How fast is fast enough?
David Peterson

Over the past few weeks, my partner Gil and I have spent a lot of time with portfolio founders discussing the market, business progress, and what to do next.

Inevitably, each conversation turns to growth. Namely, how fast is fast enough?

There’s no one right answer. But I can tell you that when investors try to answer this question, they look at it a few different ways, so you should too:

First, benchmarks.

In other words, how fast are you growing relative to others at your stage?

When you’re very early, and you’re still trying to figure out what you’re doing, zero growth is the expectation. But as you reach product-market fit, there should be a period of rapid growth. And as you reach go-to-market fit, there should be a long period of fast but sustained, predictable growth.

There are reasonably agreed upon benchmarks for each of these phases. In the early days, once a startup has figured out what it’s doing but before go-to-market fit has been established, Paul Graham suggests that “a good growth rate…is 5–7% a week” with 10% being “exceptional.” For the second and third stages of growth, all the way from $1M ARR to $100M+ ARR, Bessemer has compiled benchmarks here. These are a great place to start.

Second, competition.

In other words, how fast are you growing relative to your competitive set?

This context is critical. If you’re growing at an impressive 80% YoY, but your direct competitors are all growing at a blistering 150% YoY, then you’re probably not growing fast enough.

It can be difficult to track down information about your competitors’ growth rates (unless they happen to be public companies). But you can try to use proxies, like headcount growth, or ask your investors for intel. Even just revenue ranges can be helpful. This matters to investors and should matter to you as well.

Third, plan.

In other words, how fast are you growing relative to how fast you said you’d be growing?

As you mature, you’ll start to create an operating plan for your company, setting sales and marketing goals, revenue targets, hiring plans and the like. Now that question — how fast is fast enough? — is no longer so theoretical. You’re setting the plan. So, what should the target be?

My recommendation: set a plan that you can beat.

There are a few reasons why beating expectations matters both to your existing investors and future investors. Setting a plan and exceeding it shows that you have a handle on how the business works. It provides evidence that your team can execute. It also means you can predictably manage your cash (increasingly important these days)…

None of these frameworks alone can answer the growth question. Context matters. (For example, if you consistently beat your plan, but your competitors outpace you, you’ll lose. It doesn’t matter that you beat your plan if the plan was wrong.) But together, these provide a good framework for understanding the pace you need to hit to succeed.

Also, to state the obvious, investors don’t know how fast you should be growing. They’re cobbling together proxies as well. My advice is to show up to meetings with these frameworks ready to go. Show that you understand the benchmarks that matter and you’re exceeding them. Prove that you know your competition cold and you’re outpacing them. Demonstrate that you’re making plans and beating them.

So, how fast is fast enough? You tell me.

David

EVENTS

Jun 22 / The Importance of Culture and Values As You Scale a Business
Oren Kaniel, Co-Founder & CEO, AppsFlyer

Sep 7 / The Evolution of Collibra’s Product Positioning & How They Created a Category
Stan Christiaens, Co-Founder & Chief Data Citizen, Collibra

FROM THE BLOG

Mapping the New World of Business Collaboration
Why we invested in Reco.

What do a 2003 BMW and Microsoft Excel have in Common?
Leaving users feeling empowered and energized, rather than managed and disconnected.

Fewer, but Better Than Ever
The Israeli tech eco-system ponders a slowdown in startup creation.

Success Can be About Less Than You Think
Don’t fall victim to unfocused ambition.

EUROPE & ISRAEL FUNDING NEWS

Croatia/Automotive Systems. Rimac Automotive raised $536M for its EV supercar.
UK/DevOps. Coralogix closed $238M for its AI-Based Log analytics SaaS platform.
Germany/Data Tooling. Laminar raised $67M for its cloud data security solutions.
Germany/Financial Services. Mondo raised $43M for its B2B BNPL player solution.
Finland/Security. HoxHunt raised $40M for its anti-phishing platform.
Germany/Security. Semplicity raised $32M for its cyber risk and vulnerability assessment platform.
Israel/Security. Reco (an Angular portfolio company) closed $30M to help companies prevent sensitive data leaks by monitoring data sharing inside and outside of an organization to flag potential issues when they occur.

WORTH READING

ENTERPRISE/TECH NEWS

Software development lifecycle. Sapphire Ventures published a detailed and thoughtful analysis of the devops market. They list many of the themes we have talked about and have invested in, including software lifecycle security, increased usage of ML in development, better measurement of engineer performance, and “shift right.”

Cloud software analysis. Battery put out a detailed analysis of publicly traded cloud software companies that is well-worth a read.

HOW TO STARTUP

How to do product management communications right. Lance Walker, former CMO of Neo4j, put together some thoughts on how product management should communicate with end users, and it’s very interesting. Here’s one of his tips: “Stay intellectually honest. The PM explains how a poor implementation of the feature would be bad. You’re the product manager. You’re right, I wouldn’t be happy with a bad implementation — how about you make me a good one then? PMs don’t have to unpack all their thinking for the audience, but they will lose the confidence of the audience (regarding potentially both their transparency and technical skills) if they throw out rhetorical strawmen like this. The false dichotomy at the end is another example. The user just asked for a feature, they didn’t argue its relative importance. (Nor should the PM cherrypick sacred features against which to compare.) A feature request can simultaneously be valid, valuable, and low-priority relative to others — all at the same time.”

HOW TO VENTURE

Learnings from VC. Shomik Ghosh, who recently made partner at Boldstart (and with whom I am lucky to share some co-investments) recently blogged some of his learnings as a VC. Here’s one gem: “Usage Matters More Than We Think. This one may seem self evident but in the early days of a new product, usage matters more than number of users. If you can show that you can get 1 user to love the product, then you can likely find 1k more like that user. If however, you need to consistently hop from new user to new user to get engagement, that is likely a sign that the product is not solving a pain point deep enough for anybody. Everyone talks about user love. However, some of the most successful products in the world are products that users loudly complain about. Talk to users of Jira or Salesforce CRM and you’ll see what I’m talking about :) There are definitely loud complaints but also lots of continued user engagement.”

PORTFOLIO NEWS

Reco, a company using AI to map customers’ data sharing, announced that it raised $30M in a Series A round co-led by Insight Partners and Zeev Ventures with participation from BoldStart, Angular Ventures, Jibe Ventures, CrewCapital and Cyber Club London.

CruxOCM’s Head of People, Joanna Woo was named a top recruiter in tech.

Firebolt now has a Tableau connector (and a great announcement video).

Aquant expanded its Service Hero product line for technicians who service commercial kitchen appliances.

JFrog appointed Vicky (Jia Yu) Chan as their Japan GM & Country Manager.