At a Glance
In the journey to become a billion-dollar enterprise, every SaaS company must go through some different stages of SaaS Growth. T2D3 is one such approach invented by Neeraj Agrawal, which makes it easy for SaaS entrepreneurs to understand this whole concept easily.
Chase the vision, not the money; the money will end up following you.Tony Hsieh, CEO, Zappos
There are various stages of SaaS growth, understanding which will enable the entrepreneurs to plan the growth journey accordingly.
Who doesn’t want to grab that unicorn status for their SaaS enterprise company? It is every SaaS entrepreneur’s dream to achieve a high SaaS growth rate and make millions in no time. But can one jump from zero to a $1B company in no time? There should be small goals which one needs to achieve step-by-step, then aim for the biggest goal, right?
It is a very difficult task to build a billion-dollar SaaS company in a quick time. According to the T2D3 approach, one can turn a SaaS enterprise into a billion-dollar worth enterprise in 5 years. T2D3 stands for “triple, triple, double, double, double.” This is a very strong SaaS growth business tactic invented by Neeraj Agrawal, SaaS investor and general partner with Battery Ventures. The story of how he came up with this impactful SaaS growth rate idea is very interesting. So, before we learn about the T2D3 approach, let us see how Neeraj invented it.
How Neeraj Agrawal invented the T2D3 approach?
Neeraj Agrawal’s parents immigrated from India to Queen’s in the 1960s. While Neeraj started working at Battery Ventures, both of his parents did not quite understand what his work was about. So, one time at a party, Neeraj’s mom said to her other friends that “My son works at Battery Adventures.” Her friends were confused and disappointed as well because neither he was a doctor like his father, nor he worked at a giant bank like Goldman Sachs.
This got Neeraj into thinking that maybe his work is rather an adventure than a venture. Since he has worked for more than 15 years with B2B and SaaS enterprises, he has become more of a travel guide now for the SaaS entrepreneurial journey. He knew the roadmap to the making of a billion-dollar SaaS company very well. So, he decided to share this adventure with every aspiring SaaS entrepreneur out there to help them reach the billion-dollar valuation, and this SaaS growth rate guide has become famous as the T2D3 approach.
Stages of SaaS growth through T2D3 approach
According to Neeraj Agrawal, there are 7 stages of SaaS growth. Since most of these stages have T2D3 as the central idea, it is also known as the T2D3 approach. For increasing the SaaS growth rate, many important factors such as sales, expansion overseas, strategic organization, etc., are important. In these 7 stages, Neeraj has focused on 7 different factors with the main idea of increasing the company’s annual revenue.
Stage 1: Understanding pain points to establish product-market fit
Before developing and launching a SaaS product into the market, make sure you prioritize the pain points of the customer. You can talk to your existing customer or conduct a survey. If you find common pain points, then you know how to build the product. After developing the product or MVP, you can launch it publicly to check if your target customers are getting benefited from it. This is how you will know if your product is fit for the market or your target audience.
Stage 2: $2million annual recurring revenue (ARR)
This is the right time to land the target clients and prepare your final pitch for the sales strategy. At this stage, you should acquire around 30-60 clients with an average deal size of $30K-$80K. According to the T2D3 approach, this will take a year to two to complete this SaaS growth stage.
Stage 3: Triple to $6 million in ARR
There are 2 ways of reaching this triple ARR goal. The first approach that is made by most of the SaaS entrepreneurs is trying to close every deal possible. But this approach does not guarantee that the SaaS growth rate will increase. You must find loyal and genuinely interested customers. Thus, the second approach, which is a bit difficult but preferable, is hiring an experienced sales VP and forming a team of 5-10 sales representatives. They will analyze the data thoroughly and make proper decisions to reach the third phase T2D3 goal.
Stage 4: Tripling to $18 million ARR
Here is where you reach the first milestone in the roadmap. The sales start fueling map, which means adding more sales reps to manage the sales. Adding a second layer of sales representatives is a very difficult yet crucial task to be made by the CEO/founder of the SaaS enterprise. This is the stage where you make the big moves, land big clients, and hire new managers.
Stage 5: Double to $36 million in ARR
This is the phase of the SaaS growth when one should plan to expand internationally. But the founder should make sure to target one region at a time. It is better to go deep in the market than go wide at this phase of T2D3. Get an experienced team of 3-5 reps in the EMEA. The fielding team should comprise of around 20-30 sales rep with 3-5 front line managers.
Stage 6: Double to $72 million in ARR
This is the stage of T2D3 when the founder or CEO should make tough operational decisions. Here you have to strengthen the reseller relationship. So, focus on quality over quantity. Instead of putting up a reseller network, try to get 1-2 channels working in the field properly.
Stage 7: Double to $144 million in ARR
This is the time when you have a potential IPO in hand and a company worth a billion dollars. According to most industrial experts, the value of a company is created post the IPO. So, it is wise to invest during the early stages and the later stages of a venture. This 7-stage T2D3 approach is the early stage to set your SaaS business on the right track. This is when you are close to the $1 billion valuation company, but the next scene is bigger than that.
In the personal experience of Neeraj Agrawal, he has seen many SaaS businesses grow from this 7-stage T2D3 approach. He speaks of companies like ServiceNow, Zendesk, Salesforce, Workday, etc., who have achieved their growth success through this approach. So, if you are also a SaaS entrepreneur, stop beating the bush around and get on the track of growth with the T2D3 approach.