Feb 21, 2025 · 22m · saastr
The Real Data on What it Takes to Go Big and Eventually IPO with Meritech Capital
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
Alex Clayton and Kathy Choi of Meritech Capital present a data-driven analysis of modern SaaS IPO requirements, examining historical metrics, qualitative standards, and the post-IPO compounding required to sustain long-term public market value.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. How this is scored →
Jason as informed peer 0.0 Guest teaching 0.0 Guest disagreement 0.0 Jason pushing back 0.0
speaking balance: gold is Jason, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 0:10 Rigorous qualification for public readiness
Alex forcefully sets high expectations, emphasizing that public markets demand a compelling reason to buy over 100 other public SaaS alternatives.
Hardest push from Jason ▶ 2:00 No host pushback presentThe episode is entirely a keynote presentation by Meritech Capital with zero host verbal participation or pushback.
Biggest teaching moment ▶ 12:20 Disproving growth-rate correlation to valuationKathy shows statistical regression data proving that absolute scale and high annual revenue CAGR have near-zero correlation with share appreciation.
Jason holds their own ▶ 2:00 No host intervention presentThe host does not speak or offer commentary during this uninterrupted stage presentation.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Jason as informed peer | Guest teaching | Guest disagreement | Jason pushing back | Why |
|---|---|---|---|---|---|---|
| Qualitative Factors Required for Going Public | 0 | 0 | 0 | 0 | Alex Clayton delivers a solo stage presentation outlining qualitative IPO prerequisites, including operational excellence and predictability. There is no host involvement or adversarial friction. | |
| Historical SaaS IPO Metrics and Valuation Multiples | 0 | 0 | 0 | 0 | Kathy Choi presents historical benchmark data on ARR scale, net retention, and valuation multiples across past SaaS IPOs. The dynamic is purely didactic with no host engagement. | |
| Post-ZIRP IPO Case Studies: Klaviyo, Rubrik, and OneStream | 0 | 0 | 0 | 0 | Kathy and Alex break down recent post-ZIRP IPO case studies including Klaviyo, Rubrik, and OneStream, followed by required current metrics. The segment is an educational keynote presentation without host participation. | |
| Post-IPO Performance and the Power of Durable Growth | 0 | 0 | 0 | 0 | Kathy presents regression analyses demonstrating that durable growth correlates far more with market appreciation than raw growth speed or size. No host is present to intervene or question the findings. | |
| Compounding Case Studies: CrowdStrike vs. SPS Commerce | 0 | 0 | 0 | 0 | Alex compares CrowdStrike and SPS Commerce to demonstrate the long-term stock returns driven by compounding durable growth. The segment is purely structured presentation without pushback. | |
| Post-IPO Operational Predictability: The Beat and Raise | 0 | 0 | 0 | 0 | Alex concludes the presentation by highlighting quarterly beat-and-raise predictability and summarizing key takeaways for founders aiming for an IPO. There is no host involvement or debate. |
Statements from this episode (18)
Meritech: SaaS companies average 10 years from founding to IPO
“First, we see that on average, it takes companies about 10 years from founding to IPO. Here we have the average years to IPO hovering around that 10 year mark over this 15 year period.”
Choi: Average ARR for SaaS IPOs has jumped to $300M–$500M
“Here we have the average ARR scale of companies at IPO quarter, and you'll see the tremendous increase from 2009, 2010, where companies were going public between 50 to a hundred million of ARR, And in today's markets, more recently, companies are in well over …”
Choi: Public markets will likely value SaaS IPOs at 7x–11x ARR
“And you'll see that companies are trading between this seven times to 10, 11 times range, with the exception of 20 20 and 21. And this is also important to note because irrespective of what private markets are valuing you at today, public markets are still lik…”
Choi: Klaviyo went public at $7.6B valuation on just $16M burn
“Klaviyo is a leading market automation company, and they went public in September of last year with a market cap of 7.6 billion dollars. There are around seven hundred million of ARR and are trading today and at 10 times ARR multiple. And one thing that's uniq…”
Choi: Rubrik IPO'd at $5.6B Valuation After Burning Over $700M
“This is a data management and security software platform that went public in April with a market cap of 5.6 billion dollars. They were around eight hundred million of ARR and are now trading at seven times ARR multiple. And you'll notice that difference in cas…”
Clayton: Top-quartile SaaS IPOs since 2018 averaged over $400M ARR and 60% growth
“A top four tile company since 2018 was over four hundred million of ARR, growing at almost 60%, worth about seven and a half billion dollars, and as you can see, had very strong metrics, and still took about 10 years for them to get there.”
Clayton: Modern SaaS IPOs demand $400M ARR and 30% growth
“We think that you need to be at least four hundred million of ARR. You have to be growing at least 30% a year. You're probably going to be worth three to five billion dollars and trade anywhere from that eight to 12 X range.”
Choi: Software valuation multiples have zero correlation with revenue size
“Here we have a regression that charts AOR multiples today versus the implied AOR scale of the most recently reported quarter of a 139 different software companies. And I want to draw your attention to the r squared value of this regression... And so we see her…”
Choi: Share price appreciation strongly correlates with cumulative dollar growth
“On the left here, we see a regression that charts the share price depreciation from IPO to today versus how much revenue has increased in dollar amounts from IPO to today. And you'll see here that the R spread value is, 0.74, which is fight high and applying a…”
Choi: Revenue CAGR has zero correlation with post-IPO share appreciation
“Now this charts the same y-axis, but on the x-axis you'll see revenue growth compounded annually. And so the R spread here, you can see it's much more scattered, is 0.03.”
Choi: HubSpot generated $11B in market cap from post-IPO new products
“And they had added essentially eleven billion dollars of additional market cap value that wouldn't exist if it weren't for these new products.”
Clayton: CrowdStrike sustained nearly 50% ARR CAGR post-IPO to $4B
“They've continued on a very high growth rate through 20 24 and have been growing at a 50%, almost a 50% ARR growth CAGR since going public in 2019, and they're approaching four billion dollars.”
Clayton: SPS Commerce grew at a 20% ARR CAGR for 15 years
“SPS Commerce went public in 2010 at around fifty million of ARR. And for 15 years, they've grown their ARR at a 20% CAGR.”
Clayton: Public SaaS companies beat and raise guidance 80% of the time
“Irrespective of all market conditions, 80% of the time, SaaS companies are beat, are beating current quarter guidance and raising the subsequent quarter guidance.”
Clayton: SaaS IPO preparation requires at least one full year
“It takes at least a year before you even say you want to go IPO if you can to do it.”
Clayton: Annual SaaS IPO capacity is capped at 20 companies
“And only 20 SaaS companies per year can actually make it public. We don't think this number is going to go higher than this anytime soon.”