5 Statistics on Fundraising from VCs

I thought it’d be fun & very informative to throw out some real facts and statistics on Entrepreneurs that are successful with fundraising from Venture Capitalists.  Enjoy!

How long will it take me to secure my first venture capital round?

I wanted to address this first, because it’s the question on everyone’s mind.  And I was shocked to find out..

  • An average of 37 months for an Entrepreneur who hasn’t fundraised before.
  • Those who have done it before seem to be getting a little better, but still coming in at 21 months.

Why is this so long?  Well, ever heard an Entrepreneur say “I spotted that years ago!”.  They probably did.  Harvard attributes part of the delay in the Entrepreneur’s ability to spot market opportunities years before they ever exist. The Entrepreneur knows it is coming, but until the rest of the world begins to catch up…it’s not time to start fundraising.

What is the Average Pre-Money Valuation?

  • The average pre-money valuation is 16 million for first time Entrepreneurs.
  • Ironically, the average pre-money valuation for serial Entrepreneurs is 12.3 million.

The difference in valuations is likely caused by the fact that serial Entrepreneurs fundraise faster than first time Entrepreneurs, resulting in a lower pre-cash valuation.

Success of high growth ventures fundraising in the early stage:

  • 45% of Entrepreneur’s ventures are successful in fundraising from early stage venture capitalists.
  • 60% of Serial Entrepreneur’s ventures are successful in fundraising from early stage venture capitalists.

My gut is telling me this is wrong, but this is what the research states.  I think there is likely other variables here also, such as Entrepreneurs and startups that actually qualify for early stage venture capital.

If anyone can find additional research on that number, please leave it below in the comments!

Do Venture Capitalists prefer a Newbie Entrepreneur or a Serial Entrepreneur?

It depends.  Here is the choices in order of VC preference:

  • First preference is Serial Entrepreneurs that have previously failed.
  • Second preference is Newbie Entrepreneurs.
  • Last preference is Successful Entrepreneurs.

Conclusion?  Entrepreneurs that have learned by failures are the most worthy of venture capitalists.  But very odd considering…

  • Serial Entrepreneurs that have previously failed..their ventures have a 20% chance of high success.
  • Newbie Entrepreneurs aren’t behind much, at 18%.
  • But the successful Serial Entrepreneurs…have the highest success rate in their ventures: 30%

So why don’t venture capitalists invest in successful serial Entrepreneurs more often?

I don’t believe this is really of question over whether or not the VC wants the serial Entrepreneur.  It’s more of a question of if the serial Entrepreneur wants the VC. ;)

What is the most desired skill venture capitalists look for in their Entrepreneurs?

Ever heard Venture capitalists say “the flavor of the month or year”?  The one skill that breeds success above all else is..

MARKET TIMING ABILITY.

According to the Harvard paper:

According to the Harvard paper, “The industry-year success rate in the first venture is the best predictor of success in the subsequent venture. Entrepreneurs who succeeded by investing in a good industry and year (e.g., computers in 1983) are far more likely to succeed in their subsequent ventures than those who succeeded by doing better than other firms founded in the same industry and year (e.g., succeeding in computers in 1985).

“More importantly, entrepreneurs who invest in a good industry-year are more likely to invest in a good industry-year in their next ventures, even after controlling for differences in overall success rates across industries. Thus, it appears that market timing ability is an attribute of entrepreneurs.”

Some good stuff to think about here!  Maybe we should trust our instincts a little more often?