Forget what VCs tell you about growth

Mark MacLeod
Jun 15, 2018 · 3 min read

If you listen to the “top tier” VCs talk about what they look for in a startup, you will often hear them talk about the fabled “triple, triple, double, double”: You get to $2M in revenue then triple to $6M, triple to $18M, double to $36M, then magically double again to $72M. It looks like this:

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There is much that is wrong with this expectation:

  • $2M in revenue, while a great achievement does not necessarily mean that you truly have the preconditions to begin tripling. What if that initial revenue came from one segment that is not representative of the broader market? False positives can happen regularly.
  • Tripling will likely blow your current customer acquisition channels, forcing you to triple while exploring completely new channels.
  • The organizational/ team changes implied in this journey from $2M to $72M in five years can’t be overemphasized. A lot will break if you try for this.

To be clear, some companies do achieve this (and more). Slack comes to mind. But, only a small handful of companies do. The rest die trying. And this is where I take issue.

I believe this triple, triple, double, double advice is self-serving: VCs want outliers. That’s where all their returns come from. If your business falls apart trying to achieve this nearly impossible growth, all good. Your VC has another 10 companies trying. One of them will make it.

In the meantime, your business is done. Your value destroyed.

My beloved Shopify offers a much more rational tale of value creation. Yes, Shopify is still a rare, once in a decade company. It is not the bar that the rest of us should realistically think we can achieve. However, it does clearly show that you don’t need to triple in order to be a highly fundable market leader.

Here is Shopify’s publicly available revenue history:

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Source: Shopify S-1 and annual filings

A few facts:

  • Shopify was fours year old before it raised its first penny of VC. The company had a proven, repeatable, profitable revenue machine before it decided to add VC steroids. I know because I worked on that round.
  • Shopify never needed to triple. Its highest growth in the above public history is 112%. Over these six years, it has averaged 95% growth.

Despite never tripling, Shopify was able to raise whatever capital it wanted from whomever it wanted, whenever it wanted. It is no coincidence that Bessemer, arguably the best SaaS VC around was the original lead investor in this business.

The last private venture round was done in 2013 at a $900M pre. Today the company is worth ~$17B! That’s about a 19x gain.

So, please forget it when VCs tell you that you need to triple. That’s too much risk. And it’s self-serving advice. Don’t hit the gas until you KNOW that you have a proven, repeatable growth engine. And don’t feel bad if you “only” double. That is an amazing achievement. One that will assure you can raise additional capital any time you want to.

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