Why VCs aim for $100M revenue and a $1B+ market

Hi! I’m glad you’re here. You’ve made it to issue #40 of VC Demystified🪄.

My name’s Nicole - I’m a Principal at an early stage venture fund, and I know firsthand that VC can often be a black box. Breaking into the industry may feel daunting and resources can seem scarce and inaccessible. I wanted to put together a newsletter to give others the playbook I wish I had when I first started.

I’ve gotten to speak with some of you who have signed up for the 1×1 conversations with me over the last two weeks and it’s been incredible hearing about your journeys! Keep pushing forward 💪.

Today’s deep dive: The explanation of why VCs chase businesses in big markets with high revenue potential

^{My personal mission is to open as many doors as possible for other people and this newsletter is just one avenue to do that. As always, I will continue to post VC insights daily for free across my socials.}

The explanation of why VCs chase businesses in big markets with high revenue potential

Welcome back! In last week’s newsletter, we walked through how to build a revenue forecast model, discussing why $100M in annual revenue by Year 7–10 is a common VC benchmark for startups.

Today, we’ll expand on how that revenue target ties directly to market size — with real-world examples of large companies that remain a small slice of an even bigger pie.

Why $100M Revenue Matters for VCs

VCs typically invest in a startup with the assumption that they will be able to scale to $100M in revenue in 7-10 years. Here’s why:

• Higher Exit Outcomes
  VCs often apply revenue multiples at exit (e.g., 10×). A company that can reach $100M in annual revenue may exit at several hundred million dollars or even billions.

• Better Chances to “Return the Fund”
  VCs expect a few big winners to drive the bulk of their fund’s returns. Startups hitting $100M+ in revenue are best positioned to become these breakout successes.

Why a $1B Market Floor?

VCs also typically like to invest in startups building in large markets. After all, in order to build a big business, you need to be serving a big market.

• Realistic Market Share

  • If the total addressable market (TAM) is $500M and you’re aiming for $100M revenue, that’s 20% of the entire market — which is huge (and unrealistic) for a young company.

  • If the TAM is $1B, you need 10% to reach $100M — still tough, but not impossible.

  • If the TAM is $10B, you need 1% to reach $100M — much more probable.

• Avoiding Unrealistic Assumptions

  • VCs look for large markets so startups don’t have to achieve 20%+ of the entire space to become “venture-scale.”

  • Even capturing 5–10% of a $1B+ market can lead to meaningful revenue.

  • I’d say VCs like to see market share requirements under 5%, with 10% being the absolute max. Hence, the $1B market floor usually.

Real-World Examples: Big Revenues, Small Market Shares

Even the world’s most recognizable brands are often single-digit or teens as a percentage of their full global market.

There are VERY few companies that achieve more than 20%+ market share so most VCs don’t bank on that happening.

Let’s look at the 2024 Global Social Media Market as an example:

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