The Latest from SaaStr: 5 Interesting Learnings from Duolingo at 360M ARR

THE LATEST FROM SAASTR

By Jason Lemkin  · Wednesday, November 2, 2022 | 5 Interesting Things, Scale

Duolingo has dominated online language learning, rocketing to $360m in ARR and a $3.25 Billion market cap after launching back in 2012.  And in today’s market, that’s strong performance. 

While the average Cloud stock has fallen almost 50% in 2022, Duolingo’s has stayed up, and is down just 10% in the past 6 months.  So it’s doing what Wall Street wants today. Despite crossing $1.4B ARR, it’s trading now at $4.7 Billion. A big number.

But is Duolingo SaaS?  Well, it’s SaaS-ish.  The core product is very B2C, but the upgrade to paid has very SMB B2B metrics, and 80% of the revenue is subscription based.  So at a minimum, it’s a good one to learn from, especially in this PLG and freemium world.

NEW PODCAST + VIDEO

By Amanda Beaty  · Wednesday, November 2, 2022 | Leadership, Marketing

In this second session of the CRO Confidential series, Founders Fund Partner Sam Blond chats with SaaStr CEO Jason Lemkin about whether tech founders still need to be based in SF, the current correction of the VC market, and what to look for in an investor.

Q&A

By Jason Lemkin · Wednesday, November 1, 2022 | Scale

Competition.

For most software / internet companies, the gross margins approach 80%. That means for every $10 you bring in, you get to keep at least $8 for payroll, etc. after paying off expenses.

In the early days, that’s not a lot of money. You may need to work for a $0 salary, sacrifice, skimp, borrow money from mom and dad, etc.

But as you approach a few million in revenues — the power of those 70–80% margins should kick in — and two things should start to happen.

THE SECRETS TO SCALING

The 3rd edition of SaaStr Scale is back!

Every December, we bring together some of the very best CEOs, VP of Sales, CMOs, CROs and Head of Product to host SaaStr Scale - a completely immersive, 1-day digital event dedicated to helping you scale to $100M and beyond, faster.

Speakers include:

• CEO, HubSpot
• VPS, Rippling 
• CMO, Samsara
• SVP, Digital Ocean
• CMO, Checkout.com
• CPO, Checkout.com
• SVP, Celonis
• CMO, Typeform
• CRO, Wiz
• CEO, Attentive
• + many more

VENTURE

By Jason Lemkin  · Tuesday, November 1, 2022 | Scale

Bessemer Venture Partners has added a great newsletter, Parting the Clouds, that’s very metrics-dense.

A few stuck out this week as helpful ways to summarize just what’s happening with SaaS public companies.  Two big take-aways from this week:

53% of the BVP Cloud Index is trading under 6x ARR, representing 40 companies.

The top tier of public Cloud companies is trading at 12x ARR, but they are growing 50%+ at $500m+ in ARR, with importantly, 15%+ Free Cash Flow margins. So the high multiples come with a lot of, if not profits, then a lot of free cash flow.

WHAT'S HAPPENING

By Jason Lemkin  · Tuesday, November 1, 2022 | Blog Posts

Sequoia Capital’s India arm put together a terrific summary of all their learnings about SaaS and Cloud from SaaStr Annual this year. 

1. Software demand is softening. Deals have longer cycles and need more approvals. The impact is likely to be visible in the next few quarters. Not every slowdown was made equal – infrastructure, cybersecurity and dev tools will be more resilient than application or vertical SaaS.

Tip the payment scales in your favor by being one of the first to unlock exclusive early access to BlueSnap's 2023 Payment Predictions eBook.

Your sales and customer success teams are losing deals and customers due to backlogged integration requests.

But can you really justify spending months of development on each integration, when an embedded iPaaS can help offload 70% of the work?

There are a lot of factors to consider in this build vs. buy decision, and it's all outlined in this guide.

© SaaStr 2022

255 Kansas, Suite 300, San Francisco, CA 94103

If you'd like to stop receiving the SaaStr Daily, click here