How these SaaS startups are making life harder for everyone else

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Subscribe to enjoy similar stories. Hot streaks at a few software-as-a-service (SaaS) startups are driving the measure of success out of reach for many others, undermining the also-rans’ prospects for the most lucrative exits. A few years ago, $100 million in annual recurring revenue was often enough to set cloud companies on the path to larger late-stage rounds at lofty valuations and perhaps even an initial public offering.

Institutional investors viewed it as the mark of businesses that could keep growing and deliver a significant return. Then the goal posts moved. Higher interest rates and slowing growth for software businesses have pushed institutional investors to raise their sights to $300 million in ARR, according to Asheem Chandna, a partner at venture-capital firm Greylock Partners.

That was no problem for cybersecurity startup Wiz, which reached $100 million in annual recurring revenue 18 months after its launch in 2020 and barreled on to a current ARR of $500 million. Wiz this May raised $1 billion in venture capital at a $12 billion valuation. Alphabet earlier this year was even in advanced talks to purchase the company for $23 billion, although the effort fell apart and Wiz said it would pursue an eventual IPO instead.

Rubrik, another cybersecurity firm, reported $919.1 million in annualized subscription revenue in the quarter ended July 31 and said it expects to exceed $1 billion in subscription ARR this fiscal year. Its IPO in April was the largest public offering of a software company since 2021. ARR is a nonstandard accounting term, to be sure, with varying definitions.