Today, we’re talking about why startup investors care more about growth than revenue.
1. There is no baseline
Founders often ask me for a baseline revenue number they should hit in order to raise a Seed round or Series A, in reality there’s no universal revenue targets, investors instead want to see exciting growth.
2. Significant revenue is no guarantee
I regularly meet founders with $1–3M ARR, who are struggling to raise because their growth is slow or erratic. Investors want to see repeatable patterns in your revenue growth.
3. Here’s 2 Examples
It will be much easier for a startup at $250k ARR and 10%/month growth to raise money, vs a company with $1M ARR and flat growth. Why? The lower revenue company will overtake the higher revenue company in just 1 year, based on the current trajectory.
So although it may seem counterintuitive for VCs to get more excited about growth vs revenue, there’s a good reason.
Best of luck out there.
Sterling Road invests in idea stage and pre-seed B2B startups based in the US, Canada and UK.
