The 2023 Edition of the Revenue Unicorn Playbook

Research & Frameworks
Revenue Unicorn Playbook

Revenue Unicorns, or Revicorns, are contemporary software companies that have surpassed $1 Billion in annual revenue. The Revenue Unicorn Playbook details how these best-in-class software firms successfully scaled from $100 Million to $1 Billion in annual revenue.

The Friends & Family Capital team uses the Revenue Unicorn Playbook to help with two outcomes. The first is to engage with our current portfolio Founders, CEOs, CFOs, and operators as they build their businesses. The second is to assist us with our investment process as we seek to identify and partner with the best venture-backed software firms.

Below is a brief snapshot of what is inside the complete Revenue Unicorn Playbook.

Who Are the Revenue Unicorns?

In addition to exceeding $1 Billion in annual revenue, the Revenue Unicorns all have core software business models, were founded in or after 2000, and had their IPO in 2010 or after. These characteristics ensure we have a contemporary era of business comparison.

Playbook from $100 Million to $1 Billion in Revenue

The Revenue Unicorns had durable growth on their journey to $1 Billion in revenue. They began their journey with 65%+ growth and never retreated below 40% growth as the floor. The Revenue Unicorns knew that a great product did not exclusively build a great business, that’s why they invested 2x on S&M as compared to R&D. Their capital allocation was efficient and operationally superior. The Revenue Unicorns targeted 60%+ for the Rule of 40 SaaS metric while at the same time creating an efficient go-to-market motion.

Financial Metrics Across Revenue Ranges

The Revenue Unicorns consistently displayed strength in revenue growth to generate exemplary compounding. As the Revicorns scaled, their free cash flow began to build, displaying the operational leverage in their business models.

Acceleration to $1 Billion Over Time

The time to achieve $1 Billion in revenue continues to accelerate for each new cohort based on founding year. Revenue Unicorns founded between 2002-2003 took 16-17 years to achieve $1 Billion in revenue. The most recent founding cohort of 2011-2012 took only 8.5-10 years to achieve $1 Billion in revenue.

Benchmark Companies

What about all the other public software companies? The Benchmark companies encompass the same selection criteria as the Revicorns with the only difference being that the Benchmarks have not yet achieved the key characteristic of surpassing $1 Billion in annual revenue. All of the Benchmark companies are still on their journey to $1 Billion in revenue and offer a great comparison to the Revicorns.

Revenue Unicorns vs. Benchmark

When analyzing the financial fundamentals of the Revenue Unicorns and the Benchmarks there are two apparent differences. The first is that the Revenue Unicorns have much higher growth throughout their journey, never dropping below 40%. Conversely, the Benchmark median revenue growth never exceeds 40% in any revenue range.

The second line item to focus on is free cash flow margin and the bifurcation between the Revenue Unicorns and the Benchmark after $500 Million in revenue. By $750 Million in revenue, the Revenue Unicorns have a free cash flow margin 3x+ that of the Benchmark.

Operational Excellence: Rule of 60

Operational excellence is not idiosyncratic with the Revenue Unicorns. The Revenue Unicorns Rule of 40 was consistently above 60%+ until they reached $1 Billion in revenue. In contrast, the Benchmark Rule of 40 never exceeded 35%.

The complete Revenue Unicorn Playbook holds many additional learnings to help you build your company to $1 Billion in annual revenue.

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.