Revenue Growth Benchmarking for Startups (Updated for 2018 IPOs)
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Last year I published a post on revenue growth rate benchmarking. Based on popular demand, I’m updating the post to include data from 2018. The updated data reflects historical revenue from 191 IPOs, including 31 new IPOs from last year. For this update, I’m presenting the data in a new format that allows for more granular benchmarking. Previously, the revenue was presented in ranges, but this iteration allows you to see percentile growth rates based on your company’s exact revenue.
A quick overview of the methodology:
- Gathered historical GAAP revenue growth data from 191 enterprise and consumer IPOs between 2010 and 2018 (over 600 data points).
- Calculated forward-year growth rates (“Y”) for each revenue data point (“X”). By presenting the data this way, it can be a useful forecasting tool.
- Estimated percentiles (90th, 75th, 50th, 25th) from power trendlines based on a regression of the data.
Revenue Growth Benchmarks for Enterprise Tech Startups
The enterprise IPO data includes revenue growth rates from 126 companies (over 400 data points). The chart below allows you to benchmark the growth of your company against all enterprise tech companies that have gone public over the last nine years. The dotted lines on the scatter plot estimate the 90th, 75th, 50th, and 25th percentile forward growth rates for a given revenue scale. As an exercise, take your current company revenue projections and plot them on the chart. Where do they stack up?
How to interpret the data: if your company generated $20 million of revenue in 2018, projecting 198% year-over-year growth for 2019 ($59.6 million) would fall in the 90th percentile. (BTW — If your company is growing this quickly, IVP would love to meet with you).
It may be hard to eyeball exact figures on the chart so I created a calculator that can be accessed at the link below. Simply type in your annual revenue and it will display the 90th, 75th, 50th, and 25th percentile forward growth rates.
The Power of Hyper-Growth
The power of hyper-growth is best demonstrated in the chart below. A company consistently growing at the 90th percentile would reach $100 million of revenue in four years. Conversely, one growing at the 50th percentile would take more than seven years to reach that milestone.
The special group of enterprise companies that crossed the 90th percentile barrier during their growth phase includes:
Combined, these 21 companies represent over $280 billion in market value, with a median valuation of $9.4 billion. While revenue growth is important, balancing it with high gross margins and strong sales efficiency is the holy grail. The median gross margin of the companies above was 72%.
Revenue Growth Benchmarks for Consumer Tech Startups
The consumer IPO data includes revenue growth rates from 65 companies (over 200 data points). The chart below allows you to benchmark the growth of your company against all consumer tech companies that have gone public over the last nine years. It is worth noting that the data for consumer IPOs is less robust and has more variance than the data for enterprise IPOs.
Below is a link to the consumer growth calculator. Simply type in your annual revenue and it will display the 90th, 75th, 50th, and 25th percentile forward growth rates.
The group of consumer companies that crossed the 90th percentile mark during their hyper-growth phase includes:
Combined, these 19 companies represent over $575 billion in market capitalization, largely dominated by Facebook representing 80% of the total. It is worth noting that several of the consumer companies above have faltered as public companies, namely Snap, Blue Apron, Groupon, and LendingClub. This highlights the importance of achieving high growth while also building a defensible business model and one with sustainable unit economics at maturity.
My goal in publishing this is to help founders more easily benchmark their company’s growth vs its peers. Special thanks to 10XCEO for making my prior post part of their program and helping spread the word. If you found this post valuable, please consider sharing it.
“A startup is a company designed to grow fast… The only essential thing is growth. Everything else we associate with startups follows from growth.” — Paul Graham, Y Combinator
About IVP: With $7 billion of committed capital, IVP is one of the premier later-stage venture capital and growth equity firms in the United States. Founded in 1980, IVP has invested in over 400 companies with 108 IPOs. IVP is one of the top-performing firms in the industry and has a 37-year IRR of 43.1%. IVP specializes in venture growth investments, industry rollups, founder liquidity transactions, and select public market investments.