B2B SaaS IPOs: 50%+ Growth is Key, Not $500M ARR

Recent B2B SaaS IPOs demonstrate that achieving $500 million in annual recurring revenue (ARR) isn't the sole factor for success. MNTN, a performance TV software company, and Hinge Health, a digital physical therapy software provider, successfully went public with lower ARR than recent larger IPOs. This highlights a critical takeaway for aspiring public companies.

Growth is King: 50% YoY the New Benchmark

While both MNTN and Hinge Health IPO'd with substantial revenues ($260 million and $500 million ARR respectively), their impressive ~50% year-over-year growth is the key differentiator. This growth rate appears to be the current benchmark for successful B2B SaaS IPOs. Companies with $100 million+ ARR but only 15-30% growth may face challenges in today's market.

The success of these somewhat smaller IPOs indicates a receptive market for companies demonstrating robust growth, even with lower ARR. 50% growth at $200 million+ ARR remains a strong indicator of IPO readiness.

Recent IPO Performance and Key Learnings

Recent tech IPOs have generally performed well. Analysis of the last 20 tech IPOs by Morgan Stanley reveals an average return of 54.7%. Top performers include Rubrik (data security), Astera Labs (data infrastructure), and ServiceTitan (field service management).

Key takeaways from recent IPO performance:

  • Infrastructure software is highly valued: Solutions with high switching costs and recurring revenue models perform strongly.
  • Identity and security software face headwinds: This sector experiences challenges potentially due to market saturation or reduced IT spending.
  • Niche B2B tools struggle to scale: Investors favor platforms with broader appeal and growth potential.
  • Timing and market conditions are crucial: IPO success is influenced by investor sentiment and market trends.
  • Revenue model clarity is essential: Predictable revenue streams and strong customer retention build investor confidence.

Revenue at IPO for recent B2B SaaS companies:

  • Klaviyo (Email/SMS Marketing): $937M
  • Rubrik (Data Security/Backup): $887M
  • OneStream (Financial Planning Software): $489M
  • Hinge Health (Digital Physical Therapy): $390M
  • MNTN (Connected TV Advertising): $226M

Q: What is the state of the US tech IPO market?
A: Healthy. Average return for last twenty = 54.7%. Six >100% (source: Morgan Stanley)
Only 5 YTD. Will we see an uptick in 2H given strong reception/performance?

While high ARR remains a significant factor, consistent high growth is paramount for B2B SaaS IPO success in the current market. Companies prioritizing growth alongside a solid business model are more likely to attract investor interest and achieve a successful public offering.