Datadog is At $1.2 BILLION in ARR -- Growing 75%!!

Let's talk about Datadog and the acceleration of cloud. Datadog is now 1.2 billion in ARR, growing 75%. That means Datadog is adding almost a billion of new ARR a year. That's incredible. And this is the type of growth rates we'd never seen before. Datadog was growing at similar rates at 330 million AR when it IPO'd. Not even as fast at 700 million in ARR just a few quarters ago. And now 1.2 billion billion ARR, it's growing 75%. So how is it doing it? Well, let's take a look at seven or eight interesting points about how Datadog did it. Number one is going up market and bigger deals. And this is interesting. The vast majority of Datadog's customers are small customers. It's a freemium product. You can sign up for free, you can start getting going for cheap. Even today, almost 90% of its customers pay far less than $100,000. But almost 80% of its revenue comes from $100,000 customers. So it's not so much that Datadog is leaving its small customers behind. In fact, it's investing in its long tail. It's investing in its smallest and its free customers. But as Datadog has become a more and more Central part of DevOps and Tech Ops, those bigger customers are more and more of its revenue. So it's a, it's a very interesting case study about going up market, but not forgetting who you are, that even with 80% of your revenue from 100k up customers, they still represent less than about 20% of the customer base. Two key to Datadog, and we've seen this with so many cloud leaders even hitting 100 million AR is more and more products and we'll talk about this. But DataDog is adding 10 new products this year. If you've used Datadog, if your engineering team has used it, you know it started off as the next generation observability platform, so sort of a new relic 2.0. And while that is still its number one product, it has radically expanded its portfolio to security, database management and so much more. And interestingly, as recently as 2008, most Datadog customers just used one product, usually the core product. Today most of its customers use two paid products. And most of its revenue, most of its revenue comes from folks that use four plus products. We also saw this at Box and a bunch of other leaders, your enterprise customers that use more of your products and tend to get more sticky with higher nrr. And we've seen that again and again with Datadog and even in 2020 only about half of their revenue came from customers with four plus products. Fast forward just one year to 2021 and it's over 70% of their new ARR comes from customers using four, four or more of their products. And obviously most of us aren't at a billion ARR yet. But I would argue even when you're in the tens of millions of ARR, you've got to start thinking about what will my second product be, what will my product expansion be? Because as you pick apart most SaaS leaders, even the ones that seem to have one product, they often have multiple products and that's the key to their growth. Okay, interesting point number four. Just related to this multi product vector, they don't buy all customers don't buy all the products at first. Most of their largest customers take several years to go from one to four to seven or more products. So you've got to earn that relationship. When you earn that relationship, when you earn that trust, when customers trust you as a, as a core vendor, they will be more inclined to buy more products from you. And Datadog is an example. But you can't rush it, you can't sell them all that first year. So much of Datadog's upsell to multiple products happens in year two and three. And so think about that for your sales team, how much pressure you put on customers to buy more. I know you want all that revenue now, I know you want it this year. But learn from Datadog, that may be getting that revenue in years two and three, even from an additional product is the right way to actually earn it. Point number five on NRR net revenue retention and GRR gross revenue retention. It's so interesting that with cloud leaders NRR never seems to decline. We always used to think, hey, net revenue retention of 120, 130%. It can't last. It can't last. As we get to 50 million, 100 million 200 million of revenue, it seemed like we would max out the accounts, but we keep bringing in so many new customers and delivering more value and more products from them. It turns out high NRR can scale infinitely. And we see this again with Datadog. Datadog has had 130% plus NRR for 16 quarters for four years in a row and it's not stopping. And even more importantly, it's gross revenue retention. How many of its customers, how many logos it retains, keeps going up again as it adds more products. So GRR was around 92 93% in 2018. Today it's 97, 98%. That's a big jump, right? Right. Going over 95% logo retention, that's pretty high. Most of us are lucky to have north of 90% logo retention. And Datadogs not only is top tier, but it's going up. It can be done folks. There is not, there is no gravity in NRR and grr even if it feels like there should be. And again, key to that is their land and expanded more products.6 on Datadog A lot of us do this, but one of the keys to its growth has been 450 native integrations. How many can you build? Well look, I know your engineering team gets tired. There's only so many you can support. They break the APIs, get refactored. But it's 450 integrations means sort of that Datadog works with just about every system you want to monitor, observe, et cetera. And that's a key to their secret sauce. 450 integrations. 7. We talked a lot about the 100k customers. It's interesting to watch. 1 million custom 1 million ACV customers. In 2016, Datadog had two $1 million customers. 1 million a year. Now it has 145. It's interesting we see this pattern of steadily and aggressively, but not too aggressively going up market again to $1 million a year customers. 145 is incredible. But they did take five, almost six years to do it and again without breaking that long tail. Even though the majority of the revenue comes from bigger and bigger customers, the majority of their customers are small that they can grow and grow into and spread their brand and spread the love. And the last quick point on Datadog point 8 is even as a product that developers across the globe love, it segmented its sales team into a classic small, medium and large segmentation. Self serve is self serve. There is no sales team and that is primarily month to month billing. Note they don't push self serve customers to pay annually. MongoDB learned this too. Mongo brought in their first sales team and pushed everyone to annual contracts. We get why. And it backfired on them. Their conversion rates plummeted. Datadogs ticks with month to month at the low end of the model, then in the middle and deals up to about 50 or 100k that they can often see growing organically. The inside sales team comes in, they close a lot of deals. They work over zoom and work over the phone. And it's a pretty classical way you handle sort of the five figure deals. They either come in as leads or you wait for the accounts to grow and you reach out. And then there's a separate enterprise and field sales team that has longer sales cycles that works on the big deal. So as you're learning about sales teams, realize everyone segments that everyone segments their sales team, at least into small, medium and large customers. Even folks that are seemingly have a large self service component like Datadog. Even folks that are developer focused. Datadog does it. Mongo does it. You should do it. Segment your sales team. Incredible story for Datadog. 1.2 billion growing at 75% year over year. It looks like an outlier, but we're seeing this so often because the cloud is just so huge, my friends.