Box is at $1 BILLION in Revenue -- And Accelerating!! Here's How They Do It!

Hey Sasser, I wanted to talk about five interesting learnings from Box as it crosses 1 billion in ARR. And there's a bunch of interesting things in this. Most especially that BOX is re accelerating at scale. It is growing far faster at a billion. And all of its metrics are better. NRR growth, deal size. We'll talk through that. And the key is really truly going multi product finally and more and what that means. But this is a great milestone. Back in the early days of SaaS, in 2014, before any of these SaaS IPOs, we wrote a post on TechCrunch that said box will be at a billion in ARR before you know it. Now, we thought we would get there just a little earlier than 2022, but the point was, with high NRR, with NRR well above 100%, there was almost no chance Box wouldn't get to a billion ar. It was just a question of time. And it's funny that back in 2014, almost no one believed it. No one believed in the power of recurring revenue. No one really believed in. And it didn't really take off in the public markets and the public mindset until maybe 2016, 2017. It's not that long ago before that people really didn't believe. They believed that these SaaS businesses could almost collapse overnight. Fast forward to today. We've seen every SaaS lead, almost every SaaS leader that has IPO'd with NRR north of 100% just accelerate, accelerate, accelerate. And BOX is the latest at a billion an ARR. They're growing far faster than they were just a year or two before. So let's talk about five plus five, five plus interesting learnings about Box at a billion. So the first one we already touched on, but this is super interesting. At a billion in error, our box is growing 18%. It's not a rocket ship, but it's back to being a growth stock. But a year ago was only growing 10% a year ago box. And some of this was an impact from COVID and all that, but BOX growth had plummeted to 10% in Q1 of 2022. Their calendar 2022, it's really a year ago. Fast forward to today. Growth went from 10% to 12% the next quarter to 14 to 17 and now 18%. That's incredible acceleration in just essentially four to five quarters to go from 10% to 18% year over year growth. So we'll talk next about how that happened and why. But let it be a challenge to everyone that says they can't grow faster, they can't really accelerate that their product is so mature that their TAM is so penetrated. Well, you could have said that about Box, but it's growing again almost twice as fast at a billion as it was the year prior. To relate to that, interestingly, Box has accelerated that growth still with 20% plus operating margins. In other words, about 20% of that billion flows more or less to the bottom line. And how do they do that? Well, every company does it a different way ultimately. For SaaS, what you'll see at scale, at scale the biggest challenge is if sales and marketing consumes too much of each dollar, you basically never get profitable. Now in the early days when you're growing, none of this matters. We can talk about magic numbers, right? When you're growing quickly, when you're acquir customers, when you're acquiring customers with a 5, 10 or even longer lifespan, as long as your magic number is reasonable, as long as you can afford to spend, spend that in sales and marketing. Get that 10 year customer in early, get it in now because it always pays off. But at scale, that doesn't work. At scale you can't spend more than a dollar to make a dollar. As a startup you can, but it's tougher at scale. And so you really need to get your sales and marketing costs post IPO or at least as you get bigger than that, down below 40% of your revenue. If you get it below 40% of your revenue, then usually you can end up getting profitable. And that's what Box has sort of done. They've gotten down to 28%. That's pretty low. Like Hashicorp, which we'll look at shortly, they're explosive at 400 million, they're growing 50%, they're at 70%. 50% is probably average for most SaaS public companies. So Box has been very thoughtful and careful about bringing its sales and marketing costs down to 28% of revenue. And that's why they're profitable. That's at the edge of too much for a sales driven model. But it proves that you like ZoomInfo and a few others, you can actually build a very efficient sales and marketing engine. At scale point number three, enter our growth. And again, this is tied to going more multi product and adding more value, which we'll talk about next. But this is pretty cool. A year ago box was at 103% NRR. Okay, not great. Not great for something that's enterprise y. If you segmented it, you would have seen that with the bigger Customers and the multi product customers are much higher. And with the small customers just using the core Box product, it was lower, which makes sense. But on a blended basis 130% is, is was not top tier a year ago. Today it is today. In just one year they've gone from 103 to 106 to 109 to 111% NRR. That's about big deal. That means they're getting half of this growth. This growth from 10% a year to almost 20. Half of it they're getting ultimately by increasing their NRR dramatically from 100 to 110%. So it's a reminder of the power of growing your NRR and it's a reminder that it's again, it's never too late. Boxes NRR will go from 100 to 110% as it crosses a billion in ARR. Your NRR does not need to decline. You do not need to make excuses. You do not need to settle for a decline in NRR and you do not need to settle for mediocre. Aaron Levy and the team at Box did not settle. And that's why their NRR has gone up incredibly from 103 to 111 in just a year point four. And now let's dig into this a little bit more Box. You can see it if you go back and watch or listen to the session that Aaron Levy and I did at the last Sasser annual. We had Box's CRO talking about this too. You can find both those sessions on sasser.com but now Box's multi product strategy is coming to fruition. So the old Box of literally just being file storage is mostly in the Box packages up its multi product offerings in security, in compliance, in workflow as suites. And that has led to doubling their 100k deals. And 37% of their new bookings now come from these suites, these hundred K plus multi product deals. So on this whole series of five interesting learnings we've talked so many times about when to go multi product, how it works, you've got to get there by 100 million ARR at least. You may need to get there earlier for SMBs because you can exhaust your TAM more sometimes with SMBs because the deal size is lower. Maybe you can wait a little longer if you're very enterprise. But Box waited. Box maybe waited some of the longest to go multi product. But it did. It did. And this is the ultimate victory in its category that these suites, now these multi product suites are driving these 100k plus deals.5, just to tie it all kind of together. Box is now a free cash flow engine. So it took a while. It took a while, But Box generated 91 million in free cash flow last quarter and 170 million last year. So they're on track to do over 200 million of free cash flow. So the model works. It doesn't always work perfectly as a free cash flow engine. In the early days, and I think when we look at the top SaaS and cloud companies, there's some that were essentially almost always profitable. There's the Zooms, which are an incredible cash flow engine. Zoom spits out a dollar of free cash flow for every $2 it takes. And we've almost never seen anything like that. There's the Atlassians that were bootstrapped, their entire history and qualtrics as well. But most SaaS, companies that are sales and marketing driven, it turns out it takes them until hundreds of millions of dollars to generate real free cash flow. But ultimately they need to get to that 20% of the revenue going to the bottom line. And Box has now hit that. It took a while, but they've hit it at a billion. And it means the model is finally working. So kudos to Box. Pretty cool. And again, not to be too redundant, but a challenge to all of us that it's never too late. It's never too late to go multi product. It's never too late to drive your NRR up and you can grow faster. You do not. Your growth rate does not have to decline as you scale. In the last year, Box's growth rate went from 10 to almost 20% in one year. Pretty darn impressive.