How to Overcome the ARR Question

The goalposts for companies Seed-Series C looking to raise has changed tremendously.

Investors now expect and demand more in every aspect of your business for them to put up the capital required to fund your round properly.

For many founders, “ARR” is not where they would like it to be, and they think it will kill any sort of investor conversation they’re having if brought up.

But it doesn’t have to.

Here is how we recommend to tight-walk the “revenue” question, and how to compensate for it properly:

What Investors Are Really Asking

When investors ask about ARR, they’re usually not actually focused on the dollars in your bank account.

They’re using it as shorthand to test for something much bigger: inevitability.

They want to know whether customers truly want what you’re building, whether your solution is capable of scaling in a repeatable way, and whether you’re creating the kind of momentum that makes your success feel inevitable.

Revenue is one way to signal inevitability, but it’s not the only way.

If your ARR isn’t strong yet, you need to bring other proof-points into the room that show the same thing just as convincingly.

What to Show Instead of ARR

There are several signals that matter as much - if not more - than early revenue.

• Pipeline Quality: signed letters of intent, enterprise pilots, and waitlists that demonstrate demand building ahead of revenue.

• Customer Engagement: retention rates, usage metrics, or NPS scores that prove customers who try your product stay with it.

• Market Validation: anchor logos, strategic partnerships, or regulatory approvals that make your position credible.

• Team Background: often underlooked, but show previous work experience, reputable advisory board members, previous exits, etc.

We have been able to make deals work where ARR was nowhere near normal “investing standards” because we simply built the story around other areas.

The team’s background, the size and adoptability of their TAM, distribution partners, etc.

Depending on your market, having adequate revenue will matter more in some industries than others, but 95% of the time there are other things you can do to build your story strongly without having $10M ARR.

If you’re raising Seed through Series C and your ARR isn’t where you’d like it, our job is to make the inevitability of your business undeniable - and connect you with the right capital groups in our network who will see it the same way.

If you’re interested in getting help with your raise, check out Breakout and we’d be happy to review your mandate to see if we can help.

Thanks for reading,

Ryan
Breakout Capital Group