Startup Growth Stages

There's no typical series of Start Up growth stages.

But want to get a sense of step-function by looking at some examples.

Artificial Game Rule-s I'm focusing on here:

• largely software company - high ($250k) Revenue Per Employee
• largely product not custom-services - high margin
• (relatively) low-touch sales (Atlassian not WorkDay)
• tech isn't Rocket Science (e.g. streaming video)
• cf Unicorn

The Startup Growth Stages are roughly:

• T=0.0yrs: 2 CoFounder-s start BootStrapping for relatively brief time
• T=0.5, numEmp=2 (incl/just the 2 CoFounder-s): raising OPM (Seed Capital, $0.5-1.0M) to pay themselves plus ~2-3 Early Employee-s to accelerate Customer Development
• T=1.5, numEmp=5: raising Series A ($1.0M-$3.0M) enough to hire a few more people for long enough to get to Product Market Fit?
• T=3.0, numEmp=10: raising Series B ($2M-$8M?) from Venture Capital to accelerate growth and get to Liquidity Event
• T=7.0, numEmp=40: Liquidity Event ($10M rev, $100M value)
• See below for some examples.
  • If goal is IPO, then probably need revenue of $100M, which means you'll have to grow much faster, even if you push out the "deadline" to 8-10yrs from founding.
    • hmm, median IPO offering runs ~$100M which supports my original $10M revenue goal. Though that's all IPO-s, not just this tech/software universe, so probably lower multiples ergo high revs.
  • Or you could hope for Buy-Out from BigCo, but a risky bet to take.
  • Or you could go for an LBO to buy out your investors while taking on lots of debt. See 2013-10-30-KickstarterNonexitPayback
  • But I will still stop my org-structure planning for Growing Your Startup Tech Product Team at numEmp=40.

Some examples (ideally companies that have gone public in last 5yrs), listed alphabetically

(Disclaimer - some of the ratios below don't check out very well, but since I'm just getting overall sense of scale, I'm not losing sleep over it.)

Note: after assembling the below profiles found:

• this piece on the dearth of small-company IPO-s. The median annual sales of tech company IPOs last year was $106 million, as compared with an inflation-adjusted $25 million in 1996... In 2013, only 43 tech stock IPOs occurred, whereas venture capitalists sold 376 of their portfolio companies in trade sales (M And A).
  • These days, most institutional investors will hardly consider a company with less than $100 million in revenue and a valuation of at least $500 million.
• this good summary of Enterprise SaaS companies. If you just spend 9.5 years raising $110 million dollars across five rounds of funding, and hire 530 employees, including a sales and marketing team of 160 people, while building a world-class product that can win in the hyper-competitive enterprise software business, to reach $70 million in annual revenue, you can create a high margin business with predictability. Sure you don’t want to build a dating app?

Atlassian

• 2002 founded
• 2010 $60M
• 2014 $150M
• 2014 1148 employees; rev $150M (2013), valued $3.3B (still private)
• Dec'2015 IPO market cap $4.37B
• 2016 1760 empl; rev $457M

Everyday Health

• 2002 founded
• 2003 $1.7M Series A
• 2003 $4.5M Series B
• by 2011 total $84.7M funding
• Mar'2014 IPO (12yrs after founding); value $454M (=2.83x rev), rev $160M; 520 empl

GrubHub

• 2004 founded
• 2007 $1.1M Series A
• 2009-13 total $83M
• Apr'2014 IPO (10yrs after founding); value=$2.6B = 19x rev; $170M rev; 680 employees

HubSpot

• 2006 founded
• 2006 Seed Capital $500K
• 2007 Series A $5M
• 2008-2012 total $95M
• 2014 IPO (8yrs after founding); value=$700M = 9x rev; rev=$77M; 700 empl

Kayak

• 2004 founded
• 2004 Series A $8.5M
• 2004-2012 total $225M
• 2012 IPO (8yrs after founding), value=3x rev, rev=$224M, profit $9M; 185 empl

LinkedIn

• 2003 founded
• 2003 Series A $4.7M
• 2004-2008 total $120M raised
• 2011 IPO (8yrs after founded); value=13x rev, rev=$243M; 1288 employees

Marketo

• 2006 founded
• 2006 Series A $5.4M
• 2008-2011 total $100M
• 2013 IPO (7yrs after founding); value=$1.4B = 13x rev; rev=$95M; 373 empl

Textura

• 2004 founded
• Feb'2013 $6.8M in debt financing
• Jun'2013 IPO (9yrs after founding) - value=21x sales, prev year sales $21M, loss $18M; 287 employees

Trulia

• 2004 founded
• 2005 Series A $2.1M
• 2005-2008 add'l funding $31M
• 2012 IPO, value=6.4x rev, rev=$77M, net loss $6M; 250 employees

WorkDay

• 2005 founded
• 2005 raised $15M
• 2009-2011 total $160M
• 2012 IPO (7yrs after founding); value=39x rev, rev=$250M; 1400 empl

ZenDesk

• 2007 founded
• 2008 Seed Capital $500k
• Mar'2009 Series A undisclosed
• Aug'2009 Series B $6M
• total $85.5M
• May'2014 IPO (7yrs after found), value=$632M = 8.7x rev; rev $72M, loss $22.6M; 500 employees

Some still-private companies

Asana

• 2009 founded
• 2009 $1.2M Angel Capital
• 2009 $9M Series A
• 2012 $28M Series B
• Apr'2014 61 empl, rev =$25M?
• Dec'2014 92 empl
• Dec'2016 130 empl

BaseCamp/Thirty7 Signals (maybe a Life Style Company doesn't belong on this list, but still interesting to ponder) (and the numbers are much sketchier)

• 1999 founded as design consultancy
• 2004 BaseCamp product launched
• 2007 $4M revenue
• 2008 $8M revenue
• 2011 $20M revenue
• 2013 36 employees
• 2015 47 employees
• 2016 50 employees (12 devs)
• 2017 revenue $25M, 52 employees ($480k/empl)

EverNote

• 2007 founded
• 2009 $26M Series A!
• 2009 $10M Series B
• 2010-14 total raised = $240M
• 2010 revenue $5M?
• 2011 75 employees
• 2012 revenue $40M? ($200k/emp?) (run-rate): 34M users, 1.4M paying
• 2013-01 280 employees
• 2013-09 330 employees
• 2014 revenue $36M/yr?
• 2015-01 400 employees
• 2019 expected revenue $100M?
• 2023 revenue $50M? (I don't think revenue dropped, I think the truth is probably between this number and the 2019 number - all of them are crude outside estimates

GitHub

• 2008 founded
• 2012 $100M Series A! (valued $750M)
• 2013 192 employees>
• 2015 255 employees

WattPad

• 2006 founded
• 2010 Angel Capital $?
• 2011 $3.5M Series A
• 2012 $17.5 Series B (15 employees)
• 2013 $0 revenue?
• 2014 $46M Series C (70 employees)

Some IPO bits

For 2014: 55 companies in the technology sector went public, Renaissance said, raising a total of $32 billion. That compares with 45 tech companies that went public in 2013, raising $8 billion.

But as anybody who paid even the slightest attention to the IPO market knows, the big event in tech IPOs was Alibaba’s offering, the largest US IPO ever. The Chinese e-commerce giant listed in September, raising $22 billion, or more than two thirds the total amount raised by all companies within the sector. Factor out Alibaba, and you have 54 tech companies going public, raising just $10.5 billion dollars.