When it comes to raising money for your project or business, understanding the difference between run rate and total revenue is essential. Knowing why forecasted growth rates can be unreliable and why the most recent growth matters more than overall growth is key to making informed decisions about how to secure a Series A funding round. Let’s take a closer look at each of these topics and explore how they impact your funding round.
Run Rate vs. Total Revenue
A run rate is an estimate of what your revenue will be over a certain period of time, based on current performance. This term is often used when it comes to Series A funding rounds, as venture capitalists want to know what kind of return they will get on their investment. On the other hand, total revenue is simply the sum of all money earned over a certain period of time—it does not take into account any future expected earnings.
Why Forecasted Growth Rates Are Unreliable
Forecasting future growth rates can be tricky because there are so many variables that are hard to predict accurately. While past performance can give you an indication of where you might end up in terms of total revenue for a particular period, predicting exact figures for future periods can be difficult due to market fluctuations and other factors that may affect your income.
Why The Most Recent Growth Matters More Than Overall Growth
When it comes to securing a Series A funding round, the most recent growth tends to matter more than overall growth. This means that if your business has had significant increases in revenue over shorter periods—for example, month-over-month or quarter-over-quarter—that will carry more weight with investors than if you have had steady but slower growth overall. This makes sense because investors want to know that you are continuing to grow quickly and sustainably before they commit any funds.
Raising money for your project or business requires a thorough understanding of how run rate and total revenue differ in relation to Series A funding rounds, why forecasted growth rates can be unreliable, and why the most recent growth matters more than overall growth when considering investments from venture capitalists. By taking these three factors into account when preparing for your funding round, you can better ensure that you make informed decisions that will best benefit your project or business moving forward.