Should VC-Backed Founders Be More Willing to Quit

Should VC-backed founders be more willing to quit?

So this is obviously not the usual Silicon Valley-speak. All anyone ever says is “never give up” and “prove all the doubters wrong”.

And sure, when it works it’s awesome.

But look at the data. In the absolute best years, at the peak of the boom times, about half of companies will get from Seed to Series A.

(And in more normal years that percentage will be lower).

So the question becomes: for how many years should you keep pushing the boulder up the hill?

It’s a strange paradox that we valorize failure in startups and yet we still frequently demand years and years of a founders life in a doomed venture.

I certainly don’t have the right answer here, but as the startup world seems to be turning faster and faster I find myself wondering about the talented folks continuing to put their shoulders into potentially broken wheels.

DATA FINDINGS

• Recent cohorts have lagged behind historical averages by quite a lot. Among companies that raised their seed round in 2022, only 17% or so have raised a Series A after two years.

• That "lag" could be explained in different ways. On the negative side, it could be that many companies are trying to raise their Series A and failing. On the positive, it could be that many raised seed and then tried to become profitable and not need to raise again. My instinct is that the former explanation accounts for most of the data.

• At this point I think it's fair to say the 2021 and early 2022 vintages are lost cohorts and will never truly catch up to graduation rates from prior years.

#startups #founders #failure #seed #SeriesA