Editor’s note: This post was originally published in November 2016 and has been updated with latest data for accuracy in November 2019.

Building a startup into a sustainable business requires multiple years of commitment. But how do founders see this roadmap? When do we expect the company to be generating revenues? How steep should the proverbial hockey stick be?

Creating and presenting revenue forecasts to investors is always tricky. Too high and they will not be believed, too conservative they will lower the interest of the other party.

The lack of knowledge on how founders see the future stems out of the little data about startups financial projections. Equidam, through its valuation platform, took into account the financial projections for a sample of more than 25,000 early stage ventures across the globe. Companies providing forecasts have an intrinsic incentive in being accurate one possible, receiving a fair valuation.

Benchmarks to estimate the growth rate for startups

Forecasting revenues really comes down to a growth rate. No matter if the company starts from scratch or not, the final outcome is the growth rate and the argumentation that makes it achievable.

In our analysis, we look at the latest year of financials (YTD) plus the next three years of forecasted revenues. From these, we are able to study the annual revenue growth coefficients for the upcoming 3 years.

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The average company forecasts a growth rate of 178% in revenues for their first year, 100% for the second, and 71% for the third.

This means that a company that grossed $500.000 Year to Date (YTD) will forecast $1.390.000 for the next year, $2.780.000 for the following and $4.753.800 for the third one.

Growth rates for startups however vary widely by industry, country, and stage of development of the venture. Companies that start from scratch will of course find it easier to grow their revenues at higher percentage rates. One of the reasons for it is that a smaller number is easier to grow compared to a large one.

On top, different sectors have different setup times, adoption speed, sales cycles and market opportunities. Finally, countries have different home-market sizes, access to funding and talent etc.

To benchmark the companies against the size factor, we divided them into 2 classes of YTD revenues: companies between $50.000 and $250.000 in starting annual revenues compose the “small” group, and above $250k the “large”.

In the small companies subset the country leading for projected growth is by far India with 970% on the first year and followed by Australia with 400%. The companies in European union are forecasting a higher growth than the one of United states and Canada in all the years; India and Australia in the third year show a more similar behavior to their peers.

The large group tells a different story. The growth rate projected by large companies is structurally slower than the one projected by smaller companies.

In the first year Australian companies are the one projecting a higher growth, followed by the United states. Indian large companies instead are the one projecting a lower growth in the first year with 60%. The last year seems to be uniform among all the countries except for Canadian companies which are projecting to grow slower than their peers.

The sector with the highest growth expectations is …

What about different sectors then?

The sector that projects the highest growth rates is Consumer products, with a wobbling 376% average growth in the first year, 119% the following one, and 113% during the third, while the industry projecting a slower growth is Industrial and Commercial Services with 108% the first year, 66% the second and 61% the third. This is supporting the general characteristics of the two industries, Consumer Products have a larger potential, a larger total market, and if they display strong competitive advantages, on average an opportunity skewed towards large returns.

Among companies in the Small class, Cyclical Consumer Products has the leading projected growth in all the years. Banking instead has the lower projected growth in the first two projected years, probably due to the high investments required by the industry, but gaining the second highest result in the third year with around 100% growth.

In general, Consumer Products is the industry forecasting a higher growth in large companies as well, throughout all the projected years. The leading industry in the first year is Banking and Investments Services with 161%, followed by Consumer Products with 151%. In the last year all the industries tend to project similar growth rates, around 50%, but Consumer Products still forecasts more than 100% growth rate.

Comparison with 2016: increased optimism

In general, the expected growth by entrepreneurs grew from 2016. A previous analysis conducted in 2016 with the same methodology showed revenue growth rates that were respectively 120%, 82% and 60% (compared to 178%, 100%, and 71%), this shows more a more positive outlook by founders for the future.

India is still the country with highest growth expectations for small companies, while the projected growth for United States and Europe have a more similar behavior in large companies to the ones in 2016. Consumer Products are still the fastest growing industry while Financial Services reduced significantly the projected growth.

About The Data

The data used in this article comes from the Equidam database. Equidam is the pioneer in online automated valuation for startups and private companies. As part of its activity, Equidam collects financial projection data from users, that can never be shared unless aggregated, and uses it to accomplish its mission of increasing valuation objectivity and accessibility.

The dataset surveys more than 25,000 companies in 90 countries, spanning from very early stage and pre-revenues startups to VC backed or more traditional companies.