Chris: We can look to maintained growth each quarter and to management commentary on the earnings calls. We should also continue to look at TAM for each company, confirmation of TAM, increases to TAM, and of course TAM compared to market share already captured by the company and by competitors…and uncaptured greenfield.
This is exactly on the lines of what I was thinking. Maybe raw revenue numbers aren’t as helpful as percentage of TAM. I tend to favor the former, since I’m skeptical of TAM estimates.
As for maintained growth, I agree there as well. Current growth rate gives us insight into so many things. Qualitative factors. Competition. Opportunity for optionality. When a company’s product seems compelling but revenue isn’t growing ultra-fast, we rightly ask why. Perhaps the customers know more than we do…or maybe (I’m searching for good examples…ZS?) they just haven’t fully caught on and revenue will accelerate.
Saul: But how do we figure in new solutions in new areas that our companies like Okta, for instance, keep adding, which enlarge their TAM
Chris: We can see that some companies like TWLO and OKTA have in the past demonstrated product extensions and entirely new forays. I give these companies credit for this and tend to think they will probably come up with more in the future.
I like optionality as much as the next guy, but a company can’t keep re-inventing itself forever. I tend to believe these types of things (see Mongo’s Atlas) are much more effective at a 200m or 300m revenue run rate than a 1B+ run rate (see NTNX). At some point, “new solutions” will be incremental more than company-altering or game-changing. Unless of course you invent the next iPhone. But one of the things we actually like about our companies is their predictability. We want to see incremental good change like you guys mention, but the larger overall revenue is, the less “new solutions” will move the needle. SQ is a good example – their subscripton services have kept them growing fast for a long time, but I think in the next year or so we’ll see overall growth slow below 50%.
So yes, I believe TWLO (or OKTA…I’m less bullish on the optionality there) can definitely grow into many billion dollars of annual revenue. I just don’t think they’ll be growing it 50%+ three or five or ten years from now.
For MDB, the story seems to be that they have a lot of green field ahead even with their current solutions. If we see Atlas slowing more than Ethan and I discussed, that could be a problem. (https://discussion.fool.com/mdb-specifics-for-tinker-34241975.as…) But perhaps it could grow even faster…
Something to watch. If we can see trends like that developing, I believe that’s the kind of thing we should be looking for. I don’t see it now, but you can bet I’ll be watching. (I did add a small MDB position back this month, though, just in case.)
Bear