Startups · Entrepreneurship

What is an acceptable revenue run rate for startup investors?

Sukhjeet Singh --

September 8th, 2016

I am particularly interested in hearing your thoughts for consumer startups that are at an early stage phase of the project. This applies to Seed and Series A startups.

Alejandro Cremades Author of The Art of Startup Fundraising & Serial Entrepreneur

September 8th, 2016

This is a very interesting question. To be honest it depends on the risk appetite of the investor, the investment thesis, and also the market where you are executing. 

When it comes down to run rate, I would probably say that things start to get really interesting when you hit $1M run rate. You are basically calculating this figure based on your revenues on the most recent quarter. 

In essence, you are creating a yearly projection for potential performance. Investors are getting much pickier compared to what we used to see back in 2005. With this in mind, keeping an eye out for revenues is probably where your head needs to be in terms of metrics. 

Make sure each quarter is better than the last and that you are showing an upward trend. Investors are always excited when they visualize the potential outcome towards the future and how their returns may look like down the line.

AKBAR JAFFER Enterprise Software Product Marketing and Marketing Technology Executive

September 8th, 2016

It depends on investor and it depends on the product average price tag frequency of purchase market etc. 

Anywhere between 10% to 40% quarter over quarter for 6 consecutive quarters is a sure bet to get you funded. 

Martin Omansky Independent Venture Capital & Private Equity Professional

September 8th, 2016

No formula. Regulated products, such as needing FDA approval, require longer lead times to revenue production.unregulated, such as consumer products, should show growing sales in beginning years, but there are too ma y variables to go into a y more detail. Our group looks at long-term potential and size of addressable market more than ramp-up cash flow. We are practical enough to know that even good products need time to capture market share. Sent from my iPhone

Tom Duffy

September 9th, 2016

growth is what makes the startup viable 

Shams Juma

September 8th, 2016

I would second Alejandro's general premise, but the type of run rate really depends on the investor's risk profile. There are some investors who will invest in the vision and your team's ability to execute on that vision. In general, hitting a run rate of 10K MRR is a good start in raising your seed round. Anything before 10K is generally, friends and family.