Quite often, founders find themselves navigating through various funding rounds (i.e. Seed, Series A-C, etc.) to propel the growth of their startups. An increasing number of founders (though a relatively small percentage) are instead focusing on the startup progress milestones, rather than fixating solely on funding rounds.
Startup Growth Milestones
The startup growth or progress milestones (usually in terms of ARR) serve as tangible indicators of a startup's viability and sustainable growth. By generating substantial revenue streams, founders not only demonstrate their business acumen but also easily attract investors seeking proven market traction, while diluting less equity giving them substantial exits during IPO/Exits.
Michael Ho suggests focusing on progress milestones, and not funding rounds. In his LinkedIn post, he elaborates on a series of project milestones to focus on each stage, while relating to the funding round that currently most startups tend to raise.
Note: The median funding round size has been captured from the Carta 2023 funding guide.
1. Problem Solution Fit
The first question for any startup is "Can You Make Customers Truly Happy?"
Don’t confuse 'paying customers' with "Happy Customers."
Do you know what happiness looks like?
What actions are you measuring?
And how many can you show?
For most startups, this is where you can think of raising a 'Seed Round'.
2. Go to Market (GTM) Fit
Now once you can make customers truly happy… the next step is to find a "repeatable and scalable way to find more happy customers (typically > $1M)."
Repeatable means doing something >10 times, and scalable means that
You know the control levers and
You can get to $10M ARR on that GTM push/motion
For most startups that'll be somewhere between $1M to $3M ARR, and this is where you can think of raising a 'Series A round'.
3. Scale Market Fit #1
In other words, Product/Market Fit (PMF).
You’ve de-risked it, but you haven’t started to scale it yet.
So can you add $10M in ARR in the next 24 months?
That's venture scale growth... this is where you can think of raising a 'Series B round'.
But growth doesn't last forever, so think about adding 1 more milestone: can you de-risk your second PMF?
New Market or
New GTM Push/Motion?
Whatever it is, will it power your next part of venture scale growth?
4. Scale Market Fit #2
Now it’s time to show both versions of PMF can scale (e.g. Uber Black and UberX)
Remember, just because you’ve had one venture scale success, doesn’t mean you’ll have another (e.g. Fire Phone)
At some point, your growth will start to slow so you’ll need to show that you have a 2nd act and possibly a 3rd.
For most startups, this is where you can think of raising a Series C round.
Now your valuation multiples are starting to converge towards public companies.
But by now, valuations can start limiting your options.
So you’ll need to be clear on what’s next.
a. Are you on a path to go public?
b. Are you going to exit? or
c. Are you profitable?
Focusing on revenue-based milestones forces the founders to adopt a results-oriented mindset, fostering a lean approach to generating revenues (ARR). Such an approach minimizes dependency on external funding while ensuring that the startup is built on a solid foundation of providing customer value and continuous demand. In the long run, prioritizing revenue-based milestones helps founders for fostering a business that enjoys sustainable, profitable growth, and resilience in the competitive business landscape.