A common question among SaaS business founders is how fast their revenue growth has to be to attract investors and potential acquirers – what does good look like? As with most things, the answer is “it depends” – on things such as stage of the business, funds available, market conditions etc. However, there is a reasonable body of research and practice available that can at least provide some guidance.Before I get into that – why is there so much focus on top line revenue growth? It’s pretty simple – percentage growth in top line revenue is highly correlated with valuation multiple in recurring revenue businesses. Controlling for other factors, a higher rate of growth in revenue is one of the best predictors of enterprise value.Let’s start with the Unicorn path. Around 4 years ago, Neeraj Agrawal, a general partner with Battery Ventures in Boston, coined a phrase that has come to be known as T2D3 (or Triple, triple, double, double, double). This describes the path of the fastest growing companies that reach billion-dollar valuations in a few years. The basic premise is that a SaaS company has to find product-market fit, get to around $2million in Annual Recurring Revenue (ARR)… Read full this story
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