Growth

Traction is the single most important factor in determining whether, how quickly, and on what terms companies can fundraise. OCV companies have roughly 9-12 months to show meaningful traction. If a company struggles to gain traction, we may wind it down.

Growth is generally shown through usage and revenue metrics. Investors want to see an obvious demand for a commercial product. For an enterprise company, meaningful growth could be a handful of logos at a few hundred thousand in annual recurring revenue (ARR).

Weekly growth goals

Early-stage startups operate on a weekly cadence: weekly growth goals and product deliverables. That’s why OCV meets with Pre-Seed companies weekly.

Pre-seed company KPIs should be either usage-based or revenue-based. 10% week-over-week (WoW) growth is the bare minimum at this stage. If you’re below 5%, you should be making changes and placing bets that will get you above 10% by the following week.

Growth goals are binary, measurable, and ambitious. Production-based goals (“Release this feature” or “Write this blog post”) are important inputs that help you achieve your goals, but are not goals themselves.

Weekly active users (WAU)

Weekly active users (WAU) are the number of people who interacted with your product each week. How you define an "interaction" will depend on your business, but it should be as simple as possible (someone who logged in or took an action in the product). Once you set the definition, it should never change. Tracking WoW growth is only meaningful when the metric is stable.

Include all users in the WAU count, including ad-driven users. You will segment your users in a variety of ways (acquisition channel, profile, product engagement characteristics, etc.) in your retention analysis to better understand the composition, opportunities, and challenges in your top-level WAU number.

Measuring growth

Growth is measured by growth rate: the ratio of new customers (the customers at the end of a period less the existing customers at the beginning of a period) to existing ones.

Growth Rate = [(Present Value - Initial Value) / Initial Value] x 100

You need a high growth rate from a reasonable baseline (example).

Later-stage benchmarks

As companies progress to later stages, there are a few other well-known benchmarks you may hear about.

Triple Triple Double Double (T2D3)

This is a growth benchmark for early-stage companies to go from $1-2M in ARR (typically Series A stage) to $100M+ ARR in 5-6 years. So if you start at $2M ARR, you'd go: $2M → $6M → $18M → $36M → $72M → $144M

The Rule of 40

This is an efficiency benchmark that's more relevant once you're at scale (typically $50M+ ARR, though people debate the threshold). It says your growth rate + profit margin should exceed 40%. For example: 30% growth + 15% margin = 45%, good.

Burn multiple

This is an efficiency benchmark that tells you how many dollars you're burning to generate each dollar of new ARR. Lower is better, but the expectations are different at each stage of the company. Read David Sacks' substack article if you want to know more.