Revenue Unicorn Club: Elastic

Research & Frameworks
Revenue Unicorn Playbook

Elastic Joins Revenue Unicorn Club

Congratulations to Elastic as it crosses $1 Billion in annual revenue and joins the software Revenue Unicorns!

Let's see what we can learn from Elastic's journey...

Revenue Growth

Elastic’s revenue grew above or near the Revenue Unicorn median through $500 Million in revenue. Notably, Elastic crossed the $1 Billion revenue mark during a time of external macroeconomic headwinds.

Gross Margin

Elastic has a strong gross margin structure, matching the Revenue Unicorn median across all revenue ranges. Palo Alto Networks displays a similar gross margin profile across all revenue ranges.

Sales & Marketing

Elastic invested slightly more than the Revenue Unicorn median in sales and marketing early in its business life cycle and recently increased its investment in sales and marketing again when crossing $1 Billion in Revenue.

Research & Development

Elastic invested heavily in research and development across its history. Other Revenue Unicorns with comparatively higher research and development investment include Atlassian, Datadog, Unity, Wix, and Workday.

General & Administrative

Elastic’s general and administrative expense converged with the median as the business scaled.

Stock Based Compensation

Elastic had a lower SBC expense as a percentage of revenue compared to the Revenue Unicorn median after passing $500 Million in revenue. When viewing SBC expense as a percentage of enterprise value, Elastic is at 2.9%, which is double the Revenue Unicorn median of 1.4% in the $1 Billion+ revenue range.

Free Cash Flow

Elastic’s free cash flow margin improved with scale and held roughly steady from $500 Million to $1 Billion+ in revenue.

Time to Reach $1 Billion in Revenue

Elastic reached $1 Billion in revenue after 10 years. This is shorter than the median time of 11.25 years it took other Revenue Unicorns to reach the $1 Billion mark. Other Revenue Unicorns that took a similar amount of time to achieve the $1 Billion revenue threshold include Palo Alto Networks (9.75 years), Workday (9.75 years), and Dropbox (9.75 years).

Other Revenue Unicorns founded around the same time as Elastic (2012 founding) include Crowdstrike (2011), Zoom (2011), and Snowflake (2012). This set of companies took a median of 8.75 years to achieve $1 Billion in revenue (Crowdstrike at 9.50 years, Zoom at 8.50 years, and Snowflake at 8.75 years).

The Journey to $1 Billion in Revenue

For those of you that love data as much as we do, below is the full data set used for this analysis.

Again, congratulations to the Elastic team! Stay tuned for the next Revenue Unicorn update.

Note: The complete list of Revenue Unicorns used in the comparison can be found in the presentation here.

About Elastic

As per the Company’s materials, Elastic is a data analytics company built on the power of search. The Company was founded in 2012 by Shay Banon, Steven Schuurman, Uri Boness, and Simon Willnauer. Elastic’s platform, which is available as both a hosted, managed service across public clouds as well as self-managed software, allows their customers to almost instantly find insights from large amounts of data and take action. Elastic offers three search-powered solutions – Enterprise Search, Observability, and Security – that are built into the platform. Elastic helps organizations, their employees, and their customers find what they need faster, while keeping mission-critical applications running smoothly, and protecting against cyber threats. As digital transformation and cloud adoption drive mission critical business functions online and to the cloud, Elastic believes that every company will need to build around a search-based data analytics platform, one which brings speed, scale, and relevance to the vast volumes of data being generated.

The Company reported $275 Million in third quarter revenue for the period ended January 31, 2023. Combined with results from the preceding quarters, this recent performance boosts Elastic across the $1 Billion in annual revenue threshold as measured on a last twelve month basis to become the latest software Revenue Unicorn.

About the Revenue Unicorn Playbook

The Revenue Unicorn Playbook is an analytical guide that explores the growth of public software companies from $100 Million to $1 Billion in revenue. The goal of the Playbook is to offer founders and company leaders a framework to examine their growth and investments as they scale. You can find the original Revenue Unicorn article here and presentation here.