we’ve just discussed how the company is generally frugal.
OwnBackup doesn’t think that the accelerating digital transformation is going to slow even when COVID-19 is controlled. That could make it a 2022 IPO candidate, if it can double again this year.
Assembly
Turning from enterprise-data-focused SaaS to serving the SMB e-commerce market, say hello to Assembly. TechCrunch hasn’t covered Assembly before that I can tell, so a few words about it before we discuss what we learned from our chat with its CEO Sandeep Kella.
Assembly is a collection of e-commerce-enabling products, with a community wrapped around it like a hug. Helium10 was its first product, which provides e-commerce tooling for SMBs to sell on Amazon. Assembly has also raised capital and used those funds to buy other services, like it did in September of 2020 when it bought Prestozon, a service that deals with Amazon’s ad platform.
But Assembly is not merely focused on Amazon, Kella said. Instead it wants to build a SaaS e-commerce stack for SMBs. Shopify and Amazon and Walmart have made it easier to sell online, the CEO explained, but small companies are still forced to stitch together services to actually move product. So, what if a company brought together tooling that SMBs need to do well on the major e-commerce platforms?
The pitch was enough for Assembly to raise from Providence Strategic Growth in 2019, adding ammunition to its accounts for more acquisitions.
The resulting four-product Assembly portfolio is growing at around 85% year over year, at more than $50 million ARR. According to Kella its growth has been “fairly consistent.” But that didn’t mean that Assembly’s business didn’t grow faster than its internal organization; it did, Kella said, leading to the company formalizing processes around sales and product to get a handle on its operations.
Things changed, Kella said, once Assembly outgrew generalists. Pressed on when that change happened, he said somewhere around $20 million ARR. He also noted that many companies experience growth-related issues when they reach 30 employees or 100. Those bore out for Assembly, Kelly said, which now has around 200 people, including contractors.
The Exchange was curious about how Assembly managed to grow so quickly while selling to SMBs, a market category some VCs shun due to higher expected churn and lower expected ACV. Community appears to be part of the answer. Kella said that Assembly has around 30 people on its content team and investing in community is a must.
Building an SMB is lonely work, he said, so Assembly does webinars and streams and other live events. This, he said, helps small business founders feel less alone. But the effort isn’t altruism. You get to listen to customers and then use what they tell you in making product choices, he explained.
There’s a trend in SaaS, Kella said, especially SMB SaaS, in that your audience is your moat.
Finally, what was Kella’s biggest 2020 learning that was not COVID-related? As Assembly has scaled, he’s learned the importance of “nailing” who they hire; with a multibrand portfolio, Kella said that he needs folks aboard who can have their fingers on the right pulses and the ability to “bubble up” the things that they need to.
Kella said he’s become a full-time recruiter, which is something we’ve heard from other CEOs.
And that’s our first two! More to come next week!
Comment