Edison Partners Growth Index Reveals 7 Traits of Fast-Growth Tech Companies

Edison Partners Growth Index Reveals 7 Traits of Fast-Growth Tech Companies

Fast Growers Spend More and Hire Faster, with a Disciplined Approach Across the Organization That Sets Them Apart

Edison Partners, a leading growth equity investment firm, announced the results of its fifth Edison Partners Growth Index. The report, a study of the firm’s portfolio of growth-stage technology companies, finds that fast growers—or companies with 30 percent or more annual growth—share seven key characteristics associated with their growth.

“While focused investment in sales and marketing continues to be the primary catalyst for achieving 30-plus percent growth, here in our fifth edition of the Edison Partners Growth Index, customer success, pricing model sophistication and strong corporate cultures also emerged as key growth drivers,” said Alex Symos, Vice President, Go-To-Market Center of Excellence at Edison Partners. “Fast growers also tend to take a more holistic and disciplined approach to acquisition and retention of their customers and, interestingly, employees alike. They spend with the intention to build a business model for scale, one that will bear exponential returns as the company grows.”

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The 2019 Edison Partners Growth Index found that fast growers share seven traits across operating and financial dimensions. Among the key attributes, fast growers prove to:

Spend significantly more dollars on Sales and Marketing. Fast growers saw 100 percent higher Sales and Marketing spend with a primary focus on customer acquisition. They invested 50 percent to 60 percent of 2018 revenue on Sales and Marketing, which is in line with Edison’s recommended range.

Invest more in Customer Success. New this year, the Growth Index found that fast growers spent 6x more to onboard and retain customers. As a result, they grew ARR with existing accounts by 35 percent, retained revenue at 17 percent higher rates, and saw net dollar retention of 102 percent. Fast growers also enjoyed Net Promoter Scores that were 40 points higher than slower-growth peers.

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Hire faster and retain employees longer. Fast growers grew headcount by 22 percent in the year. Even with rapid hiring, fast growers drove revenue per employee more than 3x higher than slower growers. Fast growers also prove to have a keen focus on what Edison Partner refers to as the people equation, meaning they are better at building distinct corporate cultures with strong disciplines for employee engagement, performance management and making difficult people decisions early. This enables fast growers to retain more employees than slower-growth peers in nearly every functional area.

Record higher EBITDA losses. Bottom line losses of roughly 86 percent were higher for fast growers, fueled by rapid hiring practices, higher spend in sales, marketing, product, and general administration expenses. While higher operating costs were necessary to fund their business strategy, fast growers still drove gross margin expansion more efficiently by simplifying product, limiting service dependencies, reducing hosting costs, and capturing more value.

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