July 2025
“Venture capital is unscalable. Production equals the time each partner has. Being ‘right’ doesn’t lead to superior performance if the consensus forecast is also right.”
– Bill Gurly, Benchmark
“Ideas are a dime a dozen. It’s the execution that’s really the important thing and you need really good people for that. Good people can change directions, but there are very, very few truly great people who can execute properly.”
– Arthur Rock, the first ever Venture Capitalist
There is a really excellent formula truism in technology investing that I’ve always liked called the Triple Triple Double Double Double or T2D3 for short. It was coined by Neeraj Agarwal from Battery Ventures when analysing the growth trajectory and growth rates of their own portfolio of startup investments that turned into unicorn companies worth over $1 billion in enterprise value. To be a company worth that in technology generally means having over $150 million per year in annual recurring revenue (ARR) and being valued at 7 times your revenue.
So what the T2D3 does is a formula or description of the revenue growth required to get to $150 million per year that results in becoming a unicorn company worth $1 billion. To illustrate the kind of growth that venture capital investors are looking for when they make investments. What it shows is that it doesn’t matter how long it takes to get to $2 million per year in ARR. But from that point, if you want to raise money and become a unicorn, you have to triple in revenue per year for 2 years, then double in revenue per year for 3 years.
What those numbers look like is if you have $2 million per year in revenue when you want to start to hyper grow. That turns into $6 million in year 1, the first triple. Which turns into $18 million in year 2, second triple. Which turns into $36 million in year 3, first double. Which turns into $72 million in year 4, second double. Which turns into $144 million in year 5, the fifth double. If you average these numbers out it roughly translates to a sustained compound growth rate of 10% month over month consistently for 5 years straight from a revenue base of $2 million ARR.
This is an extremely useful formula for several reasons that only just recently dawned on me but I think are very important. What this did is put hard numbers to this unknown factor about startups called growth. Everyone knows a startup has to grow quickly to get big but nobody has any real understanding of how fast that growth has to be for venture funds to be interested in funding it.
It answers the fundamental and age old question in startups of is my company venture fundable? Most businesses are not venture fundable because they’re not able to grow at this rate. If you don’t think you can grow at this rate, then the company likely isn’t venture fundable and the founders shouldn’t raise venture capital. Because that’s the growth rate for the return that the investors are looking for. Why? Because they’re making 20 bets knowing 19 will fail. So the 1 that succeeds has to get to scale to return the capital from the failed bets quickly.
You can still build a successful business that doesn’t grow at this rate, it just may not be suitable to raising venture capital. I for example don’t think any of my businesses can grow at that rate so I know deep down that my businesses should probably not raise venture money and is why I don’t. What the venture dollars do is compress time. You can be growing slower and compound and build a $1 billion dollar company over a few decades, which is an excellent outcome for founders and the world. But that also is not a venture fundable startup because the investors don’t just need a big return, they need it quickly.
Because their funds operate in 10 year life cycles where the venture firms have to find investments, make the investments, grow the businesses rapidly and then exit those investments to produce a 5X – 10X return for their investors all within 10 years. That’s hard to do and explains all the incentives and behaviours of venture firms. They’re not there to support average outcomes, the whole indsutry is built to support outlier exceptionalism.
This formula can become a sort of litmus test of whether or not to begin ingesting the rocket fuel that venture investment represents. If you think you can grow at this rate, wonderful. You have a venture fundable startup. Because while you’re growing at this rate, you’ll probably need to raise money many times and you’ll need their capital and support further along. Because growth consumes cash.
But it is dangerous to raise venture capital and not grow at this rate because by doing so you remove the number of options you have as a founder. The founders ownership of the business is buried underneath a liquidation preference stack from the investors, meaning that they get their money first if the company sells because they have to recover their investment. So if you don’t sell for a big number, the founders often get very little. But they knew that going in, by trying to T2D3, you’re trying to grow as fast as you can and convert your startup into a rocket ship.
You also don’t want to raise venture capital and be growing at much less than this rate because then the investors will orphan you, which is to stop providing additional capital and support until you do start growing. But you feel like you can’t grow until you get that capital and support. So you end up in a slow negative growth demoralising spiral. You’re not dead but as far as they’re concerned, you’re not alive either.
Because a VC is a person, it frees up their time to support their winners that are growing at this rate, they only have a fixed amount of time and they want to use that time to support their home runs to go bigger, not their base hits to land softly. What I think this implicitly says is actually not to raise money institutionally until you are growing at this rate for fear of being orphaned.
What this formula subtly answers is the other question of when you should raise venture capital. Well, when you’ve crossed $2 million in ARR of course. Because that’s when you need to start the T2D3 growth upswing which you need the VC money for to spend to start growing at that rate. The hallmark of venture capital funded businesses is that they’re growing extremely quickly. So if you’re not at $2 million ARR, then you’re probably too early to try to raise VC dollars.
But there are other types of investors that exist, angels and seed investors. They don’t do follow on investments and so there is absolutely no signaling risk to raising money from them if they don’t then invest more later. You can’t be orphaned by someone who is only ever going to write one cheque and a small one at that.
So the trajectory should be to raise money from angels and seed investors and use those funds to build a product and grow it to $2 million ARR, however long it takes to do so. The angels and seed investment dollars give you runway and time to figure out the product and business model. To try and fail and attempt new things. Until you’re at $2 million ARR, that’s the experimentation phase to find the product and business model and market demand that will unlock growth.
Why is it $2 million ARR? Well that’s the point where the companies in Neeraj’s analysis hit their breakout trajectory. I think what that says is shorthand for having product market fit. As in until you are at $2 million in ARR you don’t have product market fit. Once you are there, then you do. Because by that point you’ve probably figured most of it out. You’re probably already growing steadily.
You know what the product is, what the market looks like, who the customer is and how to acquire them. All you need now is extra dollars to scale up whatever it is you’re already doing at this point. The VC isn’t trying to help you figure out product market fit, they’re trying to help you grow once you already have figured out product market fit.
So what this T2D3 has secretly told us is the whole strategy and playbook for how to build unicorns. Raise money from angels and seed investors to figure out the product and grow it to $2 million ARR, which probably takes a couple years for most people and is the inflection point of deciding to change the marathon to a sprint. Then raise money from venture capitalists to achieve a specific growth rate, the triple triple double double double that will allow you to grow into a unicorn valuation in 5 years time.
It’s also told us when not to do it, if you don’t think you can grow at that rate, which will be most of us and most businesses, then we shouldn’t. So this provides the mental framework to think about this problem. We can be more informed and intentional about what model we’re implementing, which game we are playing with this company and our lives and whether or not we even want to play this game.