The Perfect 5-Year Startup Revenue Plan (or Perfectly Amusing)
I’m always amused to see 5-year revenue forecasts of early stage startups. I too made similarly amusing revenue forecasts when we stated AccelerEyes.
It is, unfortunately, a somewhat standard practice for startups to share 5-year revenue projections with potential investors. Applicants to Venture Atlanta are asked to share their 5-year revenue projections (unless that changed this year). Many of the presenting companies will share their projections during their presentations in a few weeks (register here). It’s inspiring and amusing at the same time to hear those revenue projections.
It’s amusing because it’s impossible to predict the revenue of an early stage company. These companies have cumulative all-time revenues under $50k. It’s impossible to predict where they will go.
I took notes on some of the companies at Venture Atlanta last year. I compiled those notes and determined the average revenue starting point of the early-stage companies ($30k) and the average projected growth rates of the following years (35x, 6x, 4x, and 4x). Assuming that the “mean” is the ideal statistic and assuming that my note taking was reasonably good, the perfect 5-year startup revenue plan is:
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
| $30 K | $1 M | $6 M | $27 M | $108 M |
When I presented at Venture Atlanta in 2009, I shared our 5-year projections. According to my projections, I declared that AccelerEyes would do $90 million in revenue in 2014. That’s gonna be shy of the perfect $108 M Year 5 revenue plan.
For potential investors, the company’s predictions on revenue are meaningless. If you’re going to share predictions, it is much more interesting and useful to understand how the company is going to acquire customers, how many customers are in the market, and how much pain those customers feel.
Even better, it is good to show traction. It is good to share how you are already servicing your ideal customers. It is good to share that you have acquired customers by virtue of the goodness of your product, not by virtue of your friends tossing you a favor in your industry.
I’ve written before how silly venture traditions (like written business plans) are dying out. I hope these amusing 5-year revenue projections die out too.
What are your thoughts on 5-year startup revenue projections?