7 Reasons You May Not Want Venture Capital

7 Reasons You May Not Want Venture Capital

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First for the good news

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1500 companies get venture capital financing every year

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350 VC Backed companies are sold every year

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And 50 go public

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Now for the bad news

Of the 350 that are sold, only 26% get a return better than 4 times

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That means that only 12% of VC backed deals are successful.

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As a result, the VC industry performs worse than any other major index.

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And since returns are concentrated in a few firms about 85% of VCs lose money

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But while the VC firms lose money, their partners still make excellent money.

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The amount you raise in Seed and A rounds is inversely correlated with success

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Stats show that you’re not any better off starting a company and getting VC money that you are getting a regular job.

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So where does it work

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California startups raise 53% of the VC rounds raised

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And they get 60% of the exits

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But VC financing outside California is slowing to a crawl

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The top 10 funds in 2002 got 17% of the capital and in 2012 got 48% of the capital.

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They have a 14% lower cost of capital.

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And they have a portfolio of all the top performers

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So venture capital works in California

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But not well elsewhere

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Helping individuals, managers, and entrepreneurs improve strategy execution.

Charles Plant 416 458 4850 cplant (at) materialminds.com

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