Want Seed Funding? Why Investors Want to See $72 Million in Revenue by Year 10

Want Seed Funding? Why Investors Want To See $72 Million In Revenue By Year 10 - Gettyimages 1326873991 511371

What would make your early-stage company venture-backable? Investors typically talk about three factors driving their decision-making: team, product, and market. But there’s an overriding component overlaying all three. That is, how much of a return your company can generate for investors when all three factors align as hoped. If that return isn’t large enough, investors don’t want in, according to Augustin Sayer of Newfund, a $300 million seed-stage VC firm.

It’s common to hear VCs make the sweeping statement that you need to show a path to growing revenues 1000x, and valuations by 100x, to justify an investment. Sayer unpacked the details behind that hurdle in a series of LinkedIn posts.

Sayer’s specific example imagines a SaaS company that raises a seed round at $3k in monthly revenues, and which will eventually exit with a valuation of 10x revenues. To justify a seed investment of $1 million at a $4 million valuation, he suggests, a company would need to show a path to…

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This article was written by Steven I. Weiss and originally published on www.inc.com