Time to hit $1M ARR

Average vs. Top Performers

Every now and then you read success stories of startups that have reached $1M ARR in just a few months (like HeyGen or Setapp).

In general, the focus of most articles is usually on VC-funded SaaS companies and/or frontrunners, like in Lenny's Newsletter

But how long does it take the average SaaS startup to get there?

The first time I saw data on the broader SaaS market was in ChartMogul's SaaS Growth Report.

Source: ChartMogul

On further research, I also found an older article from Baremetrics - see chart below. Please note that it also includes data from companies that have not (yet) reached the $1M ARR.

Source: Baremetrics

A comparison of the two shows that they provide very similar results.

You can see that it takes the average SaaS company around three years (~1000 days) to go from initial revenue to $1M ARR.

If you add in the time it takes to earn first revenues, the whole journey there might take much longer sometimes.

I would argue that you should hit the $1M ARR mark in two years or less (i.e. be in the top quartile of ChartMogul's analysis) to fit into the VC framework. This corresponds to usual growth expectations of investors.

To summarize:

  • The average SaaS company takes ~3 years to hit $1M ARR

  • It takes 2 years or less for the top performers

  • If you want to take the VC path, you should be amongst the top performers. Otherwise, have a plan B ready.

Don't worry too much if you need longer. Especially if you are bootstrapped. In the end, it's a marathon, not a sprint ;-)

Interesting articles by SaaS bootstrappers on the topic: