RVNU #006: Getting to $100M ARR
Scaling from high-growth startup, to category leader.
AI Audio Discussion of this Newsletter:
Introduction:
At RVNU, we define the Scaling phase as the point at which your business has reached escape velocity and is transitioning from high growth to sustained success. This is the destination we obsess about at RVNU. It’s our goal to get you here, after which we either help founders/CEOs incubate a new product or transition out of your business altogether.
This phase requires hiring experienced leadership, scaling your go-to-market (GTM) organization, and expanding into new lines of business. While it offers immense opportunities, it also carries risks, as rapid growth can strain operations.
Today, we’ll explore the three key stages of scaling, provide examples from successful public SaaS companies, and highlight common pitfalls to avoid.
Stage 1: Hire Executives
Definition: As your startup scales, managing growth becomes complex. The first step is hiring executives who bring deep expertise in scaling businesses. These leaders should oversee core functions such as sales, marketing, operations, and finance, freeing founders to focus on strategy.
The key to success is finding executives who not only have proven experience in scaling but are also a cultural fit with your company’s vision. These leaders will drive both operational rigor and strategic growth.
Example: Zoom strategically hired Ryan Azus as Chief Revenue Officer in 2019, right before their IPO, to drive global sales efforts. Azus had a proven track record from his time at RingCentral and Google Cloud, where he scaled global sales organizations. At Zoom, Azus implemented a multi-segmented sales strategy: segmenting sales teams by customer size and industry. He prioritized enterprise deals and integrated with marketing to target industries like healthcare and education, which were rapidly adopting video conferencing solutions.
Under his leadership, Zoom focused on upselling large enterprise clients, while maintaining the product’s appeal to smaller businesses through its freemium model. This structured approach helped Zoom achieve 300% year-over-year revenue growth, growing from $623 million in 2019 to $2.65 billion in 2020.
Exit Criteria: A fully staffed executive team, each with clear ownership of their roles, aligned with the company’s vision.
Anti-patterns:
• Hiring executives without scaling experience.
• Bringing in leaders who don’t align with the company’s culture, leading to misalignment and inefficiency.
Stage 2: Scale Go-to-Market Organization
Definition: Once the executive team is in place, the next step is scaling your go-to-market (GTM) organization. This involves expanding sales, marketing, and customer success teams to support growth in new markets and customer segments.
To scale effectively, you must align sales, marketing, and customer success around common goals and standardized processes, ensuring consistent revenue as you expand into new regions.
Example: Tableau, where RVNU co-founder Laura Wheeler is an alumni (2013-2021), scaled its go-to-market organization by adopting a land-and-expand strategy. Initially, Tableau offered individual licenses to users within larger enterprises, allowing them to try the product for free. Once a small group began using Tableau, the company’s sales team strategically nurtured these accounts, expanding usage to entire departments or the whole organization. This strategy was highly effective because it started with users experiencing the product’s value and then scaled through internal advocacy within the customer’s organization.
In 2014, Tableau further enhanced this strategy by leveraging usage data to track product adoption and identify power users, which helped the company target upselling opportunities. By identifying where usage was highest, they could deploy their salesforce to turn small accounts into enterprise-wide deals. This approach allowed Tableau to increase its average deal size significantly, leading to revenue growth from $202 million in 2012 to over $850 million by 2016 and setting the company up for its IPO.
Exit Criteria: A fully scaled GTM team that consistently hits revenue targets, with well-coordinated sales, marketing, and customer success operations.
Anti-patterns:
• Scaling GTM without sufficient planning, causing bottlenecks.
• Misalignment between sales, marketing, and customer success, leading to inefficiency.
Stage 3: Expand into New Lines of Business
Definition: As your core business stabilizes, consider expanding into new lines of business, either by launching new products or entering new markets. The goal is to diversify revenue streams and reduce dependency on a single product or market.
However, it’s crucial that these expansions align with your company’s core strengths and long-term vision.
Example: Zendesk successfully expanded beyond its initial customer support software by launching Zendesk Sell, a CRM for sales teams, and Zendesk Sunshine, an open CRM platform designed to offer greater flexibility in building customer experiences.
Zendesk’s expansion wasn’t just about launching products—it involved strategically addressing unmet needs within their customer base. Zendesk Sell was developed to simplify sales tracking for small-to-medium businesses (SMBs), building on the feedback from customers using Zendesk Support. On the other hand, Zendesk Sunshine was built to serve larger enterprises that needed a customizable platform to unify all customer data across different touchpoints.
The impact was clear: Zendesk’s annual revenue doubled from $500 million in 2017 to over $1 billion by 2021. By aligning their new products with customer needs and offering customizable, scalable solutions, Zendesk expanded its addressable market significantly and created additional upselling opportunities within its existing customer base.
Exit Criteria: Successfully integrate new products or business lines that contribute to revenue growth and align with strategic goals.
Anti-patterns:
• Expanding too quickly into unrelated areas, stretching resources thin.
• Launching products that dilute focus or don’t align with core business strengths.
Conclusion:
The Scaling phase is where your startup transitions from rapid growth to long-term success. The three critical steps—hiring experienced executives, scaling your go-to-market organization, and expanding into new lines of business—are key to ensuring your company grows efficiently and sustainably.
• Hiring executives provides operational discipline and allows founders to focus on strategy.
• Scaling the GTM organization ensures that your teams drive consistent growth across new markets.
• Expanding into new business lines diversifies revenue and strengthens your market position.
Note to reader: traditionally in SaaS, venture capitalists have looked for founders to hyper focus on one product getting to $100M in ARR. Nothing stops founders building 5 products that each do $20M in ARR, but it’s technically harder on multiple levels, and less attractive to future acquirers and the public markets for IPO.
However, from a GTM perspective, we believe if founders build their first product line applying the RVNU framework, that increases the probability of replication in their second product line because the RVNU process is scientific and forces documentation. This therefore increases their chance of success and reduces the scale of difficulty, from a GTM perspective at least.
Thanks for reading folks!
Wayne