Startup general interestVenture Capital

Revenue benchmark for Series A – $1m run-rate and 20% MoM growth

By June 4, 2014 6 Comments

Entrepreneurs are always asking us when we think their company will be strong enough to pull off a good Series A, which you can think of as $1-2+m Series A at at least a $3m pre-money. Every company is different and there are as many exceptions as companies that follow the rules but if your company sells product (e.g. the ecommerce companies or software companies that we invest in) and you have a $1m revenue run rate and 20%+ month-on month growth you will generally be in good shape. Companies with greater revenues and stronger growth are able to raise bigger rounds at higher valuations.

Companies with higher quality revenues (quality encompasses predictability and margin) will get away with a little less, or will get a higher value Series As when they hit this milestone. Companies with very low margins and/or unattractive working capital  characteristics will often need higher revenues to get their Series A.

Similarly, companies with faster growth will get a way with lower revenues and/or be able to command higher valuations.

Revenues and growth are only of significance if the company is otherwise attractive. At Series A that means 2-3 great people on the team, a great product, a large and attractive market and the ambition to go for a VC scale exit. For Forward Partners that means an exit of £100m+.

Breaking it down by sector in order of quality of revenue:

  • SaaS – most SaaS businesses bill their customers on a monthly recurring basis and have gross margins of over 90%, hence their revenues are ‘high quality’ and all other things being a $1m revenue run rate will attract a higher valuation than businesses in most other sectors
  • Ecommerce – good ecommerce startups typically have gross margins in the 40-60% range and revenues are predictable only to the extent that the company has found a scalable channel for acquiring customers, hence their revenues are lower quality than SaaS companies and all things being equal a $1m revenue run rate will attract a lower valuation
  • Ad tech and affiliate – the revenues of most adtech and affiliate startups come from the sale of one off campaigns or from exploiting short term movements in media pricing. This makes revenue in any given month a poor predictor of revenue in the following month, hence revenues are lower quality still and a $1m revenue run rate is generally not enough to pull off a Series A.


We have an Open Day the week after next where we will offer our help to four early stage ecommerce teams. If you’d like to apply to join us, get in touch.