The Markets Are Great . . . but Venture Outcomes Haven’t Changed Much
A few years back I blogged about the hard data behind venture outcomes and the challenge of creating a venture portfolio that produces strong returns. That blog post – which turned into one of my most read posts ever – grew out of a study done by Correlation Ventures showing the distribution of outcomes across over 21,000 financings during the years 2004-2013 as well as some of my own observations. The Correlation study produced a lot of interesting data and showed that the typical “1/3, 1/3, 1/3” model that many VCs talk about was significantly more optimistic than the reality of typical venture returns. The vast majority (almost 2/3rds) of venture financings fail to return capital. And only about 4% produce a return of greater than 10x. Pretty humbling. Here’s the graphic I used from that post: …
September 20, 2019· 2 min read
How Well Do Founders Do in Venture-Backed Exits?
A few years ago I wrote two posts – Venture Outcomes are Even More Skewed Than You Think, and Some More Data On Venture Outcomes – that challenged the mythology that only 1/3 of venture-backed deals failed and showed just how rare large (10x and greater) venture returns really are. I think the sharpness of the curve surprised a lot of people and contributed to a bunch of discussion at the time around just how rare “venture outcomes” really were. Not surprisingly, I was looking at the data through the lens of an investor and in so doing was only focused on how well investors fared in company exits (as a side note, I’m hoping to update these data now that a few more years of a bull market are behind us). …
September 9, 2019· 3 min read
Venture Returns by Sector
Readers of this blog know that I love sharing data from Correlation Ventures (they have a pretty extensive database of venture deals and venture outcomes and love to post share trends from time to time) – see two great examples using their data here and here from this blog. A few weeks ago they sent around the chart below which I thought was interesting to share. I’m not surprised at the non-pattern here – as an industry venture is very stochastic. Venture returns are all over the map, really underscoring the need to time diversify venture investing and venture exiting, to the extent to which the latter can be controlled (this graph doesn’t show the date of initial investment, which would be a great new cut at the data – I’ve asked Correlation if they could re-run the analysis that way and will post it if I can get it). Also interesting to note the blip of “Consumer” in 2013 as well as what appears to be a bit of a countercyclical trend in healthcare. Sometimes there are interesting tidbits to be taken from seemingly chaotic data. …
May 9, 2016· 1 min read