Key Takeaways
- • Bessemer Venture Partners' "Scaling to $100 Million" benchmarking report identifies ARR as the primary scale metric, with average growth falling from nearly 200% at $1–10MM ARR to 60% above $50MM ARR.
- • Cloud companies can expect roughly 70% year-over-year growth endurance in the private market (about 80% among public cloud peers in the BVP Nasdaq Emerging Cloud Index), meaning next year's growth is typically ~70% of the current rate.
- • Retention benchmarks cite roughly 85% gross and 120% net retention, with gross retention consistent at 85–90% across ARR ranges.
- • At $100MM ARR, average expense ratios are R&D 35%, S&M 50%, and G&A 20% of revenue, with companies reaching about –35% free cash flow margins at that scale.
- • Private funding rounds averaged about 30x ARR for $1–10MM companies and about 15x for $10MM+ companies over the past decade, with recent top-company rounds at 20x–34x.
Summary
Bessemer Venture Partners has published "Scaling to $100 Million," a benchmarking report drawing on more than a decade of its cloud investments, which it describes as one of the largest cloud portfolios of any venture firm. The report aims to give founders, executives and board members reference points for metrics such as gross margin, R&D spending and growth relative to peers, data that Bessemer notes is typically scarce for private companies.
The report's first lesson is that ARR is the primary measure of scale. Bessemer's portfolio data show average ARR growth of roughly 200% for companies at $1–10MM ARR, 115% at $10–25MM, 95% at $25–50MM and 60% at $50MM and above. The middle 50% of companies narrow considerably as they scale, from 100–230% growth at $1–10MM to 35–80% at $50MM+. Bessemer attributes sustained growth at scale to market consolidation among leaders and to "Second Act" product expansion, citing PagerDuty and Toast as examples. The report also cites Procore, which moved from bottom-quartile to top-quartile growth by the $25–50MM range before going public in May 2021 at a valuation above $10 billion.
Bessemer estimates private cloud companies retain about 70% of prior-year growth each year, a figure it calls growth endurance, and about 80% among companies in the BVP Nasdaq Emerging Cloud Index. Retention benchmarks are about 85% gross and 120% net, with gross retention consistent at 85–90% across ARR bands.
On operating efficiency, the report recommends targeting 65–70% gross margins over time. At $100MM ARR, average R&D is 35%, sales and marketing 50% and G&A 20% of revenue. Cloud companies typically reach free cash flow margins of about –35% at that scale, and Bessemer advises reaching free cash flow breakeven within one to two years of $100MM+ GAAP revenue before considering a public listing.
On valuation, Bessemer reports that funding rounds over the past decade averaged about 30x ARR for companies at $1–10MM ARR and about 15x for those above $10MM, with recent averages of 20x–34x for top-performing companies. Bessemer notes that dilution declines as ARR and round sizes grow.
The report's first lesson is that ARR is the primary measure of scale. Bessemer's portfolio data show average ARR growth of roughly 200% for companies at $1–10MM ARR, 115% at $10–25MM, 95% at $25–50MM and 60% at $50MM and above. The middle 50% of companies narrow considerably as they scale, from 100–230% growth at $1–10MM to 35–80% at $50MM+. Bessemer attributes sustained growth at scale to market consolidation among leaders and to "Second Act" product expansion, citing PagerDuty and Toast as examples. The report also cites Procore, which moved from bottom-quartile to top-quartile growth by the $25–50MM range before going public in May 2021 at a valuation above $10 billion.
Bessemer estimates private cloud companies retain about 70% of prior-year growth each year, a figure it calls growth endurance, and about 80% among companies in the BVP Nasdaq Emerging Cloud Index. Retention benchmarks are about 85% gross and 120% net, with gross retention consistent at 85–90% across ARR bands.
On operating efficiency, the report recommends targeting 65–70% gross margins over time. At $100MM ARR, average R&D is 35%, sales and marketing 50% and G&A 20% of revenue. Cloud companies typically reach free cash flow margins of about –35% at that scale, and Bessemer advises reaching free cash flow breakeven within one to two years of $100MM+ GAAP revenue before considering a public listing.
On valuation, Bessemer reports that funding rounds over the past decade averaged about 30x ARR for companies at $1–10MM ARR and about 15x for those above $10MM, with recent averages of 20x–34x for top-performing companies. Bessemer notes that dilution declines as ARR and round sizes grow.
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