What is a Good Startup Growth Rate?

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The Startup Growth rate. For many startup founders and funders it’s the only metric that matters.

It shouldn’t be, of course—there’s no shortage of experience demonstrating that—but leaving that aside one is still left with the question: how much growth is good growth? What is a good startup growth rate? The answer is different for every startup and each phase of development.

 

Don’t Let The Entrepreneurial Drive Outstrip Prudent Management

For venture capital-backed startups, aiming for 5% or higher growth per week is an oft-cited figure, with Y-Combinator seeing 5-7% as good and 10% as exceptional.

This might work for some companies, but the numbers show that it doesn’t work for all or even most. Rapid growth is no guarantee that there won’t be a sudden demise, especially if that growth is obtained by burning through funding too quickly.

Your startup’s growth rate targets should take your industry, your team’s current capabilities, your audience, and perhaps most importantly your funding phase and the source(s) of your working capital. No business runs for long without money in the coffers, so any growth that outstrips your funding is bad long-term management, plain and simple.

The age of your startup matters even more. Though it might seem counter-intuitive, you should expect higher growth rates shortly after launch than after your startup has had a year or two to grow—when the law of big numbers catches up and slows your growth down, it’s a sign you’ve weathered those initial growth spurts better than most.

This graph from Paul Graham at avc.com shows a typical (though by no means universal) growth curve for a tech industry startup, illustrating just how important it is to take age into account when measuring and comparing growth:

chart-of-the-day-the-startup-curve-march-2012

 

We won’t as far as to say “slow and steady wins the race,” but remember to pace yourself. Race as hard as you can, but don’t give your accountant a heart attack. Remember it takes time to build a successful start-up, and there is no such thing as an overnight success.

  • http://plabro.com Pankaj Garg

    unless you have created another napster!

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