[Fundraising for Startups] Lesson 7: Business growth and the 10% rule.

If I share one piece of entrepreneurial advice to my younger self, it would be this: entrepreneurship isn't about luck or who you know -- it's about the process.

...

People have an amazing ability to overcomplicate everything.

Ask any entrepreneur what "the right" growth rate might be and you'll get a million different answers.

The truth, like most things, is super simple: 10% month over month growth.

That's really all you need because compounding growth is the most powerful thing you've never really understood.

For easy math, let's pretend that you're making $100/month through your business today and you grow that revenue at 10% each month. Here's what that looks like:

• Month 1: $100
• Month 2: $110
• Month 3: $121
• Month 4: $133.10
• Month 5: $146.41
• Month 6: $161.05
• Month 7: $177.16
• Month 8: $194.87
• Month 9: $214.36
• Month 10: $235.79
• Month 11: $259.37
• Month 12: $285.31
• Month 13: $313.84
• Month 14: $345.23
• Month 15: $379.74
• Month 16: $417.72
• Month 17: $459.50
• Month 18: $505.45

You see what's happening, don't you? The business is doubling just about every 8 months... and it just gets faster and faster.

Now, before you crucify me for not discussing churn or anything else -- you're missing the point.

In the early days, investing in a startup is an emotional decision for an investor. If you can show that you're focused on building and growing a business, you've already set yourself up to look like a better investment than anything else that the investor has probably seen lately.

If, on top of that, you can show a 10% month over month growth rate, you're basically killing it.

When someone asks you how much traction you've got, you should always have a line ready. Maybe it's something like "we're making money and we're growing at X% month over month at this point."

Make sense?

-P

P.S. if you're in a long sales cycle business, you can apply this same concept to the growth of your pipeline too.