There is a common thread between my X feed and conversations I have had with follow-on VCs in the Bay Area.
Their revenue growth expectations for doing the next round seem extremely steep, even to me as a seed investor.
Many claim that they are regularly seeing startups that are meeting these kinds of expectations, even in the Enterprise AI world. Which, personally, I find hard to believe! But then, I see startups on X that every week are claiming 0 to $500K ARR in 30 days, “we are the fastest growing startup ever in X/Y/Z”, and investors like Paul Graham sharing hockey stick graphs of a variety of colors.
Anyway, for now, let’s park the discussion of sustainability, unit economics, dodgy revenue math, etc. Let’s say as a founder, you have some solid early traction but don’t have these ridiculous growth numbers to show. How should you then tell the story, especially while pitching in the Valley?
I am typically advising folks to explore combining one or more of the following 3 elements:
(1) Focus on “quality” of revenue – signals include customer scale/ tier, how happy they are (low/zero churn), and whether there is a land-and-expand motion happening even with 1-2 names, especially if there is evidence of ACV expansion.
(2) Capital efficiency of early execution – lead with “look at how much we have accomplished with such limited capital”, which highlights resourcefulness, strategic & iterative thinking, street-smart execution, and naturally leads to the line of thought that goes “what could this team achieve when armed with capital”? This is a great point to get investors to start imagining.
(3) If applicable, deep work around IP and building hard things around the product – don’t be shy to talk about the deep, grindy, and non-trivial work that’s gone into building behind the scenes to get the product to this stage. Ideally, have a compelling argument as to why this work can’t be just “bought” with capital and why a new YC batch company can’t just copy it.
These arguments might still not do the trick for the momentum VCs. But remember that only a handful of large investors are positioned to play that game anyway (the ones who have been saying “triple, triple, double, double is dead” for the last year or so on every podcast).
There is a large variety of capital pools, definitely across the US & even in the Bay Area, that structurally don’t play this game. Hopefully, these arguments should help you land your story better in front of them.
