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March 7, 2024

Investors Care About Growth Not Revenue

Investors Care About Growth Not Revenue

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.

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Ash Rust

Ash Rust

Managing Partner, Sterling Road

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