CAGR, or compound annual growth rate, is a measure of the annualized percentage growth rate of a company's revenues over a certain period of time. It is often used as a way to compare the growth of different companies or to project future growth.
For investors, CAGR can be an important factor to consider when evaluating a startup's potential for growth. However, it is not the only factor that investors consider, and the relative importance of CAGR may vary based on the specific investor and the stage of the company.
In general, investors tend to look for startups that have a strong potential for growth, but they also consider other factors such as the company's business model, market opportunity, and management team. They may also consider the company's current financial performance, including its revenue and profitability.
Overall, while CAGR can be an important factor for investors to consider, it is just one piece of the puzzle when it comes to evaluating a startup's potential for success.
The expected compound annual growth rate (CAGR) and revenues for a startup can vary significantly based on a number of factors, including the industry it is in, the stage of the company, and the strength of its business model. That being said, there are some general trends that investors tend to look for when evaluating a startup's potential for growth.
At the seed stage, investors may be more focused on the potential for future growth, rather than current revenues. They may be looking for startups with a strong business plan and a clear path to profitability, rather than a proven track record of revenue generation.
At the series A stage, investors may be looking for startups that have started to generate revenue and show signs of traction in their market. According to a report by Mattermark, the median revenue multiple for series A funded companies was 2.6x in 2020, with a median CAGR of 69%.
At the series B stage, investors may be looking for startups that have achieved significant growth and are on a path to profitability. According to a report by Mattermark, the median revenue multiple for series B funded companies was 4.5x in 2020, with a median CAGR of 105%.
It is important to note that these are just median values, and the CAGR and revenue expectations for a specific startup will depend on a number of factors. Additionally, these expectations may vary based on the specific investor and the industry in which the startup operates.