Market expansion & global reach drive billion-dollar software growth

New research from Bain & Co. has examined the business strategies that distinguish software companies surpassing an annual recurring revenue of USD $1 billion.

The analysis reviewed 600 software firms with annual revenues of over USD $100 million, with particular attention to the 26% that have reached or exceeded USD $1 billion a year.

Rather than focusing on the creation of entirely new markets or disruptive strategies, the report concluded that most companies in this bracket achieved growth by substantially expanding the total addressable market for their products.

The findings indicate that this approach to market expansion is more prevalent among billion-dollar revenue companies than other high-growth strategies often cited in the sector.

The report showed that around 80% of software companies generating between USD $1 billion and USD $3 billion in annual revenue now offer at least two distinct major products.

This diversification of product lines suggests that companies seeking to scale revenues frequently move beyond a single offering to capture broader customer needs within and across market segments.

Additionally, the research highlighted a significant trend among Software as a Service (SaaS) firms that initially targeted one specific industry. Almost all such firms that reached the USD $1 billion revenue mark have since expanded their operations into sectors beyond their original core vertical.

The study also noted the importance of international growth. Of the group of about 90 USD $1 billion-plus software firms analysed, more than two-thirds are generating at least 30% of their revenue from regions outside their primary market.

This points to the role of globalisation in achieving scale, as companies reaching the highest revenue brackets tend to establish a presence or customer base in multiple geographic regions.

Reflecting on the findings, the press release stated: "Of those software firms who have achieved $1 billion in annual revenue, most have done so by expanding their total addressable market (TAM) - not by creating a new market or chasing disruption."

The report further added: "Around 80% of software companies with $1 billion to $3 billion in annual revenue sell at least two different major products."

It was also highlighted: "Almost all $1 billion SaaS firms that initially focused on a single industry have since expanded beyond their core vertical."

Finally, the press release noted: "Of the group of about 90 $1B+ software firms that Bain & Co. analysed, more than two-thirds generate at least 30% of their revenue from outside of their primary region."

The research suggests that expansion of product portfolios, diversification into new industries, and international market reach are significant factors for software firms aiming to progress from the USD $100 million tier to annual recurring revenues of USD $1 billion or more.