Industry Analysis - September 29, 2021

Investors Value Past Success

Startups are notoriously difficult to assess because there is so little financial data available for them. As a result, many investors look to the team as a good indication of potential growth and success. A well-rounded team is highly valued, as it will have all the necessary technical, managerial, financial, and soft skills needed to reach success. In particular, many investors view the founders of a company as the most important component of the team. Founders bring the starting idea and grand vision. They need to have not only managerial skills, but also a proven track record. And an easy way to check their track record is to see if they have led any previous startups to successful exits.

Percentage of Founders With Prior Exits

In this Chart of the Week, we dig deeper into the correlation between founders with prior exits and the success of crowdfunding rounds. We looked at all the Regulation Crowdfunding and Regulation A deals that were active between January 2018 and August 2021. There were a total of 1,005 crowdfunding rounds. Successfully funded rounds consist of deals that were confirmed closed and currently active deals that have hit the minimum investment amount. Not funded rounds are deals that did not reach their minimum goals and closed without dispersing investors funds. With these definitions, there were 834 successfully funded rounds and 171 not funded rounds. Out of all the successful rounds 13% were led by founders with prior exits. Just under 9% of the not funded rounds were led by founders with prior exits. 

In both categories, the majority of founders did not have prior exits. However, it seems there is a correlation between successfully funded rounds and a higher percentage of founders with exits. Seeing that a founder has succeeded in bringing another startup to either an acquisition or public listing inspires confidence in many investors. While this trait is not the only way to evaluate founders, our data shows that investors do value it. 

Note: all data used for the Chart of the Week comes from the KingsCrowd database and represents a snapshot of the crowdfunding market.

About: Inez Sanjaya

Inez's background is in the startup ecosystem, which she is very passionate about. Inez has experience working in a startup, a Google-backed accelerator, and lastly in Plug and Play Tech Center. Prior to this, she was a part of VU Venture Partners doing deal sourcing and conducting due diligence. Inez graduated from the University of California Berkeley with an Economics degree.

View more articles by Inez

Other Articles

New Deals for Week Ending 12/08/2019

Below are the latest equity crowdfunding raises begun this past… ...

Finding Fair Startup Valuations

This Chart of the Week examines revenue-to-valuation multiples across industries… ...

Common Real Estate Investment Options

If you want to get started with real estate investing,… ...