5 Interesting Learnings from Digital Ocean at 700M ARR

So is it possible to be too efficient in SaaS and Cloud?

Maybe. And if so, maybe that’s Digital Ocean. If you haven’t heard of Digital Ocean, ask your developer. Many have used Digital Ocean at the cheaper, simpler version of AWS-Azure-Digital Ocean to get going fast and quickly.

Growth has slowed the past year, but profitability? It’s gotten crazy good.  Or at least, operating margins and free cash flow are.

Digital Ocean is only growing 16% now at $700m ARR, and churn is up and NRR down.  But it’s raining cash, and earnings per share is growing 22% — faster than revenue.

Going from nothing to $1B is a massive undertaking.

Alessio Artuffo, President and COO of Docebo, shares lessons learned, misconceptions, and what he would have done if he could do it all over again.

The image above is a glance at Docebo today. 70% of customers are in the Enterprise and mid-market space, and 30% are SMBs. They’re also growing fast and are nicely profitable. 

For context, Docebo is a learning management platform addressing the needs of corporations that train an audience internally and externally. Customers range from AWS skills-builder platforms with billions of users to Zoom using it for customers and employees. 

Let’s dive into it. 

Hey SaaStr Community,

Hope you're having a great Holiday season. We know some folks are resting up for the New Year while others are still online selling!

Either way, if you’re thinking about attending SaaStr Europa 2024 in London, we’re having a little holiday-time fun with our spin to win Winter Wheel.
Play it now to see if you win a ticket or an epic discount.

So we’re reaching new levels of efficiency in SaaS — at least in the public markets.

The average public SaaS company now has hit $300,000 in revenue per employee or so on average.

That’s a good metric to think about at scale now.

But what does it mean in practice, when you are well before the IPO stage? :)

Now that I have 5 investments at $200m+ ARR, and they are all basically cash-flow positive (which is necessary today), I’ve seen one clear trend in today’s new efficient world.

Just about everyone at $200m ARR now has about 700 employees or so.

So we had an action-packed 52 weeks of Workshop Wednesdays this 2023!  It’s been a big hit for us with over 4,000 of you attending our Live, FREE Workshop Wednesdays every … Wednesday!

Sign up here to join (and bring your questions)

So which were the most popular in 2023?  A few great ones to catch up on.

10%-20%.

If fewer than 8%-10% or so of your demos convert to paid customers, you’ll start to burn out your sales team.  Because they generally need to close 10-15 deals a month to eat (more for SMB, less for enterprise, but 10-15 is pretty common).

If they have to do more than 50 demos a month, they’ll just run out of time.  Even that’s a lot of demos.  If you have a good engine running, you’ll want 20% or more of demos converting.  That way everyone can hit quota, or at least most can.

But — this is a trick question. As are most funnel questions.

The more folks you attract into your funnel, the lower your conversion rate.

The fewer, but more highly qualified folks you attract, the higher the conversion rate.

This is why SaaS start-ups often are so proud of their “amazing” conversion rates before they hire a real VP of Demand Gen. I’m not so proud. It’s because your top-of-funnel is unimpressive.

So avoid obsessing too much about absolute metrics inside your funnel, especially the metrics between lead and close.

Instead, measure them, and usually, drive them up.

© SaaStr 2023

644 Emerson St. Suite 200, Palo Alto, CA, 94301

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