Learnings from the latest SaaS IPO
Sailpoint is the latest SaaS company to go public. We read through their prospectus (424b) and below is what we learned and gives you a sense of what it takes to go public.
What they do. “We deliver solutions to enable comprehensive identity security for the enterprise. We do this by unifying identity data across systems and identity types, including employee identities, non-employee identities, and machine identities.” They were founded in 2005 and this is their second time to be a public company.
SaaS Model. 92% of revenue is SaaS. “As of October 31, 2024, our ARR was $813.2 million, reflecting an increase of 30% compared to October 31, 2023. Of the 30% increase in ARR, approximately 16% was attributable to new customers and approximately 15% was attributable to existing customers”
Retention is excellent. “As of October 31, 2024, our dollar-based gross retention rate was 97%. As of October 31, 2024, our dollar-based net retention rate was 114%, reflecting an increase from 109% as of October 31, 2022.” Additionally, 32% of customers have over $1mm of ARR and 76% are over $250k of ARR.
Contracts are multi-year and pricing is simple. “our customers typically enter into three-year contracts, with annual billing upfront…. our pricing is tiered and based on the suite, with the option for the customer to purchase additional products and capabilities a-la-carte.”
International customers matter. “For the nine months ended October 31, 2024, we generated 68% of our revenue from the United States, 19% from EMEA, and 13% from the rest of the world”
It’s ok to generate a net loss. For the year ended January 2024, the business had an operating loss of -$332mm. Cash from operations was -$120mm and free cash flow was -$132mm. That said, losses are narrowing. For instance for the nine months ended October 2024 and 2024, operating loss was -$158mm and -$267mmm, so profitability is in sight.
The key take-aways to us: In order to IPO in this market, ARR needs to be sufficiently large, growth needs to be strong, profitability doesn’t matter so long as the path to profitability is clear, and retention needs to be excellent. Contracts also need to be classis SaaS. These characteristics are also present in other recent IPOs like ServiceTitan, Waystar, and OneStream.
Thank you for your readership. See more blogs and SaaS data at blossomstreetventures.com. Email the author at [email protected].