I read two terrific articles this month that summarized venture capital trends over the last several years. The first was Pitchbook’s 2016 VC Valuations Report and the second was CB Insights’s Venture Capital Funnel. They are a must read for anyone thinking about going down the venture capital route, in terms of financing their growth. Read together, they help you better understand what you can expect along the way. Below is my summary of these two articles that are most relevant to you.
Starting with the CB Insights data, they looked at 1,098 companies that raised seed stage capital between 2008 and 2010, and then tracked the outcome of those companies over the following years. Approximately 46% raised a following Series A, 28% a Series B, 14% a Series C, 6% a Series D and 2% a Series E round. And, of this group, only 28% of them got to an M&A exit for their investors. And, of those exits, 71% where under $50MM, 10% were $50-$100MM, 8% were $100-$200MM, 6% were $200-$500MM, 3% were $500MM-$1BN and only 2% were over $1BN.
So, what’s the conclusion from this data. Entrepreneurs think they have the best idea in the world and they are on their way to building the next unicorn level company. But, only 1% do. So, know going into the process, that there is a big drop off from one step of your growth to the next, with a lot of headwind along the way. The odds to getting to a huge payday is very low. And, the odds to getting to any exit are not great, with…