Source: https://docs.google.com/spreadsheets/d/1RSHx9pwrSKfOlUr2jyqK...
So here's my thoughts -- I think some outside "real world" perspective is needed here. While 9% M-M growth may seem OK in the VC-fueled hockeystick growth world, in the real world of profitable businesses it's spectacular. Some companies spend years running losses trying to get to profitability, and if that 9% is real (and sustainable), then I can think of only two things going on here: A) Either the whole world has gone crazy or B) More likely - there's missing information here.
As peter points out -- at a 9% growth rate the business turns profitable after 6 months and on the 13th month is net profitable. Any rational investor would be frothing to get involved in that sort of business - it becomes a money-printing machine in short order.
So I'm assuming that there's missing information here -- either the 9% monthly growth isn't sustainable (then it's not a true 9% M-M growth rate) or the costs must rise substantially to sustain it. And if that's the case, then you can start to see the real reason VCs might be hesitating.
So I guess my point is: Don't obsess over the raw growth number as the sole problem. That sets the wrong target. In the end, profits drive businesses, and massively profitable businesses can go public (and get great valuations), and public companies make VCs happy.
That's not 100% true.
1) Growth rates like this are not sustainable long-term, and a 9% growth rate doesn't look great when lots of other companies are at 15-25% monthly growth with similar revenues.
2) The revenues multiples for Series A startup are very high. Would I invest in a $600k revenue/year startup growing 9% monthly at a $4m valuation? Sure, that sounds good. But a Series A would be more like investing $5m at a $25m valuation, which is way higher than the startup is worth based on pure fundamentals. The reason to invest at a $25m valuation is because you think there's a 10% shot the startup will be worth $500m, not because you think it's a 100% shot at $25m. High growth rates are one of the best indicators that a startup has a shot at $500m.
(My fund does seed/Series A investments.)
Your first point is right (and I addressed 1 later in my comment) -- if 9% isn't sustainable long-term, then the whole picture is quite different and a different metric should be used. And your second point, put differently, is "asking prices are too high", which is a fair point.
So I'd recast the original problem in a different light: "Company X is growing at 9% now, expectations are that it's unsustainable and won't be profitable for a while, and at the same time, they're asking a very high price relative to that growth & profitability rate", which explains why they're having trouble a bit more clearly.
My fundamental point is that the meme "anything less than 5% growth per week is bad" in a vacuum feels crazy by itself. With more context, it makes more sense.
https://docs.google.com/spreadsheets/d/1YoPnpFzmcpdZQh6HZ_2f...
EDIT: they would hit breakeven at 22 months - not bad actually.
I don't really understand this blog post.
I think the blog post is particularly focused on Series A Silicon Valley VC firms. With as easy as it is to get Seed funding at the moment (in SV and with decent connections, anyway), they’ve got multiple companies with – to quote another poster here – 15-25% MOM growth at similar levels of revenue. They’re not looking for the thing that will be making $25k/mo in profit a year from now. They’re looking for the thing that will be sold for millions of dollars.
I think this company would be a great investment for somebody who wants to put $100k+ into a long-term, strategic venture. It is probably a pretty bad deal for most VC firms, though.