Mailbag: Defining Reasonable Revenue Growth

Q: What kind of revenue growth is reasonable for a startup to demonstrate at the early stages?
A: As revenue grows, the absolute numbers get bigger but the percentages get smaller. Adding $200,000 onto $100,000 in revenue translates to a 200% increase. Adding $500,000 onto $1 million in revenue yields just a 50% increase.
As the numbers get bigger, growth and expectations should ratchet down.
But revenue growth can’t slow down too much. Seed-stage companies should still aim for at least 100% annual growth. Post-seed stage, 40% to 100% growth usually excites investors.
For companies beyond Series B, I apply the Rule of 40. …read more



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