What would make your early-stage company venture-backable? Investors typically talk about three factors driving their decision making: team, product, and market. But there's an overriding component overlaying all three. That is, how much of a return your company can generate for investors when all three factors align as hoped. If that return isn't large enough, investors don't want in, according to Augustin Sayer of Newfund, a $300 million seed stage VC firm.

It's common to hear VCs make the sweeping statement that you need to show a path to growing revenues 1,000x, and valuations by 100x, to justify an investment. Sayer unpacked the details behind that hurdle in a series of LinkedIn posts.

Sayer's specific example imagines an SaaS company that raises a seed round at $3,000 in monthly revenues, and which will eventually exit with a valuation of 10x revenues. To justify a seed investment of $1 million at a $4 million valuation, he suggests, a company would need to show a path to achieving $72 million in annual revenue by year 10 after the seed investment. The reality for your firm could vary depending on the standard multiple applied in valuations for your type of company (which VCs and some fellow founders should be able to tell you), some specifics of your path to growth, and the details behind your fundraising. But Sayer's projections are largely consistent with the overall industry assumption that VCs are looking for potential unicorns when making an investment.

The goal for a VC investing in your company is the potential to "return the fund," which means generate an exit that equals the overall size of the fund. For a fund making 100 investments, the hope is that a few of them will generate a return equal to the total size of the fund to make up for the fact that the vast majority of seed stage investments will never generate a profitable exit. Sayer shows that a $100 million fund making $1 million seed investments at $4 million valuations will have to account for the likelihood of 20 percent dilution in each of two subsequent funding rounds, meaning that the seed fund will want to see an exit equivalent to 144x the valuation at the seed stage investment.

So if you're trying to get seed funding, know that VCs will come to meetings with you already having done this math. And they'll expect you to show that you're aware of the calculations -- and have a plan to generate these returns for their funds.