What makes your startup VC-backable?

What makes your startup VC-backable? The answer is simple, but not easy to achieve: VCs look for companies that can earn $100M in revenue in about 5 years.

Generally speaking, this is the type of revenue ramp that VCs are looking for:

• Year 1: $1-2M
• Year 2: $6-7M
• Year 3: $20-25M
• Year 4: $50M
• Year 5: $100M

It’s extremely challenging to hit these numbers.

And it requires two things:

1) A large $BB market.

Why? Because it's easier to hit $100M with 5% share of a $2B market than with a 20% share of a $500M market.

2) A unique competitive advantage that your customers love and your competitors cannot easily copy.

Why? Because you can't dominate a market unless your product is the best product available for that market.

Why do VCs use this $100M ARR benchmark?

Because they raise big funds and need 1-2 investments per fund to generate a $B+ exit to deliver an ROI to their LPs.

Google ‘VC fund returner’ for more info on this math.

What if your market isn't big enough to hit $100M ARR?

Lower your sights and focus on angel investors. They invest smaller amounts and therefore need smaller exits to deliver an ROI on their investments.

All blog posts

Follow me on LinkedIn for more pitch deck and startup tips.