OKR Software & Startup Growth: What the Data Reveals

The Rise of OKR Startups and a Surprisingly Spacious Market

Within the continuous cycle of venture capital investments, it's occasionally observed that several startups addressing the same challenge secure funding around the same time. This phenomenon occurred with startups focused on Objectives and Key Results (OKRs) in early 2020.

The simultaneous influx of capital into these OKR-focused tech companies raised questions. Was there genuinely sufficient market space for so many startups developing software to aid companies in goal management? OKRs, a corporate planning methodology, have moved beyond being a specialized concept.

Initial Predictions and Market Expectations

Our initial assessment of this group suggested potential “consolidation” as growth slowed. However, it was evident that both founders and investors anticipated substantial depth within the OKR software market.

Their expectations proved accurate, while our initial prediction was incorrect. A follow-up inquiry in early 2021 revealed that nearly all companies experienced exceptional growth, with many exceeding 100% expansion.

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For instance, Ally.io saw a 3.3x increase in growth during 2020, and Gtmhub achieved a 3x growth rate over the same period. Consequently, further investment followed.

Ally.io secured $50 million in a Series C funding round in the first quarter, while Gtmhub completed a $30 million Series B during the same timeframe.

Current Performance and Future Outlook

These won’t be the last OKR startups to raise capital this year. We recently contacted the group again to assess their Q1 performance and gauge their optimism for the remainder of 2021.

The recent results of these companies are strong, exceeding their initial projections. Importantly, the level of optimism among these competing companies is higher now than it was before Q1 2021. The OKR startup landscape is becoming increasingly competitive.

Our analysis suggests that our previous assessment of the software market’s depth may have been an understatement. This is positive news for both startups and investors, challenging the notion of “SaaS-fatigue.”

The Broader Context of Venture Capital

It’s logical that OKR startups are thriving, and the software market is proving to be expansive. The substantial venture capital investment observed in Europe and the United States during 2021 likely reflects positive results and evidence of continued growth potential for software-focused startups.

Despite appearing similar on the surface, these companies are pursuing distinct strategies and differentiators to gain an advantage within their specific segments of the OKR market. This suggests the sector may not be as saturated as it initially appears.

Insights from Industry Leaders

Let’s hear directly from Gtmhub COO Seth Elliott, Workboard CEO and co-founder Deidre Paknad, Koan CEO and co-founder Matt Tucker, Ally.io CEO and co-founder Vetri Vellore, and Perdoo CEO and founder Henrik-Jan van der Pol regarding their perspectives on the software market.

We will begin by examining the startups’ Q1 2021 performance, then explore their outlook for the rest of the year, and finally discuss how differentiation within the group may be preventing overlap and fostering individual success.

Significant Expansion

WorkBoard is experiencing considerable momentum at the beginning of 2021. The company, led by Paknad and having secured funding in both March 2019 and January 2020, reported to The Exchange that 82 new employees were brought on board during the first quarter of 2021.

Furthermore, WorkBoard anticipates replicating this hiring surge in the present quarter. According to Paknad, communicated via direct message, the organization is making substantial investments and successfully achieved its first-quarter objectives.

A 90% year-over-year growth rate was realized by WorkBoard in the first quarter, with projections indicating a more than doubling of this growth throughout the current year.

This trend isn't isolated. Gtmhub reported a growth exceeding a doubling in the first quarter of 2021 when contrasted with the same period in 2020, and is currently performing ahead of schedule, as stated by its COO.

Ally.io is also demonstrating robust expansion, with CEO Vetri Vellore informing The Exchange of a “very strong Q1” that surpassed ambitious internal projections. Revenues increased by 35% compared to the fourth quarter of 2020.

The company maintains a year-over-year growth rate of 3x, according to Vellore.

Koan and Perdoo are similarly observing positive progress. Koan’s Tucker indicated via email that his company’s start to the year was “really strong,” noting that the usual post-new year decline in trial interest hasn't materialized.

Perdoo’s Van der Pol reported a doubling of qualified leads in the first quarter compared to the previous year, achieved without increasing advertising expenditure.

While not all startups disclosed specific metrics, a clear pattern of growth is evident across the group. Continued expansion is also expected by these companies.

A Positive Outlook Among Startups

Inquiring about the level of optimism held by a startup founder is often met with a resounding affirmation, much like asking a reporter if they would appreciate a beverage. The response is almost invariably positive.

To gain a more nuanced understanding of the startup community’s perspective on the remainder of the year, we posed the question of whether their current outlook was more hopeful than it was at the beginning of the year.

Seth Elliott, COO of Gtmhub, stated that his startup is “undeniably more optimistic.” This increased positivity stems from several factors. These include a recent influx of capital, an “ambitious growth strategy,” and a first quarter marked by exceeding expectations.

Consequently, Elliott and his team are “more confident regarding both the expansion of the market and, crucially, Gtmhub’s growth trajectory in 2021” compared to their previous assessment.

However, increased capital availability can also intensify competition. Vellore of Ally.io communicated via email that while he believes the OKR “sales landscape is clearly advantageous for [his company],” the broader “environment is becoming more competitive due to growing industry awareness and adoption of the methodology.”

Despite this rising competition, the OKR startup group remains largely unfazed. This is partly because each startup is differentiating itself by focusing on unique market segments, allowing for diverse growth patterns.

For instance, Koan shared with The Exchange that they are “very” optimistic about 2021. They attribute this to their “bottom-up approach,” predicting that a “product-led growth strategy will ultimately succeed within the enterprise OKR market as time progresses.”

Key Factors Driving Optimism

• New capital infusions
• Aggressive growth plans
• Strong first-quarter performance
• Differentiated market strategies

The overall sentiment suggests a belief in the continued expansion of the OKR market and the ability of these startups to capitalize on emerging opportunities.

Is a Multitude of Competitors a Problem?

During our discussions with various companies, a notable observation emerged: each firm perceives significant distinctions between itself and its rivals, coupled with strong confidence in its strategic direction. This wasn't merely optimistic rhetoric or disparagement of competitors; rather, it reflected genuinely different perspectives on market analysis and competitive strategies.

Despite these differences, a common thread unites all startups specializing in OKRs. They consistently believe their focused approach surpasses that of larger companies offering goal-setting as a component of a wider suite of services. According to Paknad, several of these broader providers have already exited the market, attributing this to a lack of expertise in strategy execution.

While competition persists, the OKR landscape is becoming increasingly defined by specialization. Workboard, for instance, explicitly targets the enterprise market, branding itself as an “enterprise results platform” on its website. Gtmhub, operating within the same segment, anticipates that meeting the stringent requirements of clients demanding SOC 2 type II and SOC 3 compliance will attract further business, allowing them to extend their product strengths to self-service customers, as Elliot suggests.

Gtmhub also distinguishes itself through its reliance on a partner network for consulting and coaching services, rather than providing these internally. Elliot explains this decision, stating that many enterprises prefer guidance from established consulting firms, potentially limiting the total addressable market for in-house services.

Conversely, Koan adopts a bottom-up strategy. Tucker highlights this as a significant shift in go-to-market approach, extending beyond just pricing. “Following our transition, Koan is typically first adopted by a single team, then expands cross-functionally, and ultimately achieves organization-wide adoption once the product’s value is recognized,” Tucker explained. This contrasts with both top-down implementations and broader performance management tools, which address different objectives.

Both Koan and Perdoo introduced free tiers in 2020. Van der Pol detailed the impact of this move: “Several thousand new companies registered for our free version, which is currently limited to 10 users. To enhance its appeal, we continually added new features to the free tier.” Perdoo’s commitment to free resources and OKR advocacy is likely also contributing to the reported doubling of qualified leads.

Considering the spectrum from enterprise to budget-conscious users, what about the mid-market? Ally.io is specifically targeting this segment, as Vellore conveyed, expressing confidence in its potential: “Our focus on the midmarket has enabled us to expand into larger accounts while sustaining robust growth within our core customer base. We are securing more substantial deals and witnessing rapid expansion among a significant portion of our nearly 1,000 clients,” he shared with The Exchange.

Future Outlook for the OKR Software Market

Venture capital firms generally anticipate portfolio companies to expand beyond their initial target market. Similarly, startups initially focused on the midmarket often aspire to capture the enterprise segment. Conversely, companies serving large enterprises aim to prevent smaller competitors from gaining traction and ultimately dominating the market.

Our initial assessment of the OKR software market's size may have been conservative, potentially stemming from insufficient market segmentation. Consequently, the mergers and acquisitions we predicted last year could still materialize, but likely after these startups have fully penetrated their current specialized areas.

Further analysis will be conducted as key players in this category secure additional funding. We anticipate revisiting this topic in the near future.