Plotting Your A Round

The easy goal for most SaaS and marketplace companies is hitting $100K MRR with steady MoM growth to reach Series A. I hear that number consistently. While there isn’t one size that fits all, for the sake of this post, I’ll run with that number. With a number in mind, how do you hit that Series A goal and what do investors expect growth to look like moving forward?

It’s not about simply reaching a revenue figure and showing investors real dollars. Factor in the timing of growth and show a quick acceleration from low revenue to $100K MRR (just a made-up number).

Plenty of startups have struggled to gain significant interest and have sat at low $10-20K MRR for months or even a year+ to eventually figure it out. Four months later they're seeing 25-50% MoM growth and show a growing funnel with repeatable conversion at the bottom. That four-month sprint with a pro forma showing 3X+ growth for the next year of operations is what gets investor attention. Take the same product and stretch that revenue growth over 2 steady years and it's far less attractive.

With increased seed deal volume (~175% increase from 2010 to 2013 and leveling off in 2014) comes increased Series A options for investors. Some companies will raise with little revenue but an intense user adoption growth rate. Some founders will sell a grand vision of solid technology and avoid the revenue lust of VCs. These are the outliers. Most startups won’t raise again. Think strategically about revenue growth and building a healthy company.

Execute on your seed round goals and have a revenue-driven investor introduction to make it to the grand vision discussions.