MongoDB is at $700,000,000 in ARR!! What Can We Learn?

Hey, everybody wanted to take a few minutes to talk about one of the great cloud and SaaS and developer success stories, MongoDB. MongoDB is an open source database software product that has been commercialized commercial open source software. And in fact, Mongo is arguably the most successful commercial open source software vendor, having grown 700 million in ARR now growing 39% a year. So it's 700 million in revenue. It's essentially accelerating. It's growing 40% a year. That means in a year it'll be at a billion and just keep going. And it's incredible because Mongo, first of all at its core is free. It's been downloaded 130 million times for free. And not only is it free, it means its competitors can use it as a company. Amazon has a version of Mongo that it sells. And so Mongo's had to be super clever and find a way to evolve its licenses and its business strategies so that it can grow faster than ever. And so it has again, 700 million in ARR growing 40%. And what can all of us learn? What lessons here that all of us can take away? I want to give you five interesting learnings and then four bonus ones that I think are interesting to all of us. The first one is very interesting. Customer distribution. Mongo has a classic small, medium and large distribution. It has 25,000 total paying customers. 25,000 only 2,800 of which go through sales. So almost 90% of the customers self serve, they download, they try it, they use Mongo, they never talk to a salesperson. So that's the small. Essentially almost 90% of the customers are never touched by a salesperson. The ones that are though the sales team really is well hunting because the 1 million ACV customers are the ones growing the fastest. Now Mongo has 98,1 million plus ACV customers. So that means that maybe 20, 20 plus percent of their revenue is from their 100 biggest customers. And that's up from just 62 a year ago. So from 62,1 million ACV customers to almost 100 today. That's big growth in $1 million deals. But the smaller whales aren't growing as quickly. The 100k customers only increased from 898 to 975. Small growth, 10% growth. So clearly Mongolia, when it does jump into deals, it's jumping into the biggest ones. And Mongo does. What many of us do with freemium businesses is it looks for signals. They examine accounts, they look for the ones with the highest potential for expansion. The Ones that reach out, the ones that don't. And sales jumps into deals. And even among big deals, the developers often buy first and then later other business leaders come in as the deal size goes up. So sales wants to get involved relatively early so they can help map out the stakeholders. But they do it from for the really big deals mostly they really clearly focus on the $1 million plus deals. Cause those are growing much more quickly than the 100k deals. The second point is just a little bit more on the one we touched on which is even though Mongo has 101 million plus customers, the vast majority of its customers really are do really do self serve. They really do. Only 2,800 of its 25,000 customers are direct sales. It's super interesting that they can make this work. Now. Many developer focused companies do the same fastly does it. Snowflake does it. Others can do this, but it absolutely requires a careful process so that you're not over mining the small customers, that you're not over monetizing them. You have to let them grow and you have to look for the right signals. And what's great about this, and here is an example of when freemium really, really, really works. It's direct sales Customers are up 47%. Up 47%. They have 2,800 paying customers today, but there's only 1900 a year ago. And that means the logos, the paying customers are growing even faster than the revenue. The customers are growing 47% while the revenue is growing 40. That is an incredible sign for the future. What we see with a lot of SaaS and cloud companies is after a hundred million, sometimes a little more ARR. They keep growing, but so much of it is from the install base. 70% of Salesforce's revenue comes from its existing customers. We see this time and time again, especially where the NRR is very. Because it's just easier to get more revenue out of existing customers than find new ones. And it's great, but ultimately it creates headwinds. Ultimately you need new customers to keep buying from you. So when you see something like Mongo, that's at 700 million and its new customer count is growing 47%, that's an incredible sign for the future. Incredible. And it's a much higher ratio of revenue from new to existing customers than we often see. So it's a reminder to focus as much on gross revenue retention and new logo growth as well as just bookings growth. Because if you just focus on revenue and bookings alone, without new customer growth you may lean on your existing customers too much and not fill that top of the funnel. Third, interesting point is NRR is only 120% and I don't mean that that's low. It's very impressive. 120% net revenue retention again means that for each million dollars of Mongo revenue that that grows into 1.2 million the following year and then 1.44 million the following year and so on. It's an incredible compounding rate and it is world class. But interestingly, it's not crazy off the charts high like 160% at Snowflake or what we see at Twilio and others. So it just shows that there's a range. You do want to be world class and you want to push NRR as high as you can, but different companies and different processes are a bit different. So 120% NRR is world class, but it's not the absolute highest in general or in the category in the enterprise. And it shows of variety here. Point four, which is as much about the cloud overall as Mongo, but the free version has been downloaded over 100 million times. But 55 million of that was just in the last year. So while that's great for Mongo, it shows it very much ties to this growth in customer count and the incredible growth in the business. It's also a proxy for the cloud. I mean, database technologies are one of the core things every cloud vendor needs and Mongo is a leader. It is the leader in its segment and it's. But it is not the only vendor. And the fact that it is growing so fast and accelerating it accelerating that more. There are more downloads last year of Mongo than its first 10 years combined, shows the cloud is just getting going, that the growth is going to be breathtaking. So Mongo, in a way we can almost use as a proxy for the cloud and if its downloads are accelerating, that's a good sign for all of us as cloud founders, cloud investors, cloud, VCs, cloud everything. It's incredible. Main point five and then we'll hit just a few bonus points. Multi cloud. Multi cloud is one of Mongo's top drivers of growth. And there's a bunch of reasons for that specific to Mongo. We don't get into it, but a lot of times you'll read a lot about multi cloud running, running your products on Amazon and Azure and Google and others. But it can seem very enterprise, it can seem very transitory. Like does multi cloud? Do we really need multi cloud? Can't we Just trust Microsoft or Amazon. Well, Mongo shows no that multi cloud is even more important than we imagine. In fact, in fact, Mongo expects 98% of its large customers to be multi cloud by 2024. So multi cloud is not a transition. It's not a transition phase from on prem to one cloud or a transition phase as we learn to trust the big cloud vendors. Now, multi cloud, as expensive as it is, as duplicative it can be to run your application on multiple clouds, it's here to stay. If 98% of Mongo's customers want it, it means if multi cloud is important to your customers, deliver it. And Sometimes for a SaaS vendor, it can almost be a check the box feature. Sometimes folks really won't wanna run so much multi cloud, but it clearly shows that in big deals, if you can provide it and customers want it, it can be an incredible differentiator. Okay, four quick interesting points. Number six, professional services are a very small percent of their revenue and are actually gross margin negative. So professional services, look, they're part and parcel of big enterprise deals. You're going to do a $1 million deal at Mongo, someone's going to have to help deploy it. Will it be your own resources? Will it be the vendor? Or will it be a partner, a third party that does it? An Accenture or a custom shop? And some folks do services in house. Qualtrics does an incredible job of it. 20% of their revenue is from services and they make good money off of it. But other folks are not as good at making money off it. Mongo loses money. Salesforce tries to do as few services as it can. HubSpot has its partners and its agencies do its implementation. In fact, HubSpot's partners make three times more money than HubSpot itself does. Deploying HubSpot to its customers, Mongo doesn't want to do it. Mongo is like Salesforce and HubSpot. They don't want to do it themselves. They're not like Qualtrics. Services are only a $28 million business for Mongo and it loses money. So it's a very small amount of their revenue. It's not growing. Mongo does services when it has to, but it tries to find implementation partners to do 95% of it. For seventh point, this one's super interesting, folks. Mongo found that annual contracts were bad. Now, I'm sure this probably is not true in their top 10 counts or so, but this is super interesting. As Mongo scaled up its sales team, it started with an incentive program that heavily pushed annual deals. Many of you like annual deals because it can bring in cash early. It backfired on them. It backfired on, it backfired on their developer communities, the ones that buy from first. Again, remember, even in their biggest deals later, multiple business units will come in to write the big check. But in the beginning it's the developer coming in. They didn't want to pay annual, they didn't want that salesy approach. We're having to buy something they just wanted to try before you buy, which is the way most developers did. And it was breaking things. So Mongo changed its sales comp program to incent signups instead. Salespeople is now paid when the account signs up. They get a commission right then and there, not for an annual contract. And it really worked. Sales took off when they did it. And it's just a reminder. Look, every, every company is different. We looked at Zoom recently Zoom as Zoom has exploded since COVID The majority of its customers now pay monthly. By the same token, Smartsheet has done quite well. 400 million also to SMBs. But as smartsheet has gone up market, they've gone primarily to annual contracts. And Qualtrics is 100% annual selling to the enterprise. So there's no perfect answer here. But Mongo is a reminder to listen to your customers. Annual contracts can be great, but they also can create friction. And listen make sure that that the friction's worth it. Because what you want is happy customers. What you want is happy customers paying a fair price, telling their friends and buying more for you. That's the way to get to a hundred million and billion in revenue, not creating unnecessary friction in the sales process. Mongo figured that out fast. It was too much salesy stuff to their developers. So they changed, they changed incentive program and incentives really matter in all departments, but especially sales. And they said no more annual contracts. We pay you just when the customer signs up. And magic happened. Two last smaller points. But interestingly, Mongo did see some Covid impacts. But they said they're back, they're back they said. Customers belt tightened after Covid and especially it was a slowdown in account expansion. Logos kept growing, but accounts didn't grow as much. We've seen this with Procore and others where customers just didn't grow as much after Covid hit. Although logo churn did not go up. Account expansion again took a pause. But it's back. Mongo said all its cohort behavior dynamics are where they were pre Covid. So you might expect that given the incredible growth of all cloud companies and Mongo almost 40% at 700 million revenue. But Covid is behind us in the case of Mongo. And the last interesting point, Mongo's going back to the office so we'll learn more what everyone's going to do. Mongo says junior employees benefit from training and learning and more senior employees maybe don't need those benefits. So Mongo wants its junior folks, its newer folks to spend time in the office if they're comfortable, but they're not going to force anyone back. And so some version of this is likely what a lot of us at scale will do. We'll realizing that even with the onboarding, even with everything we've done remotely there, there can be benefits to being together. So Mongo is not getting rid of the office despite being a very developer centric company, but it's not forcing anyone to go back. That likely will be the next transition phase for many of us. But anyhow, 13 years for Mongo from 100 plus million downloads to 700 million in ARR today growing 40% with its new customers growing even faster. New customers growing 47% year over year. Wow, what a success story and something I think that so many of us can learn from.