Sammy is the Managing Director and Cofounder of Blossom Street Ventures. Email him directly at email@example.comSumo Logic recently went public and in case you forgot to read their S1, we summarize it for you below. There are some nice learnings from how Sumo runs their SaaS business.
Data is eating the world. “The volume of data is growing at an extraordinary pace, which is, at best, difficult to digest and, at worst, an impediment to driving the speed of decision-making needed to compete in today’s dynamic marketplaces. Our platform scans an average of 873 petabytes of data per day and an average of 18.6 billion events per second. Our platform integrates and analyzes structured, semi-structured, and unstructured machine data, both historically and in real time, to provide actionable intelligence around what happened, why it happened, and how to resolve business, technology, or cybersecurity issues.”
But larger customers actually grew during that time; Sumo is becoming more “enterprisey”. “Customers that had annual recurring revenue, or ARR, greater than $100,000 or more grew from 187 as of January 31, 2018 to 234 as of January 31, 2019 to 323 as of January 31, 2020, and to 330 as of July 31, 2020. Customers that had ARR greater than $1 million or more grew from seven as of January 31, 2018 to 17 as of January 31, 2019 to 25 as of January 31, 2020, and to 29 as of July 31, 2020.”
Primary competitors are some of the best. Splunk, Elastic, Datadog.
Material Weakness. “In connection with the audit of our consolidated financial statements as of and for the fiscal year ended January 31, 2020, we identified a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.” That said, “This material weakness did not result in any errors to the consolidated financial statements as of and for the fiscal year ended January 31, 2020 or the six months ended July 31, 2020, nor did we find any evidence of management override of entries in our financial reporting process.”
Much of this share count is subject to 180 day lockup. “Based on 83,889,892 shares of our common stock (including the Capital Stock Conversion) outstanding as of July 31, 2020, we will have 98,689,892 shares of our common stock outstanding after this offering. Our executive officers, directors, and the holders of substantially all of our capital stock and securities convertible into or exchangeable for our capital stock have entered into lock-up agreements.”
Pricing is not per user, and they encourage adoption. “We offer multi-tiered paid subscription packages for access to our platform, the pricing for which differs based on a variety of factors, including volume of data to be ingested, duration of data retention, and breadth of access to platform features and functionalities. Our subscription packages encourage customers to expand their adoption of our platform by providing them with the flexibility to ingest and analyze large volumes of data and the ability to access a broad suite of platform features and functionalities without incurring overage fees, as well as insights into their usage patterns.”
Payback is fast, land and expand is strong. “We employ a land-and-expand business model centered around our platform offerings, which have a rapid time to value for our customers and are easily extensible to multiple use cases across a business.”
Customer Support is tiered. “We offer two tiers of customer support. Our standard customer support tier is included with all subscriptions to our platform and includes correspondence with our customer success team and access to online support portals. Our premium support service is available to our customers on a subscription basis and includes 24/7 access to a technical account manager.”
Contribution analysis of the customer also looks good. “At the end of fiscal 2018, the 2018 Cohort accounted for $10.1 million in ARR and $19.8 million in associated costs, representing a contribution of $(9.7) million, or a contribution margin of (97)%. At the end of fiscal 2019, the 2018 Cohort accounted for $14.6 million in ARR and $7.6 million in associated costs, representing a contribution of $7.0 million, or a contribution margin of 48%. At the end of fiscal 2020, the 2018 Cohort accounted for $18.3 million in ARR and $8.2 million in associated costs, representing a contribution of $10.1 million, or a contribution margin of 55%. These metrics are illustrated in the chart below.”
Integrations are key. “We have a simple onboarding and implementation process as well as automated self-paced or instructor-led training and certifications, which enable customers to begin using our Continuous Intelligence Platform within hours. Once they adopt our platform, customers are able to leverage approximately 175 out-of-the-box applications and integrations, allowing them to quickly realize the benefits of Sumo Logic without costly and lengthy implementation.”
Exec comp. The CEO pulls a salary of $372k, put also received $3.3mm in options and other comp last year.