I’m going to tell you a bit about two startups and I’d like you to guess the name of each company.
Both of these businesses are publicly traded. Both startups provide database software to developers to build applications. Both have grown very fast. In fact, their revenue trajectories through 2020 are nearly identical. Both companies employ a usage-based pricing model: pay for what you use.
In 2016, each company recorded less than $50m in revenue. In two years, both would near $200m in revenue. They would both exceed $400m in 2020.
Both of these businesses trade at similar valuations as of this writing.
| Red Company | Blue Company | |
|---|---|---|
| Market Cap to Revenue Multiple | 32.6 | 32.2 |
But here the stories diverge in 2021.
Red Company’s revenue explodes from $595m to $9.9b. That’s 16.6x growth, a rate most seed stage companies would struggle to match. The fastest growing public SaaS company last year charted 1.1x growth.
Who is Red Company and who is Blue Company? Message me on Twitter with your answer. I’ll share the answers on Monday.