In world of startups, revenue kills

“You learn a lot once you start down the revenue path of a startup. One of the first lessons is that no matter how big you get, next quarter you have to be bigger. No one cares if you’re generating $50M or $100M per year. What matters is how quickly you’re growing quarter over quarter and year over year” Seth Sternberg, co-founder, Meebo

Having revenues means having a business, which also means you are valued on your revenues and your ability to grow revenues. If you as a startup have revenues, then you can no longer command any ephemeral valuation for your company — your investors need to show how they are valuing your business. Unless of course you are Dropbox, Uber or Airbnb who are bringing in a ton of money and are valued based on those revenues.

As an investor, it is hard to justify a multi-billion dollar valuation (to your partners or limited partners) when your are investment is bringing in only $10 million a year in revenues. So from that perspective, revenues, tend to muddy the picture. Sadly, that is the reality of the post-Silicon Silicon Valley!

A letter from Om

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