Growth Velocity Expectations in SaaS: The 5x Standard
Jason Lemkin argues that 5x growth has become the new baseline expectation for successful SaaS companies between $1-10m ARR, replacing the previous 2x standard. The author contends that growth velocity during the critical $1m-$10m ARR phase is the primary factor determining venture funding success, talent acquisition, and acquisition outcomes, regardless of absolute revenue figures.
Metrics in this report
10$ millions ARR
target milestone
Critical inflection point where momentum translates to valuation
1-2$ millions ARR
range
Minimum revenue before growth velocity becomes critical evaluation metric
125%%
floor recommendation
Companies at $1-2m ARR seeking venture funding
90%%
actual
At $250m ARR, 2012
>100%%
minimum threshold
Post-initial traction, 2005-2006 SaaS companies
150-200%%
standard range
Marketo, Yammer era companies post-initial traction
5xmultiple
new standard
Current mega-round funded companies, $1-10m ARR phase
4xmultiple
actual achieved
9 months, $100m to $400m annual payroll processing