Once You Take VC Money You Are Building for Many Years

Founders, be aware: once you take VC money, you'll be running that startup for many years 𝘄𝗵𝗲𝘁𝗵𝗲𝗿 𝗼𝗿 𝗻𝗼𝘁 𝗶𝘁'𝘀 𝗮 𝘀𝘂𝗰𝗰𝗲𝘀𝘀.

We've all heard the stat that "9 out of 10 startups fail". But how long does each failure take?

Many startups are founded, attempt to get VC backing, remain unfunded, and then shut down. That all happens in the pre-seed phase. Lots of quick bursts in the idea stage.

But once you raise a seed round, startups fade much more slowly.

𝗛𝗼𝘄 𝗧𝗼 𝗥𝗲𝗮𝗱 𝗧𝗵𝗲 𝗖𝗵𝗮𝗿𝘁

Each row in the graphic below represents a cohort of companies that raised their seed rounds in a given year and quarter. The x-axis shows the time (in 6 month increments) from the date of that seed round. Percentage indicates how many of the original group is still alive.

𝗞𝗲𝘆 𝗙𝗶𝗻𝗱𝗶𝗻𝗴𝘀

• After 2 years, 90% of seed startups are still kicking. ~25% of the original group has made it to Series A by then.

• After 4 years, 78% of seed startups are still kicking (~45% or so have raised another round while ~30% are stuck at seed). 22% have closed down.

• The rate of closures is quite sensitive to macro conditions. The swan dive in startup funding that happened right as Covid hit affected many companies that had just raised their seed rounds, even though startups as a whole popped back very quickly.

This is a major chunk of your life devoted to something that has only a small chance of working - it's why we have so much respect for founders taking that risk anyway 🙏

#startups #founders #fundraising #venturecapital

Full recap of what happened to VC-backed startups in 2024 available for free here: https://lnkd.in/gjXdPvjj