Investors love to talk about certain revenue minimums before they’ll consider investing (e.g. $1 million and $5 million are the most common thresholds). In reality, what they really want is a story that shows scalable growth. Let’s look at two examples:
- Startup has been in business for four years
- Added $50,000 in new recurring revenue last quarter across 50 new customers
- Just hit $1,000,000 in annual recurring revenue last quarter
- Startup has been in business for three years
- Added $250,000 in new annual recurring revenue last quarter across 100 new customers
- Just hit $500,000 in annual recurring revenue last quarter
Which one is more valuable? Which one will attract more attention from investors? If you hear the message about requiring a million in revenue to garner investor interest, then it appears Company A will be most desirable. Actually, Company B is much more desirable, even with half the annual recurring revenue. Company B is adding more customers at a much higher average customer value in the same period of time. Investors want to see the customer acquisition machine working and Company B clearly has it humming.
What else? What are some other thoughts on telling a story with quarterly growth numbers?