Seed funding is an important first step for many entrepreneurs. However, few of these founders realize how much farther they will have to go.
Our team used new data from an investment tracking service to create the chart below. It illustrates how many seed-funded companies raise additional rounds of financing. It also shows the number of these businesses that “exit” via acquisitions or mergers, and the number that do not reach an exit or earn more investment. (Our experience suggests that most companies in this last group quietly go out of business.)
We think the results are quite intriguing.
In some ways this is good news. Most seed-funded businesses are able to raise at least one more round of financing. One in four companies exit or go on to raise a sixth round. On the other hand, many of these businesses still perform quite poorly. Seventy-five percent of them stop raising money and have not exited.
This data used in this analysis is drawn from a selection of companies that raised seed funding from venture capital firms in 2009. To learn more about this research, which comes from CB Insights, click here.
Contributed by Rhett Morris.