Baker’s Dozen of Facts About Startups What You Need to Know

Dedicated for makers

6 min readJan 22, 2019

I have a Telegram channel about technologies, startups, and analytics. It’s interesting that if you have a blog it always forces you to learn something new. Almost 3 years have passed since I created Groks. And I want to share with you the most interesting facts about startups for this time that had changed my mind. Not forecasts, not opinions, only proven stats from trusted sources.

1. The US startup is disappearing

While companies that were less than two years old made up about 13% of all companies in 1985, they only accounted for 8% in 2014. More important, the share of private sector workers in companies that were less than two years old had decreased almost twice. Every year it becomes harder and harder to compete with huge companies for employees. Yep, I stole this header from Quartz.

2. Half of all VC deals lose money

And 6% of investments produce 60% of returns. Furthermore, 1.2% of all VC deals have attracted close to 25% of all VC dollars so far in 2018. Interesting paradox. Why it’s important? I think that we should think like investors not only when we want to raise money, but when we just want to make a startup. And it’s very difficult! There are several startups with the best venture investment returns of 50–2500х, but you need to get about 20% IRR. Look at your growth. Read something about how do venture capitalists evaluate startups. Will your startup brings to you needed IRR?

3. Amount of seed-stage deals have decreased

In Q3 2018 seed-stage deals declined to 18% of all deals from 33% in Q4 2016. Yes, this doesn’t substantiate the title above, because it’s about seed deals rate, not absolute numbers. But the total amount of VC deals is also reduced. Therefore we can say that a number of seed-stage investments have reduced more than 2 times. Today it’s more difficult to draw the attention of investors at the early stage to your project.

4. Two years is time between venture rounds

This fact based on the set of venture rounds in Crunchbase dated between 2000 and November 2018. Over the years, a consistent trend emerges. On balance, companies raise money at a fairly consistent pace. Fast growing unicorns are dispersion. Knowing it, think about your budget and be careful with expenditures even if you already raised money on the early stage. Ran out of cash is the second most common reason why startups fail.

5. M&A is the most widespread way to success

CB Insights notes that 97% of exits are M&A and only 3% are IPO. Exits matter because that’s when you, your team and your investors get paid. Investors live by exits, but many founders keep dreaming of unicornization and avoid the “E-word” until it’s too late. Oddly enough, and to use a chess metaphor, we hear a lot about the “opening game” (lean startup) and the “mid-game” (growth), but very little about this “end game.” As a result, founders miss opportunities or leave money on the table. This is a shame. In time to sell a business, there can be the best decision. By the way, exits often happen early, 25% at the seed-stage, 44% before Series B.

6. No market need is the main reason of fail

This statement is based on analysis of 101 startup postmortems. In this connection, I want to mention low-touch SaaS benchmarks from Stripe. Low-touch is a month-to-month subscription with price points clustering around $10 for B2C applications in the $20 to $500 range for B2B. This corresponds to an average contract value (ACV) of approximately $100 to $5k. So 1% conversion rate of trials with credit card not required for low-touch SaaS is roughly baseline for competent execution, 40% conversion rate for trials with credit card required. 10%+ churn rate is evidence of very poor product market fit and an existential threat to the company.

7. B2C2B sales matter

For every dollar of IT spend, another 40 cents are spent by line of business owners buying software directly. Depending on the department, B2C2B represents anywhere from 36 to 72% of a department’s total spend. This pattern of software purchasing spans most of the key departments within a company. While sales and marketing top the list, finance, engineering and HR also buy software this way. Tomasz Tunguz said in 2015 that bottoms up selling is a fundamental shift in SaaS.

8. Low price is often a bad competitive advantage

Many people think that if they offer a better price, they can build a big company. But days of bazaars passed a long time ago. Customer service is a keystone of your product and there are a lot of great articles about it. The most remarkable is that while you are trying to suggest the lowest price, someone can increase revenue by raising charges. For example, ESPN lost nearly 13 million subscribers after lifting the price by 54%. The paradox is that ESPN’s revenue has increased too by roughly the same 54% since the change of subscription price. By the way, bigger revenue is a very good competitive advantage. Maybe you should increase prices to gain more.

9. The Pareto principle works for ad revenue

More than 80% of the ad revenue is concentrated in a relatively small segment of users — typically less than 20%, according to Soomla. Another data: U.S. and Canada generate $21.20 per person in advertising revenue for Facebook, while those in the Asia-Pacific region generate only $2.27 each. Hence it’s better to have one user from North America than nine users from Asia.

10. Just 0.3% of iOS apps in the millionaire’s club

There are more than 2 million apps available in App Store and only 2,857 of them make over $1 million a year, according to App Annie. Users in many countries keep around 100 apps installed on their iOS devices, actively using roughly 40 every month. This is a reason to ask yourself, will my application become a member of that club?

11. Age increases the probability of success

A person who is 40 is 2.1x as likely to found a successful startup as a person who is 25, according to Kellogg Insight. Moreover, among the 2.7 million founders in their dataset, the average age of a company’s founder at the time of founding was 41.9 years. But great success more often comes to young people. The older you are, the more cautiously you make decisions, but the more decisively you refuse risky ideas. In other words, the older you are, the lower the level of startup ambitions, but the higher the probability of success. Also, there is similar research proves that.

12. You don’t need a co-founder

There are thousands of articles out there that tell you that, as well as why you need a co-founder. But more than half of 6,191 startups with exit did so with just a single founder, the average is 1.72 founders. On the other hand, the analysis of billion-dollar startups tells us, that only 20% of these have had a solo founder. Although each unicorn is a unique unrepeatable story. I believe in data and bigger statistical selection. So for me, the myth about cofounder broken.

13. All in the palm of your hand

55% of America’s billion-dollar startups have an immigrant founder. It means wherever you are my dear friend you have a chance of success. You can change the world.

One last thing…

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