Phillips and Kirchhoff (1989) find, using the 1976-1986 United States Establishment Longitudinal Microdata (USELM) files of the U.S. Small Business Administration, new establishments show an average survival rate of 39.8% after 6 years.
The economically rational founding team would sell at time of VC funding for $900,000 to avoid the undiversified risk.
That's a funny statement, but kind of the point of VC generally, that you're investing in undiversified potental.
3 startups fail, have gone bankrupt or business were closed3 startups are worse than average, aren’t very profitable, returning less than the invested capital, but are still active3 startups are a moderate success, are profitable, returning just the invested capital, were not acquired yet and are still active
22 percent were failures57 percent are still independently operating29 percent got further funding post-Y-Combinator10 percent were acquired
This is the trend across several seed funds, so the more accurate statement might be 1 out of 10 startups have a timely exit.
What is a startup? Two founders working in a garage, who try and build a product? Are they a startup when they incorporate? Is the project a startup when they get funding? How much funding qualifies? Does $30k that you've pulled out of your 401k count as funding? How about VC?
But if you were to look at all of the new business ventures that people put serious effort, time, and money into, most of them never find a complete team that quits their day jobs, hire a lawyer, incorporate, rent office space, launch a product or service, or obtain arm's length outside funding. In other words, most startups never even launch, much less succeed.
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According to this dataset, about 50% of angel-backed companies return less than investors put in