UiPath Is at $600,000,000 in ARR -- Growing 60%!!

Hey, everybody wanted to take a few minutes to talk about one of the most interesting SaaS and Cloud stories, if it even is a SAS one, which is UiPath. UiPath is now at 600 million in ARR. Almost doubling, almost doubling. Last year it went from 330 million in revenue to 600 million in revenue. It's crazy. And in fact it's. In 2015 it was only doing 1 million in revenue. So it went from 1 million in revenue in 2015 to 600 million in revenue in 2020. We've almost never seen a software company grow at that pace. And in fact, as incredible as that is, it took a long time. UiPath was 10 years old before it did its first 1 million revenue. Founded in 2005, originally as an outsourcing company, raised a tiny seed round and it took 10 years for them to get to 1 million in revenue. 2005, 2015, 1 million in revenue. 600 million last year. I mean, that is the steepest acceleration that we can imagine. So I want to do five interesting learnings today and actually a few bonuses ones. Five plus about five others on what we all can learn as founders and Cloud and SaaS executives from UiPath. But before we get there, let's be clear. UiPath looks and feels like a SaaS company. It has very high NRR, which we'll talk about one hundred and forty five percent NRR. It is sold and marketed in many ways like a SaaS company, but technically it's not a SaaS company at all. Only a tiny amount of UiPath's revenue is actually based in the cloud. And what the vast majority of its revenue does is connect on PREM and cloud software through scripts that often run on a Windows computer. A lot of the software, believe it or not, is Windows Server, Windows PC and Serv. So you could certainly say this is not SaaS. This is, this is desktop and server software. And you would be right. But it looks, acts and feels and is monetized like SaaS. It is priced like SaaS. And it is connecting the cloud and on PREM and local devices, which is part of SaaS and Cloud. So let's call it a cloud company even if it's not SaaS. And I think all the learnings for the five interesting learning series still hold. So what's happened? What's gone on with UiPath? What can we learn in this incredible journey from 0 to 1 million over 10 years and then 1 to 600 million the next five? I mean, it's crazy. First of all, you can debate whether UiPath is SaaS or what it is, but people love it, Customers love it. Customers love it. UiPath has an NPS of 71 and 145% net revenue retention. That means its customers buy another 45% each year. It's fairly incredible. And it's a reminder that these two go hand in hand. If customers truly love you, a 71 NPS is off the charts. Good. Now, you can tweak NPS, you can game it by how you ask the questions, you can exclude folks from it. But 71 is awfully good for a company about to go public. And so it's a reminder that when you don't know what to do, drive NPS up. Drive NPS up. That alone will help drag up your net revenue retention and drive down churn. Second, interesting learning and why UiPath is a very healthy business. Its revenue is growing 65% at 600 million, which is incredible, right? It will be soon past a billion in revenue. So its overall revenue is growing 65%. Its customer count is growing at 33%. So that's healthy. What we've seen in a lot of cloud companies go public is that while their growth continues at a nice rate because of happy customers, net revenue retention, their new logos, slow down. Their new logos for many public companies often slow down into the teens. And that's worrisome because even if you have very high revenue retention, if your logos aren't growing fast enough, where's the future? So, 33% customer count plus 140, almost 150% revenue retention. That is a very, very bright future for UiPath. And it can be hard to figure out the ratio. Today. It means that 75% of their revenue actually comes from their base. Remember that. But with 30, with their customer count growing 33%, they've got a decade to run here. So that's kind of the golden rule. Try as you're scaling as a SaaS company, if you can get $1 from new customers for each dollar you get from upsells, if you can keep that ratio going forever, you sort of have something special, a third important part, and this is only relevant to some folks, but uipath for the most part is deployed by technology partners and sis. Folks like that. You may or may not know if you don't work with them, but you've heard of the Accentures, the Capgeminis, the Deloitte and the Cognizant and others. And really what happens is they have a big project, they'll have a big project, for example, to connect an on prem piece of software to a cloud database, or could be a million other use cases. And a big company, a big company will pay them $10 million, $20 million a year to connect to do one of these big projects. And they might pay UiPath a half million, a million or more a year and mark that up three to five times as they pass on to their customers, either directly or through or more commonly through services, because it is work to do these big projects. So UiPath would not be what it is today without its implementation partners. And it's true to an extreme with UiPath, but it's true with anyone in the enterprise. Salesforce would not be where it is today without its partners and many others. Fourth point, and we talked about this briefly already, that the UiPath talks about ARR, but it uses the term loosely. We're seeing this more and more. I mean, Shopify has incredible ARR, but most of Shopify's revenue is not from software anymore. It's from merchant services that don't recur, they're payments. Most of software. Shopify's revenue is from payments is that ARR. And personally as a SaaS person, I've resisted including non recurring types of revenue and ARR. But time has gone on and I think what we've learned is if you have the type of revenue retention you see in traditional SAS software, if you see 100, 110, 121, 140% net revenue retention like UiPath, it probably doesn't really matter how the revenue gets done. Whether it's utility based, whether it's on prem software, off prem software billing, whatever. If the revenue retention is north of 100, it counts as ARR, even if technically sometimes it doesn't recur like a merchant service for Shopify, or even if it's really not cloud software like UiPath. Again, that's our nuanced learning for 2021 and beyond. If the revenue retention is high, it counts as ARR, even if it's not truly, truly recurring revenue. And what UiPath did in the old days, you would buy a piece of software and then you might pay maintenance support, but that would be a small fraction. That was the old Oracle and SAP model. You pay a lot. You'd pay maintenance support for a decade or decades, but it would be a fraction of the initial price. UiPath has blown that up. You pay the same each year, even if it's not. Even if most of us customers are not running their software on the cloud, you still pay 100% each year. So it looks, acts and feels like SaaS. It counts as SaaS. It counts as NRR. Okay, fifth point. And then we'll hit a few. A few bonus learnings. It's hard for us sometimes to do the math of compounding of net revenue retention. We talked about before how UiPath has over 140% revenue retention at 600 million in error. And that's incredible. But what does that mean? Well, because 140something percent compounds each year to a force of nature. That's awesome. So take this in for a minute. UiPath's top 50 customers. Their top 50 customers grew their bookings 81x since 2016. 81x their top 50 customers 81x since 2016. Sorry to be a little redundant there, but think about what that means. Think about how important it is to lean in on your top customers. I can't think of how many customers I had back in the day that started off as a 25k 100k customer that have now paid over $10 million a year to Adobe for my last product. Right. That 25k customer grew to a $10 million lifetime value. UiPath has seen the same thing. 81x of its top 50 customers since 2016. And even more, its first 400k customers. Right, its first 400k just when it was breaking a million back in 2015, its first 400ks of customers pay 22.7 million. Now its first 400k paid 22.7. Think about that. Close those customers, don't let them go. Don't let them go over an sla. Don't let a dispute, let it go. Don't let ego get in the way. Close those key early logos and make customers and make them insanely happy. And your first 400k may be worth 22 million later, like UiPaths. Okay, so those are the five main learnings. Let me just give you a few bonus learnings. Number six. More just interesting at this level, $1 million customers are very important to UiPath. They had 89 last year, or rather two years ago and 21 last year. So they went from 89 customers in 2019. Sorry, rather, 21 $1 million customers in 2019 to 89 last year. And that's 35% of your revenue. So whales are interesting. UiPath can't survive just on $1 million customers. It's only 35% of revenue. But it is their biggest slice. And it is a reminder of how incredibly sometimes the enterprise those accounts can grow. Right. Almost none of these $1 million customers started there. They get there over the course, sometimes just within one year, sometimes within two years. So they don't start off as million dollar customers, but they have almost 100 of them now accounting for 35% of the revenue. So it's a reminder you've got to do this in sales especially. You have to evaluate the total potential size of an account when you close it. Not just the initial deal size or you'll under resource a deal. Just because a big customer comes in and they only pay you 50k the first year doesn't mean next year they can't pay you 500k or a million later. UiPath shows it happens again and again and again. So make sure you know the total potential deal size for a customer, not just that initial check point 7. A metric we should be talking more about. We've talked about this on Saster, which is gross revenue retention. We talk a lot about net revenue retention, net dollar retention. Hooray. UiPath has 145% and that's great. But what's just as important is that you keep your customers and that very few of them churn it. And UiPath has 97% gross revenue retention. That's pretty world class. The highest we've seen in the series is ServiceNow, which is 99% retention. I mean no one leaves ServiceNow but ServiceNow is all big deals. They're all over a million dollars a year. UiPath's only 35% over a million. So 97% gross revenue retention is pretty strong. What's your goal? Certainly it would be nice in the enterprise for you to have it well into the 90s in the enterprise and at least 80s from mid market and smaller customers. Those are sort of best of breed for gross revenue retention. Just a couple last points. The eighth one is one we touched on before. But 38% of its revenue actually comes from maintenance and support. And sometimes that's a negative. We've seen folks like like Mongo and Salesforce and others that don't really want to be in the maintenance and support business. But the key here is the margins are just as high. The margins in maintenance support are just as high. So even though 38% of its revenues comes from it, it's fine. They want to keep that in House. Point nine is super interesting and UiPath is headquarters in New York. It looks and talks a lot like a US tech company, but the truth was it was founded in Romania by European founders and most of its far more of its employees are Romania today than New York city, there's almost 800 in Romania and there's. Well, who knows where we are during COVID but in theory there's only a little more than 100 employees in New York. And what's interesting is not so much that, because we see that somehow it's that only 36% of UiPath's revenue is in the Americas. Only 36%. The vast majority is not. It's super interesting. I'm sure if you want to invest in the stock, that's an interesting growth potential, but it really shows how your roots matter. It really shows that. And folks who started off in other geographies often have at least an outsized amount of their revenue in those geographies. When we looked at wix, for example, very SMB. But wix had much more revenue in Europe and Israel than you would expect a company originally founded in Israel. And it's very interesting that despite the fact that UiPath is seen as the leader in its space of RPA and competes with a number of other leaders that started in the US that still its roots matter. Your roots matter. And it's super strong in Europe and important in the US, but still again, only 36% of its revenue here, which is surprising. Three more quick points. Number 10. Half of its employees are in sales and marketing. Just interesting to follow. 2,800 or so total employees, 1400 in sales and marketing. So half. That's pretty much what we're used to in sort of enterprise y companies, most SaaS companies half and probably a metric we should all look at much more carefully. But interesting to track. Penultimate point, patents. Patents. What's the role of patents Today? Startups don't seem to care as much about patents, and then later in life you wish you had more. UiPath's one of them. It actually the company's 15 years old, only has four issued patents. That's pretty low. But it has 129 patent applications and you can imagine as this space has become highly crowded, this rpa that having a few hundred patents helps you patents most. Very, very few startups will ever sue anybody on a patent. It happens rarely, but what's much more common is you need them for defense. You get sued by someone else, a big tech company, or more often a patent troll, and you find if you don't have some defensive patents, you're in a tough position. So UiPath probably has figured that out, deprioritizing patents early, but now only four in its entire 15 years issued, but 129 applications and the last one. And I think this will be interesting to a lot of founders. Company has been very careful on dilution and control. Again, only one little tiny seed round before it took off. And then some monster rounds. Some monster rounds at billion and then tens of billions of dollars in valuation. Excel leaned in. Excel still owns 30% of the company and is by far the largest VC. And the CEO Daniel Dines also owns 30% and 91% of the voting stock. Essentially a solo founder company. Not literally, but essentially because he owns the vast majority of the founder stock and totally controlled by a single founder with 91% of the voting share. One person, one founder controlling 30% of the equity of a company that will probably be worth over $60 billion and 91% voting control. These are the benefits you get if you wait to raise the round again. They raised a tiny bit amount. The first 10 years were brutal. 10 years to 1 million revenue. How many of us are this tough? Okay, how many of us? I personally was dejected when it took us five years to get to 10 million. It took them 10 years to get to 1 million. I can't believe they didn't quit Ultra Respect. But by doing it the hard way, by not really raising any venture capital until they began to take off, The CO controls 91% of the votes and 30% of a company that will be worth the better part of $100 billion shortly. Pretty interesting story.