(this post is a feed post from my comments on reddit)
r/Entrepreneur
I work for a VC backed accelerator and exited 2 startups via m&a and advised on a 3rd merger.
12k ARR so at a 10x multiple = a very rough valuation of 120k
If you get a seed round of 150k for a 10% stake (more likely to be 5% and below, but I put 10% for easy calculation) – the target post money needs to be 1.5mil
So from 120k to 1.5mil (let’s assume within 10 years) will give you a CAGR and a CMGR number… which you can then use as your revenue target
The other issue you need to deal with is your retention/ churn rate – if after 1 week of usage 65/100 users leave, that’s not a good sign, really we want to see churn as low as possible annual aggregate churn should be no less than 20% meaning after 1 year 80% of users are still using actively – the implications are that if your retention is 35% that means that for every dollar spent getting customers 65% will leave meaning the the CAC needs to be recouped by the remaining 35% that continue, of which, we can assume only a small % are actually paying, coupled with overheads and other costs basically you wouldn’t recoup the CAC cost fast Enough to get the growth rates needed from the above CAGR
As an extremely general rule of thumb – growth needs to be around 40% month on month (see rule of 40) and you want to have a churn lower than 20% and a CAC multiple of around 3 and a CaC payback of around a month —- this is very general, just rule of thumb guidance
Is this a good plan to raise a seed round?
byu/LavonnaTeti inEntrepreneur