Scaling to $100M ARR - B2B Cloud Benchmarks with Mary D'Onofrio, Partner Bessemer Ventures

**Ray Rike** (0:00)
Hello, I'm Ray Reich, Founder and CEO of RevOp Squared, and your host of the Metrics that Measure Up podcast. We talked to a wide variety of B2B, SaaS and Cloud thought leaders, executives, investors, and people just like you to discuss the metrics and benchmarks they use to make metrics informed decisions. Now on to today's show.
Welcome to today's episode of the Metrics That Measure Up Podcast. Today, we are joined by Mary D'Onofrio, partner at Bessemer Venture Partners. Today, we will be covering four main topics with Mary. First, the catalyst behind the recently published Bessemer Scaling to $100M Research Report. Second, the top lessons learned in benchmarks from the research. Third, enterprise valuations. Can private B2B Cloud company valuations and modables be sustained at these levels? And fourth, measuring your B2B Cloud company performance versus these benchmarks, how to avoid selection bias. Mary, can you please take a moment to give a brief background overview of your journey to becoming a guest on the Metrics and Measure Up podcast?

**Mary D'Onofrio** (1:21)
Sure. And thanks so much for having me. I'm Mary D'Onofrio, a partner at Bessemer Venture Partners, which I joined in 2018 to start the firm's growth investing practice. We have a 100-year-old firm and historically, Bessemer has been far more focused on Seed Series A and call it Early Series B. But in 2018, when I joined, we really invested in becoming a multi-stage firm. I spend almost all of my time in SaaS and in cloud investing, some in developer tools with investments in LaunchDarkly and Zapier, automation, an investment in hyper-science, a state of privacy with an investment in BigID. I also spend a lot of my time thinking about cloud broadly. I maintain the BVP NASDAQ Emerging Cloud Index, which is a benchmark for public cloud companies, authored the 10 Laws of Cloud in the state of the cloud, and I most recently published the Scaling to $100M report. I'm thrilled to be here discussing one of my favorite topics in the recent report.

**Ray Rike** (2:14)
For anyone who doesn't follow Bessemer Venture Partners and all the great content they put out, especially the Cloud 100 report, they can go to bvp.com and actually see all the different assets you produce. Correct, Mary?

**Mary D'Onofrio** (2:26)
Certainly. That's a great idea.

**Ray Rike** (2:28)
Well, let's get into the report. So first question I have for you is, what was the callous to developing this Scaling to $100M ARR report?

**Mary D'Onofrio** (2:39)
Yeah, certainly. The impetus for creating the report was really just that I kept hearing the same questions from especially CFOs and CEOs in my portfolio, asking me, hey, what are typical gross margins at our stage? What did X, Y or Z company look like when it was going public? What's the normal percentage of revenue that we should be spending on sales and marketing? And I'd get these questions one off and ad hoc, but I've gotten them steadily over the past three years. And then I would also get requests from my other partners at Bessemer wanting the same information for their companies, too. So I decided to finally put it together. Alongside my co-author, Ethan Ding, we went through 10 years worth of Bessemer Cloud company data to aggregate metrics from hundreds of companies and thousands of data points to service the results. And that was really the impetus and, you know, wanting to democratize the access to what metrics matter, what they mean, and how you should benchmark yourself.

**Ray Rike** (3:34)
Let's dig right into the metrics that matter and the findings from your research and the report that you just published. And the first finding that I saw was ARR, Enroy, Committed ARR Growth, is the North Star. Can you tell us a little bit more about what led you to the finding that this is the number one metric and benchmark that a B2B Cloud company should be looking at?

**Mary D'Onofrio** (3:58)
Sure. And ARR, you know, recurring revenue is the annualized amount of recurring software revenue that a Cloud company has at any point. And I shared it first because it's the main metric used to determine private Cloud company valuations and can be obviously a higher level metric for success, you know, is the product resonating? Our customer is actually demanding it. And while gap revenue only accounts for the rattleable amount of annual contract value that Cloud companies earn in a given period, whether it's recurring or one time revenue, ARR will give full credit for the annual recurring contract and net out not recurring revenue. So ARR will give Cloud companies credit for their customer growth that gap revenue alone wouldn't capture. And, you know, there are multiple things that impact ARR that we explored more in the report. New logo, customer acquisition, but also gross retention, net retention. And I think the reason that it's so important to track as a Cloud company is because, you know, not only is that kind of the high level result of all of the operational efficiencies that you try to put in place in product development efforts, but it shows really what the progress is in resonance with the market.