SaaS Startup Growth Stages: Triple, Triple, Double, Double, Double (T2D3)
Updated: Jun 3
You probably found the title term "Triple, Triple, Double, Double, Double" very strange. The term became popular after the publication of the article The SaaS Adventure, written by Neeraj Agrawal.
In this post, Neeraj comments that SaaS Startups can grow at very different speeds, but that certainly a good reference is what he called T2D3. The term is basically a reference to how fast a Startup SaaS must grow its annual recurring revenue. In the first two years the revenue should triple each year, and in the next three years it should double.
These growth rates mentioned by Neeraj were based on the growth of well-known companies such as SalesForce and Zendesk. The chart below shows how the annual revenue growth behaved for each of the companies:
As you can see, the 7 companies analyzed had an average and median annual revenue growth of at least 3x in the first two years, while in the other years it was 2x.
Each stage of growth has a different focus for Startup, as the size of the company varies significantly over the years, its priorities end up changing as well. Neeraj described 7 stages of growth:
SaaS Startup Growth Stages
1) Achieving Product-Market Fit
In this first stage of the Startup, the main objective is to understand the biggest Pain Points of the customers and ensure that the proposed solution is able to alleviate these pains. There is no clear way to identify when the company has achieved Product-Market Fit, but an alternative is to ask current customers what their main pains are alleviated by the product. When customer response is very similar, the company has probably achieved Product-Market Fit.
2) Reach US$ 2 Million in ARR
ARR (Annual Recurring Revenue) is the total revenue that would be obtained in one year, considering the total base of current customers and the average ticket paid. The main objective is to reach the first customers that together bring an ARR of at least US$ 2MM, that is, it is a phase in which the founders act directly in sales and in which the pitch and strategy of the sales funnel are being developed.
3) Triple to $6 Million in ARR
This is the first year of the T2D3 benchmark, so the goal is to triple revenue by 3. To achieve this result, either founders can continue to work on closing sales, what Neeraj calls the hero approach, or also establishing a sales team. The first approach is unsustainable for the company's growth, the second can be quite challenging to implement, but it can bring great benefits in the medium and long term.
4) Triple to $18 Million in ARR
This step is where recommendations from current customers start to contribute to the sales funnel and founders look to detach themselves from the operation. According to Neeraj, it is one of the great milestones to be reached by Startup, as this is what will allow the company to scale.
5) Duplicate to $36MM in ARR
At this stage the sales team should already have between 20 and 30 representatives and 3-5 managers. With a more consolidated sales team, it is time to take the first steps towards international expansion.
6) Double to $72 Million in ARR
Time to assess the need to define a director responsible for sales in different countries or regions of the world and also take the first steps in sales development through partner companies.
7) Double to $144M in ARR
This is the last step of the T2D3 model, where the company aims to double its annual recurring revenue to $144M and begins dreaming of becoming a unicorn and holding an IPO. After this step, Neeraj believes that the next step is to reach US$ 1 billion in ARR.
Now that you know what is the T2D3, don't let your B2B SaaS go-to-market strategy hold you back any longer! Access the T2D3 playbook and master the frameworks, best practices, and budgeting strategies needed to scale your business and deliver on your growth promise.
In addition to following these steps, learn more about the rule of 40, A rule used by Venture Capital companies in order to assess the financial health of SaaS Startups that are already consolidated.