Many thanks to Sameer Al-Sakran for compiling the numbers.
Category Started Funded %F ∑Raised TC Posts Advertising 3972 631 16 $8B 996 Biotech 2787 1770 64 $42B 43 Cleantech 1302 719 55 $33B 192 Consulting 3330 176 5 $2B 444 Ecommerce 5383 868 16 $10B 1587 Education 522 60 11 $½B 90 Enterprise 2389 652 27 $10B 993 Games video 3992 910 23 $16B 3625 Hardware 1726 613 36 $12B 3274 Legal 306 23 8 $0.1B 16 Mobile 4101 1099 27 $20B 4263 Network hosting 1782 340 19 $8B 1375 Other 33068 2022 6 $24B 2501 Public relations 2531 468 7 $7B 765 Search 1437 226 16 $2½B 4625 Security 710 218 31 $4B 135 Semiconductor 620 381 61 $9B 27 Software 12405 3039 25 $33B 3733 Web 12830 2401 19 $29B 14356 Category Acqu %A IPOs %I % on TC Avg Funding Advertising 221 5½ 15 ½ 6½ $2M Biotech 332 12 143 5 ½ $15M Cleantech 72 5½ 39 3 5½ $25M Consulting 107 3 15 ½ 1½ $½M Ecommerce 188 3½ 16 ⅓ 12½ $5M Education 4 ¾ 1 ¼ 3½ $1M Enterprise 257 11 41 1½ 9 $4M Games video 285 7 30 ¾ 11 $4M Hardware 139 8 81 4½ 6 $7M Legal 2 ½ 0 0 1 $⅓M Mobile 275 6½ 34 1 13 $5M Network hosting 154 8½ 22 1 8 $4½M Other 2325 7 101 ½ 2½ $½M Public relations 171 18½ 32 1½ 19 $3M Search 57 4 4 ¼ 10 $2M Security 96 13½ 12 2 7 $6M Semiconductor 119 19 51 8 3 $15M Software 1101 9 110 1 5 $2½M Web 827 6½ 57 ½ 14 $2½M
My favourite number here is the number of companies started. 12,830 Web companies started up and got a Crunchbase profile. Forget about the Facebooks and Instagrams’ buyout package to the founder, that’s the max of the sample. If you’re looking at the lower-50% CVaR, it may be $0 or less.
My second favourite number is that, even among the crème-de-la-crème who play these games, they have less than one-in-five chance of either acquisition or IPO.
As you might expect, stuff that’s harder to do and takes more technical expertise (semiconductors, hardware, biotech/cleantech) has a higher rate of success than stuff that can be learned in a year or two by >1% of the population (build a Rails app!). Software seems to be at a disadvantage except enterprise has a one-in-ten acquisition rate, which is quite a gamble with your life but counts as good odds in this low-probability game.
On the other hand, the software companies are much cheaper to start than cleantech/biotech (cleantech has highest avg funding). Web companies are 1 order of magnitude cheaper to start.
P.R. is also a standout, I’m guessing the 18% acquisition rate is acquihires (Sameer Al-Sakhran alluded to this). But still, this reveals that public relations must be an important part of the SF business ecosystem, or else the market is mispricing PR. But I have enough stereotypes about geeks who can’t negotiate that I can explain away the high valuation of smiley PR folks filling the niche none of the cool hackers want to talk about.
Of course, these are “running tallies” not “final fail/success rates”. It would be good to know
- for the subset that exited, what’s the year of founding and the year of exit?
- for the subset that didn’t exit, what’s the year of founding?
That might help us guess at what companies have been abandoned. (Did a lot of Web companies–maybe unfunded ones–make Crunchbase profiles for themselves to put themselves on display and then quit after a few months?) It would also give a more precise idea of the number of years it takes to develop a company to IPO-ability. (“Eating Ramen” is expected for a few months, but what about if it’s half a decade?)
If I get around to doing my own scrape, I’ll add those things–as well as some ggplots of distributions for some parameters. I’d also like to compare some Crunch-based estimates of success rates with YCombinator and TechStars, etc. That would be hard because of selection effects but still nice to see a side-by-side.
In the meantime, big thanks to Sameer for doing it first.
(Source: TechCrunch)
