The Growth Rate Top VCs Expect From Software Companies Under $10 Million in ARR

Why might 3x annual revenue growth not be enough to raise from the best venture capital firms right now? Most founders would call tripling revenue in a year a great result, and in the broader software world it is. But the investors writing the biggest checks are looking at a very different set of companies, and the numbers they are comparing you against have moved sharply upward.

Iconiq, a growth investor, recently published its Pacesetter Index, and Jason Lemkin of SaaStr shared it this week. The index tracks AI-native and AI-driven software companies with top-quartile revenue growth over the last three years. In other words, it describes the companies venture capitalists are chasing. I want to walk through the numbers, explain how I would read them, and cover what to do if your growth sits below the line.

The numbers by company size

The index reports median yearly growth for these companies, grouped by revenue. For companies under $10 million in ARR, the median yearly growth was 900%. That equals 10x revenue growth in one year. Between $10 million and $25 million, the median was 430%. Between $25 million and $100 million, it was 190%. For companies over $100 million in revenue, median annual growth was 115%.

• Under $10 million in ARR: 900%. That is 10x revenue in a single year.
• $10 million to $25 million: 430%. Roughly 5.3x, using simple arithmetic on the reported percentage.
• $25 million to $100 million: 190%. A little under 3x.
• Over $100 million: 115%. A bit more than doubling, from companies already at enormous scale.

Those are medians, which means half of the companies in each group grew faster. The top quarter of companies under $10 million grew 2,600%, which works out to roughly 27x in a year. A median that high is hard to picture if you run a typical SaaS business, so the shape of the curve is worth studying. Growth rates fall as companies get bigger, which is normal, but they start from a very high point.

Why 3x growth can fall short

A quick translation helps here. Tripling revenue in a year is 200% growth. Next to a median of 900% for the leading AI-driven companies under $10 million in ARR, 200% looks like a fraction of the pace that the top investors are used to seeing. If you are pitching 3x growth and calling it great, you are up against companies that did 10x.

It is worth being fair about what this data represents. These are outliers by design, since the index tracks companies with top-quartile growth, and it draws on data from public software companies and Iconiq's own private portfolio. So it shows the very top of the market, not the typical software business. Still, the outliers are the ones venture capitalists most want to fund, which means they set the standard in the room where you are pitching.

• The comparison set is the best of the best. Investors compare you against the fastest companies they have seen, not against the average software business.
• The data skews to the top. It covers public companies and one firm's private portfolio, so it describes the highest end of the market.
• The bar still matters. Even if most companies fall below it, it shapes what the most selective firms expect.

How I would think about it

Here is a simple way to turn the data into a decision. If you are under $10 million in ARR and growing anywhere near 500% or 600% a year, raise. If you can get growth to 800% or 900%, the best firms are going to want to talk to you. If you are growing less than 200% a year, venture capital might not be your best path.

These thresholds describe how well a company fits the venture model, and they say nothing about how good the business is. A company growing at 150% a year can be a very good business with strong margins and loyal customers. The issue is that venture capital funds are built to back a small number of extreme outcomes, and the structure of the asset class rewards companies that can grow at a pace that few businesses will ever reach. That does not make slower growth a failure, because plenty of excellent companies have been built on other kinds of funding.

• 500% to 600% growth: raise. At that pace, under $10 million in ARR, you are competitive for venture funding.
• 800% to 900% growth: expect interest from the best firms. This is the median for the leaders in the index.
• Under 200% growth: consider other paths. Venture capital may not be the best match for a company growing at that rate.

Three other ways to fund growth

If your growth sits below the venture range, you still have options, and some of them keep more of the company in your hands. Three are worth a serious look. They work best in combination with a clear view of your unit economics, so it helps to know your payback period and your retention before you approach any of them.

The first is revenue from customers. Raise prices, prepay by selling annual plans upfront, and grow from your own cash. Annual prepayment is a particularly useful tool because it moves cash into the business at the start of the year instead of spreading it over twelve months. For illustration, if you sign a customer to a $12,000 annual plan and collect it upfront, you hold $12,000 on day one, where a monthly plan would give you $1,000 on day one.

The second is strategic investors from your industry. A company that might want to buy you someday can be a patient investor, because it values what you learn and build in addition to the financial return. The third is revenue-based financing. You borrow from firms like Founder Path or Capchase against your future revenue, pay it back from that revenue, and keep all of your equity.

• Revenue from customers. Raise prices, prepay, and sell annual plans upfront so your own customers fund your growth.
• Strategic investors. An industry company that may want to acquire you someday can invest with a longer time horizon than a typical fund.
• Revenue-based financing. Firms like Founder Path and Capchase lend against your future revenue, and you repay from that revenue without giving up equity.

Each path has trade-offs. Raising prices can slow new sales if you move too fast. Strategic investors can make other potential buyers nervous. Financing has to be repaid, so it works best when your revenue is predictable. Even so, all three let you keep control of the company while you keep growing.

Reading the data with a clear head

It is easy to see a table like this and feel behind. A better reaction is to ask what the data can and cannot tell you. It cannot tell you whether your market is large, whether your customers love the product, or whether your margins are healthy. It can only tell you how your growth rate compares with the fastest companies that investors are looking at today, and that comparison matters mostly if you plan to raise venture capital.

• Use it to pick a funding path. Your growth rate helps decide whether to approach venture firms or build around other sources of capital.
• Do not use it to judge your business. Profitability, retention, and customer love are separate measures, and many strong companies grow well below these medians.
• Revisit it each year. Benchmarks move quickly, so check where you stand against the latest data before any fundraise.

A founder who knows where they stand can negotiate from a better position, whichever path they choose.

What to do this week

Start with your own number. Take your ARR from twelve months ago and your ARR today, and work out your annual growth rate as a percentage. Then compare it with the table above for a company of your size. This takes ten minutes, and it tells you which conversation to have next: a fundraising conversation, a conversation with your customers about pricing and annual plans, or a conversation with a financing partner.

Whether you are growing at 700% a year or 70% a year, be grateful that you are growing, and focus on solving the problem better than anyone else in your industry. Customers pay for results, and a business that delivers them well tends to find the right kind of funding eventually.

If you are a SaaS CEO with $1 million or more in ARR, you are welcome to join our weekly mastermind at sasrise.com. We have both venture-backed and bootstrapped CEOs and founders in the community, so you will hear from people who have taken each path.