Monthly vs. annual growth. How fast is fast enough.
I recently had a multiple discussions on growth rates of companies. Very often a 3x growth year on year is considered a minimum to get a decent VC funding while 2x is probably a minimum (at least for Inovo VC it is).
What surprised me is that many people can’t figure out easily how it translates into their monthly development (at least to get a ballpark if to get 3x you should od 5% monthly or 15%). Actually within our team we also had a discussion “So company’s October run rate is at 12% growth vs. last month is it enough”
The compound growth rates do miracles so for the lazy ones a short cheat sheet below (obviously seasonality blurs the picture):
So if your last 2–3 months were below 5–6% it is probably not a VC fundable business. Also if your business plan will have that assumptions. If you want to be a hot company — plan and deliver 10% growth.
Worth noticing a “tiny” 2 percentage points difference between 10 an 12% MoM growth changes your company from a 3x-er to a 4x-er — it is worth to push the company to get this extra 2ppts — this will make crazy impact on next round valuation!
If someone wants to go level deeper and monitor progress on a weekly basis worth checking out Paul Graham’s post on YC growth approach:
