only six of the 28 $100M companies he interviewed took venture capital. also interesting: "of the 28 entrepreneurs, Rao found that 64 percent had sales experience. They also had accounting and financial management skills, as well as an understanding of the value of their products, which led to higher profits."
A 32% failure rate among venture-funded enterprises sounds wildly low. I'm guessing his data is biased; for instance, he may be over-weighting companies that receive multiple rounds of funding. His data may also count any acquisition as "success"; in fact, most acquisitions aren't (many don't even return investor capital) --- boards often manage to structure wind-downs as buyouts for the sake of image.
I'd be shocked to learn that that failure rate for A-round -funded companies was lower than 60%, where "failure" means "liquidity event that does not beat break-even for investors".
Having been founded and been involved with multiple VC-funded companies: to my mind, the worst thing about VC is that it delays the inevitable. If you can't sell the minimum viable product, you won't sell the 1.0 release. If your minimum viable product requires VC, it isn't minimal. All VC does then is rob you of 1-2 of the most productive years of your life. It creates an illusory high-stakes effort with no payout. It hides the "hustle" part of entrepreneurship (or, worse, outsources it to hired-gun m-teams); if you have hustle, you can get to 1.0 without VC, and if you don't, you fail anyways.
I'm new to startup but I have been to some meetups and breakfasts. Few things I heard,
1. don't take VC money
2. raise VC money when you don't need it
3. if you really need the money by ... or else ..., then you should quit and get a real job
My instincts agree with his basic point, and there is probably much to learn from the individual companies he has studied.
However, the numbers are totally useless. He has only profiled companies from Minnesota, and many of them are over 40 years old. His data may just as well be pointing to differences in availability of venture capital over space and time.
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[ 0.20 ms ] story [ 20.0 ms ] threadI'd be shocked to learn that that failure rate for A-round -funded companies was lower than 60%, where "failure" means "liquidity event that does not beat break-even for investors".
Having been founded and been involved with multiple VC-funded companies: to my mind, the worst thing about VC is that it delays the inevitable. If you can't sell the minimum viable product, you won't sell the 1.0 release. If your minimum viable product requires VC, it isn't minimal. All VC does then is rob you of 1-2 of the most productive years of your life. It creates an illusory high-stakes effort with no payout. It hides the "hustle" part of entrepreneurship (or, worse, outsources it to hired-gun m-teams); if you have hustle, you can get to 1.0 without VC, and if you don't, you fail anyways.
However, the numbers are totally useless. He has only profiled companies from Minnesota, and many of them are over 40 years old. His data may just as well be pointing to differences in availability of venture capital over space and time.