7 Reasons You May Not Want Venture Capital material minds
Aug 07, 2015
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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