Six Interesting Stats About Startup Success

The startup world is full of interesting facts and characters. Some reach fame and fortune, some do not. But how they get there is often in unique ways. But there are common strands across startup’s which is why these stats are some useful to look at. There are many preconceptions in the startup space that I will be challenging today with some of these thought-provoking statistics.

Failure Increases Chances of Success

Entrepreneurs who succeeded in a prior venture have a 30% chance of succeeding in their next venture. First-time entrepreneurs only have an 18% chance of succeeding. Surprisingly, those who have previously failed have a 20% chance of succeeding.

So, it seems that you are better off having started a company and having failed, then not having started one at all. One could theorise that this is true because of the experience gained and those lessons that carry through to the next business venture. If you are thinking about kicking off a startup, it seems that you should just go ahead and give it a go, even if you are going to fail. Getting the first failure out of the way will help you with the next attempt.

VCs Do Invest in the People

Failed serial entrepreneurs are more likely than their successful counterparts to get funding from the same venture capital firm that financed their first ventures.

At first glance, this makes no sense, but I can see why they would. VCs are “relationship” investors and I can see how they might lean more towards the entrepreneur they know, even if it did not go well the first time, rather than take a chance on a successful serial entrepreneur they do not know. On the other hand, if I were a limited partner and had a choice of VCs, I think I would pick the candidate that has a proven track record of success, but that is just me.

Serial Entrepreneurs More Likely to Raise Funding

Entrepreneurs are significantly more likely to gain first-round funding at an early stage (60% of the time) if this is their second or subsequent venture than first-time entrepreneurs (which receive similar investments around 45% of the time).

Though the numbers seem a little high (this could be because they are on the topic of funding, not just VC funding), this makes sense. Nothing to talk about here.

First-Timers and Non-Successes Benefit More from VC Expertise

First-time entrepreneurs have a 17.6% chance of getting the funding they need from an experienced VC firm and an 11.7% chance of finding the funding they want from less experienced VC firms. Failed entrepreneurs who are funded by the experienced VC firms have a 22.1% chance of finding success compared to a 14.7% chance of success when they are funded by their less experienced counterparts. So, first time entrepreneurs and failed entrepreneurs are more likely to benefit from VC firm expertise based on these statistics.

Better VCs Provide Better Deals

Venture capital firms experience positively seems to correlate with pre-money valuation. More experienced firms pay more for new ventures, possibly because they have a higher rate of success. Probably because of all the industry connections they have built through their experience in your industry that improves those odds. This seems like one more reason to pick the top-tier, experienced VC (situation permitting). Overall, you will probably get a better deal. Not only is this “intelligent money”, but it is also more money too.

Serial Entrepreneurs Get Better Terms

Repeat entrepreneurs receive more favourable terms for vesting, board structure, and liquidation rights, but do not receive greater equity ownership percentages. So, though serial entrepreneurs may extract more value from VCs, this increase in value is in the non-price terms of the investment.

Overall, their statistics, used correctly could help some bright young startup to make the most of their odds. Doing everything you can to improve your chances of success in the early days of a startup is critical to success. With the success rates already as low as they are we should do everything we can to improve our likelihood of success.