👋 Hey, I’m Lenny and welcome to a 🔒 subscriber-only edition 🔒 of my weekly newsletter. Each week I tackle reader questions about product, growth, working with humans, and anything else that’s stressing you out about work. Send me your questions and in return I’ll humbly offer actionable real-talk advice. Now, on to this week’s post…
To get you a clear answer, I reached out to two dozen of the smartest investors I know and asked them what they consider GOOD and GREAT growth rate by stage of business. Below is what I learned.
Huge thank-you to the following amazing people for sharing their insights: Alexander Taussig and Arsham Memarzadeh (Lightspeed), Andrew Chen and Olivia Moore (a16z), Arra Malekzadeh (Craft), Caitlin Bolnick Rellas (CRV), Daniel Levine (Accel), Elad Gil, Ellen Chisa (Boldstart), Grace Ge (Menlo), Grant Ebenger (Tiger), John Luttig (Founders Fund), Jonathan Golden (NEA), Kanyi Maqubela (Kindred), Kimberly Tan (a16z), Leo Polovets (Susa), Mike Duboe (Greylock), Mike Vernal (Sequoia), Niko Bonatsos (GC), Nina Achadjian (Index), Patrick Chase (Redpoint), Rebecca Kaden (USV), Sandhya Hegde (Unusual Ventures), and Todd Jackson (First Round) 🙏
Why? Because percentages with a small base don’t mean much. This sentiment was true across every investor I talked to, e.g.:
“I look at MoM only really as a proxy for how fast it ramps to $1m ARR.
We don’t anchor on the specific percentages for MoM growth because the percentage represents a pretty small dollar difference with small denominators. For example, 10% vs. 20% growth at $100K ARR isn’t substantial. Every percentage means different things in an absolute sense when the denominator is small.
Another way of thinking about it through a MoM lens is that we’d want to see accelerating MoM growth (it going from 10% to 12% to 15%, for instance) to see that the company is picking up momentum.”
—Kimberly Tan, a16z
That being said, if you’re looking for a month-over-month benchmark below $1m ARR, answers typically fell in the 15%-25% range.
As John Luttig (Founders Fund) put it:
“In the early stages it’s mostly about time from launch to your current ARR.
If you grew to $500k ARR in 3mo post-launch, that’s more impressive than $1m in 24mo post-launch. Generally, 0 to $1m ARR in 12mo or shorter is great. There are obvious exceptions to this—not every company’s success can be measured in ARR since launch (Figma, OSS, etc.).”
Broadly, the expectation is that getting to $1m ARR within a year of launch is GOOD, and getting there in three quarters (9 months) is GREAT.
As Sandhya Hegde (Unusual Ventures) said, “You start the growth clock the month you go GA.”
Grace Ge (Menlo) shared a similar point:
“Velocity is everything post-launch. As the company matures, it’s less about convincing investors to dream the dream and more about proving the dream is real, executable, and monetizable.”
For this reason, you want to be strategic about when you launch:
“The great irony is that once you start having numbers, investors start to really care what those numbers are.”
—Caitlin Bolnick Rellas, CRV
“If you’ve launched and have very little traction, it’s worse than being pre-launch, because it shows the market/value prop is already demonstrably weak. This is why no data is better than bad/small data.”
—John Luttig, Founders Fund
However, a couple of investors specifically said that they don’t care about how long it takes you to get going, as long as when you do get going, it really gets going:
“We’re less concerned about ramp to $1mm of ARR, or growth rates every year after launch. Some of our biggest winners took several years to really get going and find strong PMF. But once they do, we want them to take off. In other words, if a business grew revenues from $500k > $5mm this year, I wouldn’t care whether it was launched 1 or 5 years ago.”