I recently got sent a report in advance by CB Insights on the state of venture capital investments and the people dimension behind the deals and dollars.
It’s the first time they’ve done this report because it’s well understood that `Vulture Capitalists,’ as they’re sometimes called, are a critical lever in the United States (and the rest of the world!) to spur innovation, entrepreneurship and economic growth.
You often hear and read that what really gets venture capitalists excited about the young, emerging, and often unproven companies in which they invest is “the team” or “the founders.”
Yes, it’s likely that YOU are the key ingredient.
Who you are is often more important than what you’re doing. Wow them with your sales pitch, energy and drive and you may receive that million dollars your company needs to grow.
In Part 1 of the Venture Capital Human Capital report, CB Insights (a New York-based company) looks atthree characteristics related to founders of venture-backed companies, specifically: race, age and experience, and the number of founders per company. They tracked 185 ‘Seed VC’ and ‘Series A’ investments to get these results.
I’m looking forward to Part 2 of the report that will look at the gender and educational background/pedigree of founders.
So what did I glean from this report that you may find beneficial or just plain interesting?
Here’s my summary:
It’s never too late to start your own business
To my delight the majority of founders were aged 35-44 years (44%) and not these young wonder kids that always seem to be in the news like Mark Zuckerberg of Facebook.
That gives hope to those of you who say you should have started in your 20s – no more excuses, just do it. That said, the26-34 year-olds seem to do better at receiving higher amounts of funding.
White supremacy still reigns in the US
Unsurprisingly (say in a sarcastic tone), the majority of people founding businesses were white. Interestingly, though, all Asian-founding teams are far more successful at raising money ($4.0 million is the average investment) vs all whites ($2.2 million).
Does that mean they create better business models, sell themselves better or are more skilled negotiators?
Experience counts for something
In this study 39% of founders were formerly CEOs/Founders, which supports the idea that VCs back experience. I’ve heard this a lot from investors I’ve spoken to.
Many will only invest in someone who’s tried and failed with a previous business before they’ll fork out their cash, because they want to know that you’ve learned from your failures. So go ahead and fail. It could earn you more in the long run – seriously.
Outside of that, common previous roles were either Directors or VPs and usually in Sales/Marketing and Product Management/Development.
Going it alone is an option
I’m personally more in favour of having your own business, but expanding your offering through strategic partnerships and collaborations.
The results of this report showed that majority of companies have two or more founders, although over a third are led by one founder. Also, the more founders you have doesn’t necessarily mean you’ll get more funding.
Location, Location, Location
So even if you’re not a real estate owner, it does pay to choose where you will set up your business if you’re in the US or heading there. New York and California both favor founding duos, while Massachusetts founders going solo do well.
You can read the entire report here:
So, were the results surprising or did I fail to tell you anything new? Let me know your thoughts on this.