We reviewed the IPO prospectuses (known as S-1’s) of SaaS companies that have gone public since 2021. They include names like Samsara, Braze, GitLab, Netskope, Figma, Weave, ForgeRock, and Informatica among them. While each of these businesses is different — some serve SMBs, some target global enterprises, some were built on open source, others on direct sales — there are best practices and commonalities among them. Below are the SaaS best practices we heard repeatedly from these prospectuses:
Land and Expand
Almost every elite SaaS company on this list runs a land-and-expand model, and many treat initial deal size as less relevant. GitLab lands customers at 50 to 100 licenses and watches them grow from there; their fiscal 2016 customer cohort compounded ARR at 90% annually through 2021. Braze actively retrained its sales team away from incentivizing large upfront deals, switching to a named-account model because “we know that we can grow customers more effectively over time.” Samsara shows cohort expansion graphs in their prospectus and reported net dollar retention north of 115% overall and 125% for customers over $100K ARR. The lesson here is to resist the urge to land the whole elephant. Win a beachhead, deliver value, expand.
Pricing Should Reflect Value, Not Just Seats
The classic SaaS pricing model is per-seat, billed annually. It works but the best companies are more creative. Samsara prices per asset, per application whereby a single vehicle using two applications counts as two subscriptions, which ties revenue to actual platform utilization. HashiCorp pushes toward usage-based pricing, billing hourly on its cloud platform to align cost with value delivered. Amplitude prices on committed event volume, not user count, so as customers grow their data pipelines, revenue grows with them. ForgeRock prices on the number of identities managed whether it be consumers, workforce, or IoT rather than users of the software. Braze uses a hybrid of monthly active users and message volume. The lesson is to price on the dimension or value that grows naturally with customer success, if you can.
Contracts Matter a Lot
Enfusion went public with monthly-cancellable contracts that required only 30 days’ notice. That is a fragile model regardless of how good the product is. By contrast, the companies that weathered macro headwinds best had annual or multi-year non-cancelable contracts billed upfront. Samsara runs three-to-five year contracts. Informatica averages just over two years. GitLab collects cash upfront on annual and multi-year terms. Annual contracts billed in advance are table stakes for a well-run SaaS company. Multi-year contracts are better.
The Open Source and Freemium Flywheel
Several of the strongest businesses on this list like HashiCorp, GitLab, and Amplitude built their initial user base without a traditional sales team, by giving away a meaningful free product and letting usage spread organically. HashiCorp’s products were downloaded 100 million times in fiscal 2021 before a salesperson ever got involved. GitLab made its entire roadmap public, inviting community contributions and feedback that accelerated product development. Amplitude’s free Starter plan with unlimited user seats allowed the product to proliferate inside organizations before sales ever got involved. The freemium and open-source flywheel is a way to build a product that is so embedded in daily workflows that the sales motion becomes much easier.
Enterprise Customers Are Worth the Extra Effort
Bigger customers are more valuable, more loyal, and more likely to expand. Braze reported that customers with over $500K ARR contributed 56% of total ARR and expanded at a faster rate than smaller accounts. Informatica doubled its average subscription ARR per customer from $98K to $198K between late 2018 and mid-2021, largely by moving upmarket. ForgeRock defined “large customers” as those paying $100K+ annually and those customers represented 92% of total ARR by Q3 2022. Amplitude reported that more than 70% of revenue came from companies spending over $100K per year. The lesson is to go for enterprise customer. If you’re selling to SMBs today, plan on building the features and the sales motion to push upmarket over time. The retention is better, the ACVs are larger, and the expansion opportunities are more reliable.
Your Net Dollar Retention Rate Is Your Health Score
If we had to pick one metric that separates the excellent SaaS businesses from the average ones, it is net dollar retention, specifically whether it is consistently above 110%. GitLab hit 179%. HashiCorp hit 131%. Braze ran at 125–126%. Amplitude reached 123%. Samsara cleared 115%. A business with 110%+ NDR compounds on itself. Existing customers fund new customer acquisition. The growth machine becomes self-reinforcing. Businesses that had lower NDR almost always traced the weakness to the same root cause: they stopped releasing new products or features. Weave explicitly acknowledged that when the initial Weave Payments rollout upsell cycle faded, NDR declined. NDR is the north-star for the health of the business, especially if your ICP is changing or moving up-market.
Go-to-Market Has to Match the Buyer
There is no single right go-to-market strategy. Expensify sells to individual employees first and decision-makers second; it’s not a top-down enterprise sales motion. On the other hand Informatica sells to CIOs and CDOs on behalf of complex multi-cloud data strategies. Samsara combines free trials with a direct enterprise sales force focused on physical operations companies with large fleets. Backblaze gets 80% of revenue from self-serve customers, but the sales-assisted customers are 20x larger on average. The GTM is different for all these companies, but what they share is alignment between go-to-market and the buyer’s natural purchasing behavior. Founders who try to force-fit an enterprise sales motion onto a bottoms-up product, or who build a PLG strategy for a complex seven-figure deal, have a mismatch.
Transparency and Culture
Intentional culture and transparency with customers was a common theme. GitLab made its entire strategy and roadmap public, solicited open-source contributions from thousands of developers globally, and published a company handbook running to thousands of pages. Backblaze published quarterly hard drive failure data, shared its storage algorithms openly, and built a loyal following of engineers who trusted the product because they could see how it worked. GitLab committed to releasing a new version on the 22nd of every month for more than 130 consecutive months. Involve the customer and be transparent with them.
Thank you for your readership. See more blogs and SaaS data at blossomstreetventures.com. Other resources we’ve built for founders include: SoftwareMultiples.com; softwareMRRcalculator.com; FounderInvited.com, and TwoFoundersTalk.com. Founders are always welcome to reach out to sammy@blossomstreetventures.com as well.