ARR becomes the north star metric for SaaS companies.
On February 16, ByteDance-backed Feishu (Chinese: 飞书) announced that its annual recurring revenue (ARR) reached USD 100 million in 2022, an increase of 2.7 times compared to 2021. This is the first time that Feishu has disclosed its core business indicators since its establishment.
Feishu CEO Xie Xin announced this figure at an internal all-hands meeting on February 16. "Crossing the ARR mark of USD 100 million is a very important milestone for SaaS products." Xie Xin said.
ARR is a key indicator in the field of enterprise services, which refers to the annual recurring revenue calculated by contract, that is, SaaS subscription revenue. For software companies, the higher the proportion of ARR in total revenue, the higher the stability and future potential of revenue.
For comparison, according to the venture capital firm Bessemer Venture Partners, the top 25% of the world's listed SaaS companies takes an average of 5.3 years to reach USD 100 million in ARR, including Slack, Shopify, Twilio and other well-known To-B companies. In Feishu’s case, it took them only 3 years to reach this figure.
Founded in 2016, Feishu was formerly an internal efficiency tool within ByteDance. It officially launched services in China in 2019 and began commercial exploration. Starting from 2021, Feishu has established a commercialization strategy based on major customers internally, and has won over several critical customers including Xiaomi (Chinese: 小米), Li Auto (Chinese: 理想汽车), Anker Innovations (Chinese: 安克创新), Keep, and Lilith (Chinese: 莉莉丝), which contributed to its massive ARR growth.
On a grander scheme, the disclosure of ARR also reflects the overall shift of the domestic enterprise service market - gradually transitioning from user scale and activity to revenue scale, focusing on indicators such as ARR and KA user penetration rate.
The year 2022 was a year of downturn in the global SaaS market. The macro-economy was shrinking, and companies were reducing costs and increasing efficiency to survive. Under such context, enterprise services companies will continue looking for healthier revenues.