The rejected startup currently has $1.5 million in ARR.
Turned down a founder this week. Why?
They were finishing the year at $1.5M ARR.
Finishing next year at $5M ARR.
Today, brutal as it is, that isn’t good enough to raise a good Series A.
Opportunity cost of cash is real.
Many users criticized Harry Stebbings for rejecting a Series A despite $5M ARR growth, calling the expectations delusional and absurdly high.
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@HarryStebbings Cool - respect that. Send them my way
@HarryStebbings Huh?
Turned down a founder this week. Why?
They were finishing the year at $1.5M ARR.
Finishing next year at $5M ARR.
Today, brutal as it is, that isn’t good enough to raise a good Series A.
Opportunity cost of cash is real.
@HarryStebbings if the fund is running low, just say that
@HarryStebbings So you’re doing diet PE now
@HarryStebbings Not gambling on early stage, and instead tripling down on high-growth category winners is completely reasonable. But it’s also just not venture capital anymore.
@HarryStebbings That’s the most absurd thing I we ever read. Unless there’s important details you’re leaving out
@HarryStebbings Please explain to me, how does someone "finish next year" at $5M ARR? What in their data makes them so confident they are getting there, and nothing ever changes in 18 months?
@HarryStebbings When the VC doesn't want to VC. Please make a mental note ot the company and let's look at the multiple in 5 years.
@HarryStebbings I mean man, next person will make that 1.5 a 3m by putting 3rd year hikes in contracts that will never happen, and put 10-20m target in year 2, because hey, why not. You are creating such negative adverse selection saying these things
@HarryStebbings A great business.
But you have to do what’s right for yours. Everyone is playing their own game 🫡
@HarryStebbings ARR is just one part of the equation. Without Capex intensity, Margin range and growth profile, is like being at the casino
@HarryStebbings What IS though? $10M? $20M ARR?
@HarryStebbings $5M next year? That’s table stakes now.
@HarryStebbings Sad but true.
@HarryStebbings How much they wanted to raise?
@HarryStebbings People still think they can raise a Series A with 3x year-over-year growth. True in 2021, not today.
@stansergiu_ @HarryStebbings Its called projection and it is finance 101 my guy.
@HarryStebbings they could raise a bad Series A
@HarryStebbings Are they currently raising the Series A with 1.5M ARR or will they be raising the Series A when they reach 5M next year?
@HarryStebbings Send them to me lol