Learnings from a SaaS IPO (Forgerock)

ForgeRock is a software company that went public in 2021. Below are some of the highlights from their prospectus. The key learnings we took away: this is a software company that transitioned to SaaS from perpetual license, pricing is not per-user, 3:1 ARR:loss ratio which is good in our view, sales are global, and upsells are based on more use cases and product offerings.

What they do. FORG “a unified and extensive identity platform to enable enterprises to provide exceptional digital user experiences without compromising security and privacy.”

Revenue is multi-year SaaS. “We generate substantially all of our revenue from subscriptions, with 88% and 96% of our total revenue coming from subscriptions in 2019 and 2020. In 2019 and 2020, our ARR was $106 million and $136 million, respectively, representing a year-over-year growth rate of 29%. We have significantly reduced our percentage of revenue from perpetual licenses. Our subscription contracts are typically non-cancelable and non-refundable, and are largely billed annually upfront. For the six months ended June 30, 2021, our weighted average new subscription term was 33 months.”

FORG generates losses, but their ARR to loss is a nice 3:1. “In the same periods, we incurred net losses of $36.9 million and $41.8 million. Our non-GAAP operating loss as a percent of revenue was (32)% and (20)%.”

Pricing is not basic ‘per user’. “Our pricing is based on the deployment method (SaaS or self-managed), products purchased, identity type (consumer, workforce, or IoT and services), and number of identities managed.”

Like a lot of public SaaS we see, sales are global. “46% of our revenue for the six months ended June 30, 2021 was generated from customers located in Europe, the Middle East and Africa, or EMEA, and the Asia-Pacific, or APAC, region.”

Marketing best practices. “Our marketing organization engages with prospective customers across physical and digital channels and provides them with solution guides, whitepapers, webinars, presentations, and other content to accelerate their understanding of our platform and drive greater adoption. We are highly focused on embracing and supporting our customers with the implementation of and utilization of our platform through dedicated customer success managers.”

Half of new customers comes from partnerships. “Our alliances, including global strategic consulting firms and global systems integrators, or GSIs, such as Accenture, Deloitte, and PwC, often promote our platform as part of large-scale digital transformation projects they drive by identifying opportunities in which our platform can help accelerate business initiatives and improve user experience. We also partner with leading regional consulting firms and implementation partners. For the year ended December 31, 2018, 2019, and 2020, 15%, 31%, and 44%, respectively, of our new ARR was sourced through leads originated from our partners.”

Customers are enterprise with $100k+ ACV’s. “As of December 31, 2019 and 2020, we had 275, and 325 large customers with $100,000 of ARR or greater, respectively, representing 81% and 86% of our total ARR as of such dates, respectively. “

Net dollar retention is 113%. “Our land-and-expand strategy has underpinned a consistently strong dollar-based net retention rate, which was 113% for the quarter ended June 30, 2021, up from 105% for the quarter ended March 31, 2019. Our top 25 customers measured by ARR as of June 30, 2021 have increased their ARR by more than two-and-a-half times (2.5x) following their initial purchase. We expand our relationships with customers as they purchase more identities, add more use cases across consumer, workforce, and IoT and services, subscribe to additional product offerings, and add additional deployment options such as our SaaS offering.”

Nice cohort data. “We continuously focus on increasing the value our customers derive from our platform. The chart below illustrates the strong relationship with our existing customers by showing the initial ARR of a cohort (defined by the year in which they became a ForgeRock customer) of new customers in a given year and the increase in ARR over time for that same cohort of customers. By increasing ARR with existing customers over time, we can significantly increase the return on our upfront sales and marketing investments.”

Visit us at blossomstreetventures.com and email me directly at [email protected]. All founders and funds welcome! We invest in companies with run rate revenue of $1mm to $30mm, with year over year growth of 20% to 50%+ depending on revenue. We lead or follow in growth rounds and special situations like inside rounds, small rounds, rushed rounds, corralling investors with our term sheet, bridges, inbetweeners, cap table clean up, and extensions. We can commit in 3 weeks and our check is $1mm to $3mm. Also visit https://blossomstreetventures.com/metrics/ for always up-to-date SaaS metrics.