The Startup Velocity Question: VC Portfolios

As discussed, the Venture Capital model looks for hyper growth startups that grow at an exponential pace. Companies that can go from 0 to $100M in revenue in 5-7 years.

Hyper Growth is not a natural state of business. Most businesses grow at a linear pace at best.

As such, VC Portfolios are full of companies that have already taken in $10-$50M in capital, but growing linearly. Instead of 0 to $100M in 7 years, they have achieved 0 to $20M in 7 years.

Unless these companies come up with a new product that is a rocket, they have to be positioned for an Exit without burning huge amounts of additional capital.

The 10X dream may be lost, but a 3X may still be possible.

We’ve discussed some of these strategies in the series.

If you need help, please reach out.

For a venture fund to be able to make 3X off a situation that could result in a write-off is of immense consequence towards overall fund performance.

In fact, at present, most VCs face an existential threat.

Key Takeaways:

• The VC model seeks companies that can grow from 0 to $100M in revenue in 5-7 years.
• Hyper growth is not natural for most businesses; linear growth is more common.
• Many VC portfolio companies have taken $10-$50M in capital but only reached $20M in revenue over 7 years.
• Companies not achieving exponential growth need to be repositioned for an exit without burning excessive additional capital.
• While a 10X return may no longer be possible, a 3X return could still be achievable.
• For VC funds, turning a potential write-off into a 3X return significantly impacts overall fund performance.

My Question to You:

Are you looking for an exit strategy for your startup?

If you think you need help, consider 1-on-1 Private Consulting with me. I will diagnose and create a path forward in an hour.

Image by Jill Wellington from Pixabay

This segment is a part in the series : The Startup Velocity Question