When raising capital a startup want to have multiple interested investors to create a competitive situation. Investors have different preferences, but I believe there are only two main groups:
- investors that invest in profitable companies
- investors that invest in very high revenue growth companies
Hence a company raising capital should either be profitable or grow very fast (or tell a story that makes it probable that it will grow very fast).
Todd Gardner captures it well, and in slightly more detail, in this graph.
However I believe that for seed stage startups the Max Growth circle should be much further to the right.
At seed stage and preferably Series A, revenue growth should be 100+ % year-over-year.
Only growing 30-40 % and being unprofitable is at best the Grey Zone and possible the Dead Zone.
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