Braze at $260,000,000 in ARR -- Growing a Stunning 63% (!)

Everybody, I wanted to talk today about a big SAC success story that you probably haven't heard of that just recently IPO'd called Braze. Braze just IPO'd at $256 million in ARR, growing 63%. Pretty incredible in a $7 billion market cap. And it's interesting for a couple reasons as a case study. First of all, it's in a competitive space, marketing automation. We all use something for marketing automation. Whether you use products like Marketo, Adobe and the Enterprise Sales HubSpot for SMBs, we're all using something. So Braze managed to carve out a quarter of a billion dollar segment in this over the last decade and do it in a very interesting way. It's also interesting because it's a great case study of being enterprise. Not massively enterprise, not Oracle or SAP, but driving to 500k and then million dollar deals. And I think we can learn a lot from Braze originally App boy, you may have heard about it back then. Founded actually out of a hackathon in 2011. Fast forward to today. They had 100 million in revenue eight years later in 2019, 100 million in 2019, 200 million in 2021. So from 100 million in 2018 to 200 million in 2021, doubling in just two years. And now they're actually growing even faster than when they IPO'd again at 63%, at 256 million in revenue. That's crazy growth. So let's take a look at what the 1200 braids customers do, how they act, what we can learn from with 5 interesting learnings and then 4 quick bonus ones. So first one is just migrating to bigger deals. So 500k deals make up half the revenue and a million dollar deals make up 37%. And what's interesting about that is it doesn't happen overnight. As we see with so many players, it takes time to go up market. So GitLab had almost no million dollar deals in the two years before its ipo. Let's take a look at Braze. Braze, million dollar deals were 25% of it just last year, a lot, but growing to 37% today. So that at the tail end, well north of 200 million, all of a sudden those million dollar deals are starting to become very fertile ground. So remember, it takes time. If it took Braze to get to $100 million in AR, to routinely close $1 million deals, the same thing can happen to you. But along the way, even these slightly bigger deals, these 500k deals grew as well, from 41% of the revenue in 2000 to over half today. So today, 10 years down the road at 260 million revenue, half of Braze's revenue is from 500k up deals. And the average customer pays $200,000 a year. So point 2. What does NRR look like in the enterprise? And Braze is helpful. The numbers aren't crazy. They're what we do expect in B2B enterprise, it's 126% NRR overall and 135 in those 500k up customers that are half their revenue, which is what you'd expect. So under, under. Under 500K, top tier, 125%. And then as they get bigger and bigger, the NRR keeps going up and up and up to 135% and beyond. Okay, maybe the most interesting part of braze is 0.3 is acceleration. And we see this with a lot of other cloud leaders. But Braze is especially interesting. It accelerated after $200 million in ARR. And we'll talk about two ways that it accelerated both revenue per se and customer count next. But this is was growing about 60% at 100 million in revenue. And then as I went to IPO, growth was still very strong. But it dipped. It dipped from 60% to about 47 and 49% right before its IPO and then boom, up to 63% today. So it is a challenge that growth always slows as you scale. It is a challenge that you cannot reignite growth later. Braze grew very quickly at 100, dipped as it scaled past 100 and then re accelerated and grew even faster at 200 million in revenue than it did at 100. Pretty incredible to grow 63% at 260 million revenue. And again a challenge to think that you always have to slow down. And what was the key to that? How did they reignite very good growth, right? 47% at 100 and some odd million to 63% at 250 million. What was the key? Well, the key was more customers because that 135% NRR was already fueling growth, right? It was already fueling. In fact, 70% of their of their increase in revenue came from its existing customers. This is we see all the time, 70% of Salesforce's growth is from its base. This is what you expect to see at the enterprise at scale is 70% of your growth comes from your base. But what Braze did is something we also think had happened, is they accelerated New customer growth. So as growth sort of slowed from 100 to 150 million revenue, their new customer count slowed. It slowed from 32% a year in new logo count down to 22% and then boom, they reinvested in that and doubled it. This is crazy. In last year new customer count was 22% year over year. Now it's grown to 48%. That's crazy. Growth in net new logos. And so they took a business that inherently was already growing 30 or 40% a year just from NRR expansion account expansion. Like that's the magic of higher NRR. Braze was going to grow 30 or 40% a year just by making their customers happy and selling them more product. But they blew that up to over 60% growth by reigniting customer count at scale. And now they have 100 customers paying half a million a year or more. So it's a challenge to tam raises a challenge to those of us that think not only does our revenue have to slow down as we scale, but we run out of customers. Are there no more customers in market? Nick Mehta from Gainsight had a great post talking about how Gainsight went through a phase transition where growth slowed and then reignited after 100 million. But the phase transition was when they felt they had acquired so many of the customers in market buying SaaS, customer success software. And we see this all the time. But Gainsight found a way to reignite growth and so did Braze by finding more customers. So it's never easy to grow your tam. It's never easy to expand the number of customers in market for your product. But Braze, Gainsight and so many others tell you that even at scale, even at 260 million in revenue, you can find more revenues, more customers in your market than you had last year. But it's very heartening to see that because many SaaS companies at scale mainly rely on their install base. But Braze is showing you you don't have to point five. Just an interesting way again to see this enterprise NRR, their 216 year customers, the class of 2016 are spending 3.2x more today. So let that just sink in for a minute. A lot of folks present this, but Braze does it particularly helpfully. How does NRR scale over time? Well again, the customers they closed in 2016, so five and a half six years ago, they're now 3.2 times bigger today. That is the magic of SaaS. It doesn't happen overnight. It's hard to grow the seat count in a week, in a month, sometimes even in a year. It can be hard. But be patient and go along and make your customers happy. They can triple over five years like they do at Braze, and that just keeps going. The NRR doesn't shrink. Braze's NR is just as high now as it was in 2016. And this is the magic of SaaS. So let those customers do the hard work for you by investing in customer success and let each batch grow 5x or rather 3x over every 5 years like braze and magic just happens. Okay, so Those are the five main learnings, but let me give you just four bonus ones. 0.6 is revenue outside the US and this is something good just to generally track as founders. Braze sees 40% of its revenue from outside the US and I think that's about what you should see. If you have sas, that is one, localized because you've got to be in other languages, at least other European languages, and two, if anybody can use it. Now when we look at folks that have telecom component ringcentrals, folks like that, they tend to have a slower international expansion because telecommunications is very different outside the US when we see a lot of fintechs, they can be slow to grow outside of the US because billing and finance can be very different. Bill.com, amazing, amazing $26 billion winner. And in SMB finance, they've been very slow to grow outside the US and Canada because it's just very different in other countries. But your general B2B SaaS, apps, your zooms, your slacks, your braces in the enterprise, your salesforces, they should get about 35 to 40% of the revenue outside of the US because if you're localized, your product's just as good there. And even if it isn't localized, it's pretty good in the UK and Australia. So challenge yourself. If your product can be used in any country in anywhere. Is your percent of your revenue too low? Outside the US it should approach 30 to 40%. And if you're seeing that type of traction, also remember to localize it early. Localization can be a real pain if you don't have a 2 byte system. If you haven't already put in a framework to localize your app, but it's almost always going to pay off. And then on top of that, Braze put in a field team. So it added field teams, human beings in New York, San Francisco, Chicago, but also London, Berlin, Austin, Tokyo and Singapore. So everywhere there is a material amount of revenue, likely more than a couple million of ARR. They have a local field team for customer success and sales and you should do it that way as well. But again, I love challenging yourself. Why aren't we getting 30 to 40% of our revenue outside the US? Braze does. You should too, if you're sort of standard B2B7. Just an interesting note on margins. One of the things that that Braze does well, we should have chatted about this beginning is one of the magic things about Braze versus its older competition, the Adobes Marketo Salesforce is it started off mobile and messaging first. It was born in 2011. It was born in the beginning of the new age of mobile and the rebirth of messaging. And so they're sending lots of messages, lots of text lots. And those communication costs do add up. So their gross margins are not the 80% we see in Pure software. They're actually 66% today and we're actually 60%. The gross margins were only 60% at IP. But it's a reminder. It's okay. Wall street does not require any discount for them having 60% gross margins. And if you have some sort of communication costs like Braze does, no one really seems to care as long as your gross margins are in the 60s. And Braze not only was there at IPO, they thoughtfully got to 60, but they've marched that up a bit. They've marched that up a bit to 66% today. So that they remain a software company, not one with too much and lower costs in communications. And then two last just small notes, just of interest. 1,000 employees at 250 million in ARR. That's certainly not the most efficient company. The crazy efficient, most efficient one was expensify all SMB. No salespeople, less than 200 employees at 200 million in revenue. So a million in ARR per employee is about as good as it gets. But Braze isn't bad for Enterprise. It has 1,000 employees at 250 million in ARR. That's a good yardstick for you to escape to as well. That's pretty efficient for the enterprise. And then a last note just in terms of dilution, because these are all replaced. They just to track. It's interesting to see that the company did raise a lot of money. And dilution is different. Times are good in sas. But co Bill Magnussen ended up with about four and a half percent at ipo. And this is I think after some secondary sales, so likely owned more before the founders are worth $300 million each at IPO. That's pretty darn good. That's a lot of money, but it's a reminder that dilution does add up. Be thoughtful, take the right amount of dilution, build something huge. But you can't own 100% and build and build a $7 billion unicorn like Braze. It's just good to see the case study about how to think about and manage dilution over time. So anyhow, pretty cool. Pretty cool example for Braze. A pretty good example of rebooting an existing competitive space, going mobile and messaging first carving out 260 million in revenue from the Adobes and Salesforces, Marketos and others of the world. Pretty impressive. Doing it in many ways the hard way and then boom. Going from 2011 0, 2019100 million so 8 years to the first 100 million and then boom 100 million to 200 million in just 2 years and then growing 60 some odd percent at 260 million. ARR. It can happen folks. It can happen in competitive spaces. And it's a reminder not only do they not run out of customers, but at scale they are increasing. They're accelerating their customer count. So don't give up. Don't think your market is saturated, don't think your TAM is there. Find more customers like Braze does. Be challenged to grow even faster at scale and don't be intimidated by the competition. Remake the competition like Braze does. It shows that we can do it. Pretty cool story.