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How Quickly Should You Grow to Key ARR Milestones? The Rule of 56789

Question:  what do you call a 10-year old startup with $10M in ARR?
Answer:  a small business [1].

When you make a list of key SaaS metrics, you’ll rarely find age listed among them.  That’s correct in the sense that age by itself tells you little, but when size is measured against age, you get a rough measure of velocity.

It’s a lot like people.  Tell me you can play Mozart’s Piano Concerto No. 23 and I’ll be impressed [2].  Tell me you can play it at age 12, and I’ll think you’re an absolute prodigy.  Tell me you have $10M in ARR after 10 years and I’ll be impressed [3].  Tell me you have it 3 and I’ll run for my checkbook.

All this begs the question of growth velocity:  at what age is a given size impressive?  Towards that end, and working with my friends at Balderton Capital, I’ve come up with what I’m calling the Rule of 56789.

  • 5 years to break $10M
  • 6 years to break $20M
  • 7 years to break $50M
  • 8 years to break $75M
  • 9 years to break $100M

Concretely put, if you walk through the doors to Balderton’s London offices with $54M in ARR after 7 years, you’ll be in the top quartile of those who have walked before you.


  • I’m effectively defining “impressive” as top quartile in the Balderton universe of companies [4].
  • Remembering 56789 is easy, but remembering the milestones is harder.  Once you commit the series {10, 20, 50, 75, 100} to memory, it seems to stick [5].
  • Remember that these are milestones to pass, not ending ARR targets, so this is not equivalent to saying grow 100% from $10M to $20M, 150% from $20 to $50M, and so on.  See note [6] before concluding {100%, 150%, 50%, 33%} is an odd growth trajectory.
  • For example, this is a 56789-compliant growth trajectory that has no whipsawing in growth rates.

Three Situtions That Break The Rule
Rules are made to be broken, so let’s talk about three common situations which confound the Rule of 56789.

  • Bootstraps, which are capital constrained and grow more slowly.  Bootstraps should largely ignore the rule (unless they plan on changing their financing strategy) because they are definitionally not trying to impress venture capitalists [7].
  • Platforms, that require years of time and millions of dollars before they can go to market, effectively resetting the starting clock from company inception to beta product release [8].
  • Pivots, where a company pursues strategy A for a few years, abandons it, and takes some salvage value over to a new strategy B. This effectively resets the starting clock from inception to pivot [9].

Alternative Growth Velocity Rules
Let’s compare the trajectory we showed above to similar one generated using a slightly different rule, which I’ll call the 85% Growth Retention Rule, which says to be “impressive” (as defined above), you should:

  • Pass $1M in ARR at a high growth rate (e.g., above ~180%)
  • Subsequently retain 85% of that growth rate every year

I view these as roughly equivalent rules, or more precisely, alternate expressions of nearly the same underlying rule.  I prefer 56789 because it’s more concrete (i.e., do X by Y), but I think 85% growth retention is somewhat more general because it says no matter where you are and how you got there, try to retain 85% (or more) of your growth rate every year.  That said, I think it stops working at 8-10 years because the asymptote on great company growth is somewhere around 40% [10] and some would argue 60% [11].  It also fails in situations where you need to reaccelerate growth.

There’s one well-known growth velocity rule to which we should also compare.  The triple/triple/double/double/double (T2D3) rule, which says that once you hit $2M in ARR, you should triple to $6M, triple again to $18M, then double three times to $36M, $72M, and $144M.

Let’s compare the 56789 and the 85% Growth Retention rules to the T2D3 rule:

Clearly T2D3 is more aggressive and sets a higher bar.  My beef is that it fails to recognize the law of large numbers (by failing to back off on the growth rates as a function of size across considerable scale), so as an operator I’m more intuitively drawn to the 85% Growth Retention rule.  That said, if you want to be top 5% to 10% (vs. top 25%), then go for T2D3 if you can do it [12].  You’ll clearly be creating a lot more value.

I like all of these rules because they help give you a sense for how quickly you should be getting to a certain size.  Growth conversations (e.g., trying to get a CRO to sign up for a number) are never easy.  Rules like these help by providing you with data not about what the average companies are doing, but what the great ones are.  The ones you presumably aspire to be like.

The limitation, of course, is that none of these rules consider the cost of growth.  There’s a big difference between a company that gets to $100M in 9 years on $100M in capital vs. one that does so on $400M in capital.  But that’s why we have other metrics like cash conversion score.  Different metrics measure different things and these ones are focused solely on size/growth vs. age.

A big tip of the hat to Michael Lavner at Balderton Capital for working with me on this post.

# # #


[1] See the definition of small business, which is somewhat broader than I’d have guessed.

[2] Even though it’s only classified as “less difficult” on this rather amazing scale from less difficult to difficult, very difficult, extremely difficult, ridiculously difficult, and extraordinarily difficult.  (Perhaps CEO’s can use that scale to classify board members.)

[3] It’s not as if just anybody can do either.  Founding a company and building it to $10M is impressive, regardless of the timeframe.

[4] Balderton universe = European SaaS startups who wanted to raise venture capital, who were sufficiently confident to speak with (what’s generally seen as) a top-tier European firm, and who got far enough into the process to submit performance data.

[5] I remember it by thinking that since it’s still pretty early days, jumping from $10M+ to $20M+ seems more reasonable than from $10M to $25M+.

[6] Don’t equate this rule with a growth vector of {100%, 150%, 50%, 33%} in years 5 through 9.  For example, years in which companies break $10M often don’t conclude with $10.1M in ARR, but more like $15M, after having doubled from a prior year of $7 to $8M.

[7] The rule would probably be more useful in projecting the future of VC-backed competitor.  (I think sometimes bootstrapped companies tend to underestimate the aggressiveness of their VC-backed competition.)  This could help you say, “Well, in N years, BadCo is likely to be a $50M business, and is almost certainly trying to be.  How should that affect our strategy?”

[8] That said, be sure you’re really building a mininum viable product and not overengineering either because it’s fun or it allows you to delay the scary of moment of truth when you try to sell it.

[9] Financings after a pivot sometimes require a recapitalization, in which case the company’s entire lifeclock, from strategy to product to cap table, are all effectively reset.

[10] Current median growth in Meritech Public Comps is 32% at median scale $657M in ARR.

[11] 0.85^10 = 0.2 meaning you’ll cut the starting growth rate by 80% after ten years.  So if you start at 200% growth, you’ll be down to 40% after 10 years with 85% growth retention.

[12] I’ll need to take a homework assignment to figure out where in the distribution T2D3 puts you in my data set.


How and Where To Answer Three Basic Questions on Your Website

Startups need to make it easy to find great answers to three basic questions on their websites.

  • What is it?
  • What do people do with it?
  • Who is the company behind it?

Sure, there are other important questions.  How does it work?  Why is it different?  Who uses it?  What benefits have they achieved?  All important stuff, no doubt.  But today, we’re going to focus on first things first — does your website make it easy to find really good answers to these three core questions?  If yes, great.  If not, what’s more important than fixing that?

What Is It?
This is the product tab.  If you sell a product, you should have a product tab.  Don’t call the product tab the solutions tab (for those who think they’re selling solutions because they do a global replace of the word “product” with “solution.”)

In general, while everyone likes to think their product is a platform, avoid labeling the product tab as “platform,” which many companies do [1].  After all, your product can be a platform.  It’s still your product.  Product is not a four-letter word.

What should be on the product tab?

  • A short description of the product.
  • That description usually includes a category name.  Some early-stage startups excessively agonize over the category name, believing that the ideal name will propel the creation of the category.  Get a good-enough category name instead.  Remember, the best way to create a category is to go sell some software.  Do that.
  • A positioning of the product.  This is short high-level differentiation.  Inexpensive sportscar (Miata).  Icelandic yogurt (Siggi’s).  Document database (MongoDB).  Cloud CRM (Salesforce).  Cheap & cheerful Salesforce (Freshworks).  Also effective are metaphors:  the DoorDash of cannabis (Eaze), the AppDynamics of data (Monte Carlo).  Uncola positioning also works:  ELT, not ETL (dbt).
  • An overview of the top three to five key features, done in feature, function, advantage, benefit (FFAB) form.  I could write a whole post on messaging, and in fact I did.  See the section near the end, The Green Spots in Cheer, for a walk-through of how to do FFAB messaging.

The enemy for an early-stage company is not your competition.  It’s confusion.  If people don’t understand what you do, they’re not going to buy from you.  And they’re only going to give you a limited amount of time to explain it.  So keep it short, sweet, and simple.

If your product is technical and requires an in-depth explanation, then you should include links to your seminal white paper [2], an 8-12 page, high-quality paper that tells your story to your ideal technical buyer.  For a great example, get Skyflow’s here [3].

What Do People Do With It?
This is the solutions tab.  Because the word “solutions” is hackneyed, so frequently and mercilessly abused by marketers that it has almost lost meaning, I am reluctant to use it in the primary navigation, but I can think of no good alternative.  Maybe use-case, but I’m not sure that’s any better [4].

This page is likely to get the least traffic of the three because users have fatigue with the word solution [5].  So support the page with inbound links from your product and company pages.  Why?  Because this page is incredibly important.  It doesn’t talk about what it is or who you are.  This page talks about what people do with it.  To the extent people buy solutions to problems and not products, what could be more important than that?

This page is also important because it tells the reader which applications of your product are important to you — for example, if you’re Alation and you sell a data catalog, is it just for self-service analytics or does the company also care about other use-cases like data governance, privacy, or dataops?  With deep content on each of those topics, it’s quite clear that they do.

The solutions tab is also important for search engine optimization.  While the product tab is typically written more vendor-out (e.g., we invented the schmumble and here are its benefits), the solutions tab needs to be written customer-in, describing problems in the language that customers use to describe them — i.e., the words they might type into a search engine.  For this reason, it’s probably better to think of the solutions tab as the problems tab.  What problems are people looking to solve that we are strategically focused on solving?

Here are quick examples of customer-in vs. vendor-out language

  • Baldness cure vs. minoxidil
  • Self-service analytics vs. data search & discovery
  • Forecasting accuracy vs. AI/ML forecasting system
  • Excel replacement vs. EPM application
  • Zoominfo alternatives vs. revenue operating system
  • Product analytics vs. digital optimization system

When you sell a platform (e.g., AirTable) you may have literally hundreds of use-cases and no single one of them is strategically important.  Sometimes you can overgeneralize and think you have just one generic use-case. For example, I literally once heard a BI executive say, “What do people do with it?  It’s a reporting tool.  They make reports.”  This misses the spirit of use-cases and certainly precludes finding any strategic ones.

Magic can happen when you discover broad new classes of use-cases.  At Business Objects we did indeed “make reports,” but we also discovered — by talking to our customers — that while most of those reports were internal, that increasingly (in the early days of the web), customers were making external reports, ones to be shared with their customers.  Thus was born the “extranet BI” use-case and what became a booming line of business along with it.

One could argue that Alation entered data governance the same way.  Sometimes you lead your customers; sometimes they lead you.  That’s why you need to be in constant communication with them to understand what they’re doing with your product.

When you sell an application, there’s also a tendency to think you have one use-case.  Think:  “uh, it’s a forecasting system; people make forecasts.”  If you listen to your customers, you might learn that they see things differently.  For example, at Host Analytics, finance departments used our EPM product to solve several different problems:

  • Building an annual operating plan
  • Creating a long-term financial model
  • Planning headcount
  • Actual vs. budget reporting
  • Board reporting

It doesn’t matter that we were running one software application executing the same code to solve these different problems.  In the customer’s mind — the only one that matters — they were using us to solve different problems.

That’s why you have a solutions tab.  Pick 3-5 strategic solutions (i.e., problems) and put them on yours.

Who Is The Company Behind It?
Some marketers dislike talking about themselves so they basically hide the about-us or company tab, de-emphasizing it in the navigation. This is a mistake and you’ll realize that when you look at a heatmap.  Even if you’ve tucked about-us into small text in the upper right corner or buried it in the page footer, people will find it.  Look and see.

Why do visitors want go to the about-us page?  If you are a new company that sells a new thing that solves a problem I have, I will start to care very much about who you are in deciding if I want to do business with you.  Are the founders two Stanford PhDs on their second startup after taking the first one public, backed by Sequoia, and solving a problem they’ve studied for 10 years?  Or are they two self-taught programmers, trying to solve a difficult infrastructure problem they seem to lack the depth to tackle, and backed by their parents?

With whom would you rather do business?  On whom would you rather bet your next promotion?  People care about the company story.  So tell it.

What should be on your company page?

  • Origin story.  Why the founders created the company.  What they were doing when they did.  Where they got the idea.  You don’t need a full origin-story page like Hashicorp, but I’ve always liked their approach as a friendly, open example of how to tell an origin story.
  • Vision.  The product page talks about what you built.  The solution page talks about what people do with it.  The company page needs to talk about your vision.  Why you’re doing it.  What gets you out of bed in the morning.  What you’re excited about.  For example, Kili Technology makes a training data platform.  What it does should be covered on the product page. Their raison d’etre should be on the company page:  AI is failing due to a lack of quality training data and they want to enable companies to successfully deploy AI-based systems.
  • Values.  If your company is value-driven or trying to build a specific culture, talk about it.  Potential customers are interested as are investors.  Potential employees are very interested.  If you feel passionate not just about what you build and where you’re going, but how you roll along the way, then say it.
  • Timeline and/or facts & figures.  Put one or both of these.  The former shows key accomplishments along the way and the latter provides a snapshot of where you’re at today.  Both are generally of interest.
  • Leadership.  Names and bios of the executive team.  It’s increasingly popular to list the whole company, but I’m not sure what value it has for the reader unless they’re a recruiter trying to steal them.  I’d add the board, too, especially if you have impressive people on it.
  • Investors.  Name-brand investors reduce the risk associated with your company.  If you have them, talk about them.  Don’t make people go to Crunchbase to figure out who’s backing you.

What About The Hero?
Wait, if you’ve answered the top three questions with the product, company, and solutions pages, then what do you do with the so-called hero, i.e., the main above-the-fold content of the homepage?

While many people have many opinions about this question, I’ll tell you my simple way of looking at it for an early-stage startup.

Given that you’ve got the basics covered on the product, solution, company pages, you strictly don’t need this space to answer those questions.  What do you do instead?

Imagine the ideal buyer, not the CDO who only visits your website in fantasyland, but the director of analytics who actually visits it in real life.  Imagine that person is on your homepage.  You have 30 seconds of their time.  What do you want to say to them?

Say that.

I’ll go back to Kili as an example.  Their vision is to enable the success of AI projects.  Their product helps with data labeling and annotation.  Here’s where the magic can happen if you know your buyer well.  They know that telling their buyer that AI requires good training data is selling motherhood and apple pie.  Non-compelling.  They know their buyer knows that quality data is important.  But — and here’s the magic — they know their buyer thinks that data labeling is laborious and expensive.  So what do you say?

Data labeling made easy
Find out how.

Or, more cheekily:

Data labeling doesn’t have to be misery.
Find out why.

Whether you like the example or not, I still love the formula.  What would you say if your ideal buyer landed on that page and gave you 30 seconds?  Say that.

The Plannuh Case Study
I’ll conclude this post by analyzing one live website.  I work with a company called Plannuh who makes a marketing performance management platform and is run by some veteran marketers [6].  I checked with them and they gave me the OK to do an analysis of their site, applying the ideas in this post.

In exchange for letting me do this and remaining friends, I’ll do a quick plug for their book, The Next CMO: A Guide to Operational Marketing Excellence.  It’s very good.  I wrote the foreword to the first edition.

So here goes.  Let’s see how Plannuh deals with the early-stage startup website challenge.

  • The first three buttons in the navigation are product, solution, and company (i.e., about-us).  Easy to find.  Very good.  [7]
  • Clicking product doesn’t take you straight to the product overview, argh, but at least the first menu under product is product overview, which does.  Good.  [8]
  • The product page has its own hero that I don’t like:  on the homepage they called Plannuh a “marketing performance management” platform and then they’re calling it a “strategic marketing hub.”  [9]
  • Once you get past the first two warm-up blocks, the product page gets better [10].  The six broad back-and-forth blocks do a good job of describing the product in feature/benefit mode.
  • The detailed feature list is OK, but without comparisons it doesn’t position the product.  Personally, I’d add two columns for alternative categories (not products) and maybe make each feature description a link to a page (or pop-up) that says what the feature is and why it’s important.
  • Net:  the product page is good.  They tell me what the product is and the associated benefits, but only after a little bit of potentially confusing warm-up.  Still, good.
  • The solution button also forces me to further navigate, probably because that’s how the template works. There is no master solutions page, which I don’t like.
  • I was surprised to find both by-role and by-need in the navigation at an early-stage company.  That’s not bad, but I’d reverse the order as I believe by-need (i.e., the problem you’re solving) is more important than by-role (i.e., tell me who you are and I’ll try to guess your problem).  People know what problems they have.  Use solutions to list them, in their language, and let them click on the one that most concerns them.
  • The names of the solutions by-need are:  accuracy, marketing collaboration, efficiency, marketing ROI, and visibility.  Most of the time, when it comes to marketing copy, less is more.  This is not one of those times.  Remember, the solutions tab is really the problems tab, so the solutions listed need to sound like problems as expressed in the customer’s language.  These don’t always do that.  Perhaps:  staying on budget, coordinating teamwork, maximizing marketing efficiency, proving marketing ROI, and managing your marketing organization.
  • Net:  the solutions pages themselves are quite good.  To the extent possible, I might enrich them with a customer quote block testifying to how Plannuh helped deliver, but that’s the only addition I’d make.
  • The company page includes most of the requisite elements:  origin story (which here implicitly includes the vision), the leadership team [11], an advisory board which some companies use not only to get advice but to boost credibility, investors, beliefs, and values.  It’s all there and executed pretty well.
  • I particularly like the video on the company page where the founder, Peter, tells the origin story derived from his personal experience as a CMO.  While the production values could be higher, the video is authentic.  The thing Peter does really well is telling the story while demoing the product — seamlessly — describing only the business problems in the narrative, while literally showing the solution on the screen.  Proof that you don’t need to describe what people are seeing on the screen in a demo.  Few people narrate a demo so elegantly.
  • Finally, the hero, which has two parts.  The large text is clear and descriptive:  easily build, execute, and measure marketing plans and budgets [12].  I know what it does and if I have a problem with marketing plans and budgets, I’ll keep reading.  The small text seems perhaps a missed opportunity because it’s covering material that’s handled on the product page.  If I took a swing at it, I might say:

Mind Your Funnel
Build, execute, and measure marketing plans.
Prove the business value of your marketing

Thanks for reading a long post.  Thanks to Plannuh for allowing me to use them as a case study.  Hopefully, I’ve convinced you to make sure your website has great answers to the three core questions:  what is it, what do people do with it, and who is the company behind it?

And if you need a seminal white paper, add that one to the list as well.

# # #

[1]  Exception:  when you sell both a platform and a set of applications and don’t want to lump them both under product, you can instead have a platform tab and an applications tab.

[2]  A concept about which I’ve spoken about in presentations but, surprisingly, not yet blogged.  Add one to the to-do list.

[3]  You should arguably write your seminal white paper before you even create your website.  Imagine it’s early days and an ideal (senior-level) technical buyer (e.g., CDO) answers your email and says, “send me an overview of what you do.”  What do you send them?  The seminal white paper is that document.

[4]  Where solutions are themselves grouped (e.g., by-industry, by-persona) you will find by-use-case as one of the groupings.  I prefer by-need or by-objective where possible.

[5]  There is a valid question as to whether this is even a page.  That is, if you press solutions, do you only get a menu from which you can pick one of several different solutions and see those one-at-a-time, or do you land on a capstone solutions page that provides an overview of them all.  Arguably such a page is of interest to no one because people are theoretically interested in the individual solutions themselves, but that said, my preference is still to provide an overview so in one page the user can get a quick sense for the kinds of problems you solve, even if no one of them instantly resonates in the navigation.

[6]  The company name is the word Planner, but pronounced with what is called a “wicked Southie accent.”

[7]  You’d be surprised how many websites don’t have all three of these elements.  Often they’ll feature “Why Us” or “How It Works” in the primary navigation, seemingly forgetting that I don’t care how it works or why I should buy one if I don’t know what it is and what it does.

[8]  A common design problem with many website templates IMHO.

[9]  You can argue that strategic marketing hub is clearly not intended as a software category, but I nevertheless think simplicity and consistency are paramount.  Why introduce the additional concept?  Are customers looking for a strategic marketing hub?  It strikes me as neither a category name nor a solution.

[10]  My grandmother was a high school English teacher who believed that 95% of high school English papers are improved by simply deleting their first paragraph.

[11]  They include the whole company in team which, depending on how you do it, can make it quite difficult to figure out who the leadership team is, which is not good.  Plannuh has the leaders in the top row or two and then includes everyone else below that.

[12]  I could quibble with saying both plans and budgets as they’re often used as synonyms.  Maybe it’s an SEO-acquired habit.

Tomorrow’s Product Power Breakfast with Paul Jozefak on Introducing SaaS as a Layer to Lighten the Legacy Load

Please join us for tomorrow’s SaaS Product Power Breakfast with entrepreneur and venture capitalist Paul Jozefak, CEO of Receeve (an all-in-one platform for collections and recovery), on how to use SaaS as a layer atop legacy systems to prove return on investment (ROI) and smooth the customer’s transition before setting out to rip and replace them.

This is an interesting strategy that I’ve seen numerous times in SaaS and it cuts to core product strategy issues, most notably, to what extent and in what timeframe do you “design in” versus “design out” the underlying technology.

In addition to both impromptu and (hopefully some) audience questions, we’ll be asking Paul:

  • Why layer on top in your target segment?
  • Are there any risks to layering?
  • What are your customers trying to accomplish when it comes to working with Receeve?
  • Where is technology in the segment headed?
  • What hurdles do you hit with decision makers?

Thomas has not been feeling well so, while he’s slated to be our lead interviewer tomorrow, I may end up taking the lead on this episode.

Either way, see you there!

Chatting About Marketing: Slides from a PE Portfolio Company CEO Summit

The good people of Riverside Acceleration Capital and my old friend Jon Temple invited me to speak at their portfolio company CEO Summit and I was only too happy to oblige, particularly because Jon asked me to speak about one of my favorite topics — marketing in early- and growth-stage enterprise SaaS companies.

In particular, Jon asked me to speak about 7 topics:

  • How to think about marketing
  • Professionalizing marketing
  • Scaling marketing
  • Managing the sales/marketing relationship
  • Planning & budgeting marketing
  • The age-old people vs. programs debate
  • Success metrics and KPIs for marketing

I’ve embedded the slides from the presentation below.

Thanks again for inviting me and thanks as well to my fellow presenters, Aki Balogh from MarketMuse and Garin Hess from Consensus.

Video of My SaaStr 2020 Presentation: Churn is Dead, Long Live Net Dollar Retention

Thanks to everyone who attended my SaaStr 2020 presentation and thanks to those who provided me with great feedback and questions on the content of the session.  The slides from the presentation are available here.  The purpose of this post is to share the video of the session, courtesy of the folks at SaaStr.  Enjoy!