A friend asks: “what percentage of U.S. startups that raise a Series A do not go through an incubator or accelerator?” That’s a great question that I haven’t thought about before. So, I dug into the data to find out.
How venture capital mega-rounds obscure improving gender diversification of startup founders
Today, I’m going to publish headline numbers of venture capital investments ($) by founder-gender type. I’m doing this for two reasons. First, while my study provided some important new information, headline numbers of capital invested is what clicks in most people’s minds for “what’s going on” (I disagree). Second, I want to point out that looking at headline numbers of capital investments might obscure a truer picture of a diversifying founder base because giant funding rounds are dominating VC markets.
To test this idea, I pulled annual figures for venture capital deals and capital invested by round size (<$50M, $50M-$99M, $100M-499M, and $500M+) and gender dynamics of founders (women-only, mixed gender, and men-only). What my analysis shows is that mega-rounds ($100M+) are male-dominated and drowning out some promising gender diversification going on for companies in-line with historical venture capital activities.
Women-Only and Mixed-Gender Founding Teams are Driving New Venture-Backed Startup Activity
Two weeks ago, I published a new report for the Center for American Entrepreneurship, titled The Ascent of Women-Founded Venture-Backed Startups in the United States. I followed-up with a summary on this blog last week.
One criticism of the report is my definition of “women-founded”. For reasons I explain in detail in the report’s methodology, I chose “women-founded” to indicate a company that has at least one verified female founder. That means it includes startups with all-women founding teams and teams with both women and men (coincidentally, it also means that I assume that companies with missing founder information had no women founders—more on that in a second). A key reason for not separating these groups was needing a bigger pool of companies to draw from in order to credibly track outcomes over time—and there just weren’t enough of them in the mid-to-late 2000’s to do that. There were tradeoffs.
However, that does not prevent me from more narrowly segmenting these groups here and demonstrating first financing trends only across the four types of founding teams in the dataset—women only, men only, mixed gender, and missing gender. To begin, the first chart here displays the raw numbers of annual first financings for startups falling into each of those four founder-gender categories.
New Study on Women Founders
Last week, I published a new report for the Center for American Entrepreneurship, titled The Ascent of Women-Founded Venture-Backed Startups in the United States. The study is the culmination of months of research and collaboration with some amazing friends at the National Center for Women & Information Technology and beyond.
Colorado is for Founders
Virginia may be for lovers, but Colorado is for doers, creators, and founders. I was reminded of that again today on Twitter by this photograph of Jared Polis and Phil Weiser—respectively, the Governor-Elect and Attorney General-Elect of the state.
How the Geography of Startups and Innovation Is Changing
We’re used to thinking of high-tech innovation and startups as generated and clustered predominantly in fertile U.S. ecosystems, such as Silicon Valley, Seattle, and New York. But as with so many aspects of American economic ingenuity, high-tech startups have now truly gone global. The past decade or so has seen the dramatic growth of startup ecosystems around the world, from Shanghai and Beijing, to Mumbai and Bangalore, to London, Berlin, Stockholm, Toronto and Tel Aviv. A number of U.S. cities continue to dominate the global landscape, including the San Francisco Bay Area, New York, Boston, and Los Angeles, but the rest of the world is gaining ground rapidly.
Hedge
I recently had the pleasure of meeting Nicolas Colin. I’ve been an admirer of his writing in the past, and we had a delightful conversation at one of my favorite breakfast spots in London. For those of you who don’t know, Nicolas is a co-founder of The Family, an early-stage investment firm started in Paris and now operating in London and Berlin.
He is also the author a new book Hedge: A Greater Safety Net for the Entrepreneurial Age, which I’m happy to have completed just this week. Hedge hits three important notes for me: it is meticulously researched (527 references! 😍), very well-written, and has a point of view that stands out from the others.
Solving Canada’s startup dilemma
Canada, we increasingly hear, is becoming a global leader in high-tech innovation and entrepreneurship. Report after report has ranked Toronto, Waterloo and Vancouver among the world’s most up-and-coming tech hubs. Toronto placed fourth in a ranking of North American tech talent this past summer, behind only the San Francisco Bay Area, Seattle and Washington, and in 2017 its metro area added more tech jobs than those other three city-regions combined.
All of that is true, but the broader trends provide little reason for complacency. Indeed, our detailed analysis of more than 100,000 startup investments around the world paints a more sobering picture. Canada and its leading cities have seen a substantial rise in their venture capital investments. But both the country and its urban centres have lost ground to global competitors, even as the United States’ position in global start-ups has faltered.
The Follow-On Funnel
Two weeks ago, I published a study for the Center for American Entrepreneurship titled America's Rising Startup Communities. The study looked at the growth and geography of venture capital first financings across U.S. metropolitan areas between 2009 and 2017. One of the biggest questions that's come out of that work is: "what's happening beyond first financings?" This post is the first of at least two that will begin to address that question. Here I will look at national trends, and in a later post, I will examine geography of follow-on investments.
Silicon Valley is Not Over
A New York Times article published yesterday declares that “Silicon Valley is Over.” This follows a recent Wired article declaring that “Everyone Hates Silicon Valley.” While this does make for great journalism, I worry that it sets a unrealistic expectations in other parts of the country. Silicon Valley is not over—not even close. And when you suggest that it is, it implies a Silicon Valley’s downfall will be a big win for everyone else. That’s zero-sum thinking and I don’t agree with it.
The Rise of the Rest Seed Fund
On Monday, Revolution — the Washington-based venture capital firm lead by Steve Case — announced a new $150 million seed fund dedicated to helping entrepreneurs living outside the well-established startup hubs get their business off the ground. I’ll use this opportunity to share three things stand out in my mind.
Almost half of Fortune 500 companies were founded by American immigrants or their children
The Center for American Entrepreneurship, a non-partisan policy and advocacy organization, published a study today on the founders of America’s most valuable companies—those in the Fortune 500. The results are striking—43 percent of companies in the 2017 Fortune 500 were founded or co-founded by an immigrant or the child of an immigrant, and among the Top 35, that share is 57 percent.
#StartupsEverywhere
Engine, the non-profit organization that supports technology startups through economic research, policy analysis, and advocacy, has been producing profiles of startup communities throughout the United States on its blog.
Chicago's Startup Ecosystem: Some Reading
I'm going to Chicago tomorrow to attend the wedding of an old friend over the weekend. Chicago has always been a special place for me—I lived there for a few years after college and received a first-rate education on the city's south side. Chicago is awesome.
A lot has changed in the city since then, including the development of a booming tech and startup scene. Some of this I've learned about through conversations with active participants in the startup community there, and some has been through a series of research that has been published in the last few months.
As such, I'll use this opportunity to share some of these items with readers who might be interested. The collection of readings—which span academic working papers, analytical blog posts, and business case studies—are all great. They are informative, well-written, and resourceful. And please, if you know of others, add them to this thread in the comments section. Enjoy.
First Round Capital: Collapse or Return to Normal?
Yesterday, an article in the Wall Street Journal talked about some adjustments in the venture capital funding market. The general thesis: fewer companies are getting funded, those that do are raising more capital than ever, and those that don't are left to die (zombie companies). I don't have the time right now to re-assess or validate that analysis in a meaningful way, but on the surface, it appears to be relatively sound.
However, it did make me curious about what's happening in funding markets, and since it's been awhile since I've done any analysis in the area, it prompted me to take a deeper look at funding trends. One thing stood out to me was a sharp reversion in first-fundings since 2015—particularly compared with relatively stable funding trends in later rounds.
Restart America: Startup-Friendly Policies in the “Third Wave”
If you haven’t done so already, I highly recommend reading The Third Wave: An Entrepreneur’s Vision of the Future, a New York Times Bestseller by Steve Case that published one year ago. Steve is back in the news, with an expanded version (in paperback) out this week that adds a chapter on startup-friendly policies in the post-election environment.
Startup Communities and Saturday Morning Coffee
A recent article in 5280 Magazine caught my attention. It profiled the economic vitality of the Boulder-Denver region, dubbing it “The Most Exciting and Innovative Tech Hub in the Country.” While I expect every local publication to champion its own hometown, this one happens to be on stronger footing than most others. You see, at least in terms of innovation and startup activity, Boulder is unique among its peers.
The article—which is excellent by the way—couldn’t have come at a better time for me personally. A few days ago, I moved myself and my family to Boulder to work on a book about startup communities. Not only did I come here to work closely with my friend and co-author Brad Feld, I also wanted to experience first-hand what makes this place so special. I came here to learn… and to contribute.
The Third Wave of digital technology meets the Rustbelt
Much excitement has been building over what feels like the beginning of an era of immense technological advance, the central role that entrepreneurs will play in its development, and the potential for a wide range of regions to reap the rewards. But progress won’t come easy. Significant challenges are likely to follow as digital technologies expand into relatively untapped areas of the economy.
Two excellent books out in as many months—and a quick data analysis here—persuasively drive these points home.
What Startup Accelerators Really Do
Accelerators are playing an increasing role in startup communities throughout the United States and beyond. Early evidence demonstrates the significant potential of accelerators to improve startups’ outcomes, and for these benefits to spill over into the broader startup community. However, the measurable impact accelerators have on performance varies widely among programs — not all accelerators are created equally. Quality matters.
Accelerating Growth: Startup Accelerator Programs in the United States
Startup accelerators support early-stage, innovation-driven companies through education, mentorship, and financing, in a fixed-period, cohort-based setting. This process of intense, rapid, and immersive education aims to accelerate the lifecycle of high-potential companies and the experiential learning of their founders. Accelerators are playing an increasing role in startup communities throughout the United States, but are commonly misunderstood or mistakenly lumped-in with other early-stage supporting institutions. Early evidence demonstrates the significant potential of accelerators to improve startups’ outcomes, and for these benefits to spill over into the broader startup community and local economy. However, the measurable impact accelerators have on performance varies widely among programs. To that end, an accelerator pioneer offers some best practices.