A list of interesting statistical facts - based on entries from my Telegram channel . The results of various studies described below once changed my understanding of venture capital investments and the startup environment. I hope these observations will be useful for you as well. For you, who look at the field of capital from the side of the founders.
1. The startup industry is disappearing amid globalization
Young companies less than two years old accounted for 13% of all US business in 1985, and in 2014 their share was already at the level of 8%. More importantly, the percentage of private sector employees working for these young companies has almost halved over the same time period.
Every year it becomes more and more difficult to compete for personnel with huge corporations.. In Quartz this phenomenon in more detail. I understand that the statistics are given only for the “most free”, but I am convinced that to one degree or another this problem affects each of the capitalist countries.
2. Half of all venture investments don't pay off.
At the same time, only 6% of all transactions give 60% of the total return, Ben Evans of Andreessen Horowitz. Subject The cash flow doesn't end there. Thus, 1,2% of all venture deals 25% of all venture dollars in 2018.
Why is it important? Because founders need to think like investors. And not only when they plan to raise funds, but also when they first thought about implementing an idea. Although it is very difficult to think in such categories - only the best investment funds in the world 100 x on the best companies in the world.
Dreaming, of course, is not harmful, but a more or less acceptable bar is 20% IRR or three x. Look at the growth rates, read something about the principles of valuation of startups by venture capitalists. Is the required rate of return realistic for your project?
3. The volume and number of seed investments are decreasing
In 2013, the share of transactions at the seed stage in the total volume of US venture capital was 36%, and in 2018 this figure up to 25%, although the median seed capital in percentage terms increased more than in other rounds. There is also data from Crunchbase, according to which the number of investments not exceeding $1 million over the past five years almost twice.
Today it is much more difficult to attract the attention of an investor to a project at an early stage. Large - more, small - less, as Marx bequeathed.
4. The interval between funding rounds is two years
This fact based on data on venture deals for 18 years since the beginning of the two thousandth. Over the years, there has been a steady trend in the rate of capital attraction. Fast growing unicorns - variance. Knowing about it think about the budget and be careful with expenses, especially if you have already closed the round at an early stage of funding.
After all, burning existing funds is the second most common startup crash. And this is not about the fact that a loss-making business has used up all the money it has. This is about cases of closing projects with a successful business model, when the founders were carried away by growth and hoped to raise new funds soon.
5. Acquisition is the most likely path to success
97% exits with M&A and only 3% with IPO. Exiting is very important because that's when you, your team and your investors get paid. Venture capitalists live by exits, but the founders continue to dream of unicorns, avoiding any thought of selling their offspring.
But one day it may be too late. Many entrepreneurs miss their opportunity to withdraw money, although the timely decision to sell the business may be the best decision. By the way, most exits early stages: 25% at seed, 44% before round B.
6. Lack of demand in the market is the main reason why startups fail.
CB Insights analysts conducted a survey among the founders of closed startups and a list of the 20 most common reasons why startups fail. I recommend that you familiarize yourself with all of them, but here I will mention the main one - the lack of demand in the market.
Entrepreneurs very often solve problems that are interesting for them to solve, and do not serve the needs of the market. Fall out of love with your product, don't invent problems, test hypotheses. Your empirical experience is not statistics, only numbers can be objective. At this point, I can't help but share for SaaS business from Stripe.
7. The B2C2B segment is bigger than it looks
For every dollar that companies spend buying IT solutions, there is an additional 40 cents spent on direct acquisitions by senior management. The bottom line is that B2B SaaS can be focused not only on corporate sales, but also on a separate segment of B2C2B (business-to-consumer-to-business).
And this software procurement model is typical for most key departments in companies. Details can be found in venture capitalist Tomasz Tunguz from Redpoint "Why bottoms up selling is a fundamental shift in SaaS".
8. Lower price is a bad competitive advantage
Many are convinced that if they can offer a lower price, they will be successful. But the days of bazaars are long gone. Customer service is the cornerstone of any product, and there are many good articles that support this thesis. Moreover, while you are trying to lower the price, your competitor can raise it, thereby increasing its revenue.
There is a lovely from ESPN, which lost 13 million of its subscribers after a 54% price hike. And the paradox here is that ESPN's revenue also increased, and by almost the same 54%. Maybe you should raise your price to start earning more? By the way, more income is one of the best competitive advantages.
9. The Pareto Law applies to advertising revenue
According to the results analytics company Soomla, 20% of users view 40% of ads and occupy 80% of advertising revenue. This conclusion is based on over two billion impressions across 25 apps in over 200 countries.
And among the two billion Facebook users, residents of the United States and Canada only 11,5%, but they bring 48,7% of income. ARPU in these countries is $21,20, while in Asia it is only $2,27. It turns out that it is better to have one user from North America than nine from India. Or vice versa - it all depends on the costs of attracting them.
10. There are only a few thousand iOS apps in the Millionaires Club.
There are more than two million available apps in the App Store and only 2857 of them generate more than $1 million a year, according to App Annie. It turns out that on an apple display case the probability of a big success is approximately 0.3%. And we do not know how many companies are behind these applications, but it is obvious that there are even fewer of them.
I will also emphasize that we are talking about annual revenue, and not about net profit. That is, some of these applications may be unprofitable for their owners. Under such circumstances, vivid stories about the implementation of the idea and the power of Apple's viral machine are more like luck than a planned result.
11. Age increases the likelihood of success.
В calculated that the probability of creating a successful company in 40 years is twice as high as in 25 years. Moreover, the average age of the 2,7 million founders in their dataset is 41,9 years. However, great success is more often to young entrepreneurs.
The older you get, the more cautious you make decisions, but the more resolutely you refuse risky ideas. In other words, the older you are, the less your entrepreneurial ambitions, but the higher your chances of success. This thesis is also confirmed by another independent from Nexit Ventures.
12. You don't need a co-founder
Contrary to popular belief that luck often follows organizations with multiple founders, The vast majority of exiting startups had a single founder, according to Crunch base.
But purely unicorn tells us that only 20% of them were founded by one person. But is it worth taking into account this value, when every billion-dollar company is a unique and inimitable story? In addition, a large statistical sample is always more accurate. The myth is broken.
13. Everything is in your hands ...
More than half of billion-dollar companies from the USA emigrants. And this means that no matter where you are, you have a chance to succeed. All in your hands… must want to buy. Investors - share. Customers are the product. The main thing is to sell.
40% of European AI startups actually this technology, but attract 15% more money. The main thing is revenue. 83% of companies that went public in 2018 , and the value of unprofitable companies after listing grows more than profitable ones. Money is where the risks are, risks are where the venture is. Sell. Revenue. Capital.
Many thanks to everyone for your attention. And special thanks to the investment director of Da Vinci Capital for their help in editing this material. If you are interested in such arguments that do not fit into the format of a full-fledged article, then subscribe to .
Source: habr.com