Startup Growth Rates

If you go to a large fund which has a billion dollars or more under management, they're looking for home runs. Venture capital business is, in a way, it's like playing baseball, where Instead of getting four runs for Grand Slam, you can get 100 runs for Grand Slam or 1,000 runs for grand slam. So people in the venture capital business, on average, know that many of their investments are going to fail. Often a third of all investments in venture capital, the investors lose all their money. And a third of the time they about make their money back. And then the remaining third, the profitable third, they have to make a big return to get a good return overall on their entire portfolio. And they're looking to make a 10x return or even 100 times return. And they're looking in many cases, for a company that could be worth more than a billion dollars for a large fund. So for the company to be worth more than a billion dollars, the revenue has to be over $100 million. Let's say just order of magnitude. And to get there within a venture time frame, meaning eight years, you have to have growth approximately triple, triple, double, double. So let's say you're a company like DoorDash, and you get to 2 million of revenue by the third year. And then not just revenue, but the profit margin in a marketplace, you'd have to look at just not just revenue, but also what's the. What's the take of the marketplace? So that number being 2 million by the third year, then you want to triple it. You want to grow very fast. You go from 2 million to 6 million, meaning that the take rate for a marketplace or the revenue for a software company, and then triple again from 6 to 18, and then double, double, double. And then you get to over $100 million of revenue in the eighth year. And let's give a real example of this. Shutterstock, a company where I served on the board for nine years, was founded by John Oranger. This is an image of John with a camera there. He was the founder. He started it in 2003. It's a B2B marketplace for images. And by Shutterstock's eighth year, they had 500,000 customers. Customers were paying, on average, $2 an image. They were buying 100 images per year each. And if you just multiply that out 500,000 times 2 times 100, that's $100 million of revenue in their eighth year. And when they started, they thought, this is what we could do, and they actually achieved it. So that kind of growth is something which most large venture funds will say, I don't know whether you can do it. I know some of the companies I invest in won't be able to do it, but my ambition is that every company invested has the potential to do that. And then in this next slide, this shows some other examples and you can see how in recent years some companies have been growing even faster. Cornerstone, an HR software company, took 12 years to get to 100 million in revenue. Coupa took eight years, Shopify six years. Then Twilio, HashiCorp, Slack and UiPath even faster. So this is possible to get to 100 million of revenue within this sort of two to eight year time frame for the very best companies.