In any given week I’ll receive 1-2 emails from venture capitalists asking for an intro to an Atlanta Ventures startup. Naturally, I ask what stage startup they target, especially if it isn’t explicitly stated on their website (this assumes it isn’t the proverbial associate call). Most of the time, the investor is looking for the startup to be at a later stage, and so the intro isn’t a good fit (most venture firms have moved up market and look for businesses that are further along).
Here are some common startup stages by revenue (investors will also expect to see growth rates above 30% as well):
- Idea Stage – No revenue or product, but lots of energy and enthusiasm.
- Seed Stage – Under $1 million in revenue (often under $100,000), working product, and paying customers with some early metrics (seeking product/market fit).
- Early Stage – Between $1 million and $5 million in revenue with solid metrics and a repeatable customer acquisition process.
- Growth Stage – $5 million or more in revenue, strong team, and working on scaling all aspects of the business.
The next time an investor reaches out, one of the easiest qualifying questions is to ask what stage company they look for, and to have them give a revenue range as part of the answer.
What else? What are some more thoughts on startup stages by revenue?
2 thoughts on “Startup Stages by Revenue”
Four years ago, Lance Weatherby took a stab at defining the four stages, and went into a bit more detail. The links are here and well worth reading.
These stages have helped inform our continued refinement of ATDC, including last week’s announcement of a “middle tier.” So Lance’s stages would correspond roughly to our “Educate, Accelerate, Incubate, Graduate” action verbs.
But I’ll note in both cases that the revenue assumptions are somewhat software-centric… and SaaS-centric at that. Hardware companies take a lot longer to get to first revenue. Medical devices take even longer than that, and cost even more, due to regulatory compliance issues. And a startup making a human therapeutic pharmaceutical: “Bozhe moy, u meenya tapor v golove!”
Since ATDC accepts all sorts of technology startups, we make allowances for those differences when reviewing applications for our new Accelerate program and our traditional Signature (formerly Select) incubation program. We’ve actually graduated life science companies — we’ve SOLD some! — that have hit all their marks but still don’t have any revenue. So David’s revenue metric wouldn’t work there.
But his underlying message is critically important: different investors invest in different stage companies. Don’t waste your time with those who aren’t going to write a check to a company like yours. They’ll still be there when you’ve matured your model, your market, and your revenue.
Very practical advice
Sent from my iPhone