Connect with us


Is Venture Capital worth it?



Venture capital has facilitated the growth of many companies including Apple, Google and Facebook. But do most startups succeed after they obtain venture capital? In this post, we answer three component questions:

  1. What are the likely outcomes for companies backed by venture capital?
  2. What fraction of companies attract venture capital?
  3. How much work is it to apply for venture capital?

We found that:

  • According to the data of Professors Hall and Woodward, the average venture capital-backed founder exits with $5.8 million of equity.
  • Roughly 1% of companies that aspire to obtain venture capital obtain it.
  • Finding out whether you will receive venture capital can take months to years of work.

What are the likely outcomes for companies backed by venture capital?

For companies backed by venture capital, failure and acquisition are more common than IPO. In 2008, Professors Hall and Woodward presented data on companies that received venture capital in the preceding two decades. In their set of 22,004 companies:

  • 9% reached IPO. At IPO, the average founder had an equity stake of $40 million.
  • 26% were acquired.
  • 34% died or were taken to have ceased operations due to going unfunded for over five years. Their founders have earned only their salaries.
  • 31% had unknown outcomes. Most of these are probably still operating. So far, their founders have only earned their salaries, although a few may go on to achieve a big exit.

Venture capitalist-backed startup outcomes

Figure 1: Venture capital-backed startup outcomes. The dataset is comprised of 22,004 companies that received venture capital from 1987 to 2008. The companies were analysed at the end of that period. Companies that have gone without funding for more than 5 years are considered dead. “Operating/unknown outcome” is a catch all category for companies without known exits. Data is from Hall and Woodward’s The Burden of the Nondiversifiable Risk of Entrepreneurship.

Professors Hall and Woodward used this data to model the earnings of entrepreneurs. They found that a successful exit for the founders is even less likely than it would appear. Although 35% of companies reached IPO or were acquired, they estimate that 75% of founders have received zero income from their equity stakes. This is because in their model, some acquisitions are so small they leave no money for the founders. The remaining 25%, however, received a highly valuable equity stake. Hall and Woodward estimate that the mean entrepreneur exited with $5.8 million of equity. Although the assumptions of their model are open to debate, the overall finding that most venture capital-backed startups fail is supported by the data.

So IPOs are rare, but when they happen, they can lead to very high earnings, and this makes the average earnings of venture capital-backed startup founders very high. This earning distribution resembles our findings of the earnings of Y Combinator founders.

What fraction of companies get venture capital?

So now that we know that getting venture capital is very valuable on average, the natural follow-up question is what fraction of companies get venture capital. We take two approaches to this question:

  1. We estimate the number of startups and the number of venture capital deals
  2. We note how many applicants venture capitalists say they accept

Approach 1. How many startups and VC deals are there?

In this approach, we estimate the number of new US companies, then note how many companies get their first venture capital deal each year.

How many new US companies are there?

We present three estimates for the number of new US companies: i) new nonemployer companies, ii) new nascent companies iii) newly self-employed.

For background, in the US, there are:

  • 6 million employer companies
  • 21 million nonemployer companies
  • 10 million self-employed, aged 25-55

I: New nonemployer companies

  • Estimate: 8 million nonemployer companies are born each year
  • Method: There are 800,000 new employers each year. Non-employer companies are more than triple as numerous as numerous as employer companies and additionally, their birth rate is over twice as high as nonemployer companies.

II: New nascent companies

  • Estimate: There are over 1 million new nascent companies each year
  • Method: There are now 221 million working-aged Americans. The PSED II found that 6% of working-aged Americans are creating a company, and do so with an average team size of 1.7, making 8 million nascent companies. 27% exit the nascent company category each year (either by starting to attract revenue, or by being abandoned). If there are 27% new nascent companies each year, then there are 1 million new nascent companies annually.

III: Newly self-employed

  • Estimate: Over 1.4 million Americans between the ages of 25 and 55 become self-employed each year.
  • Method: There are 100.6 million workers aged 25-55. 90.03% of them are salaried. Each year, 1.4% of salaried workers become self-employed. So there are over 1.3 million newly self-employed each year.

Combined estimate:

  • Estimate: 2-10 million new companies are created each year.
  • Method: These three estimates are rough and partially overlap, so we give a wide confidence interval.

How many of the new companies want venture capital?

Most new companies do not aspire to obtain venture capital. They are corner shops, restaurants, hair stylists and so on. Some researchers have estimated the proportion of new companies that aspire to obtain venture capital:

  • 2-4% of small employers were candidates for venture capital in the 1990s, according to analysis by Ou and Haynes
  • 6% of nascent companies expected their operations to have large scope five years after the company’s birth, according to the PSED II

Overall, we estimate that 2-6% of new US companies are ‘startups’.

How many new startups arise each year?

If there are 2-10 million new companies annually, and 2-6% of them aspire to obtain venture capital, then there are 40,000-600,000 new ‘startups’ annually.

How many venture capital deals are there?

1,350 companies get their first venture capital deal each year.

What proportion of new companies that want venture capital will get it?

If each year, 1,350 companies get their first venture capital deal, and 40-600,000 new companies are founded and aspire to obtain venture capital, then 0.2-4% of those companies will eventually obtain it.

Approach 2. What proportion of applicants to venture capitalists say they accept?

We can make an alternative estimate by reading how many applicants venture capitalists say they accept:

  • David Hornik reports that he funds 0.125%-0.4% of companies whose applications he reads.
  • An employee of Pentech reports that they accept 0.6 – 0.9%.
  • David Rose reports that 0.25% of companies are accepted.
  • The venture capital yearbook reports that venture capitalists accept 1% of applications.

This suggests that each venture capital company accepts about 0.1-1% of applications. By applying to multiple venture capitalists, multiple times, companies can make their chance higher than this. This is broadly consistent with the estimate that 0.2-4% of new companies that aspire for venture capital eventually obtain it.

Overall estimate and caveats:

Overall, our best guess is that around 1% of new companies that aspire to obtain venture capital eventually get it. However, there are some caveats:

The chances of any particular startup obtaining venture capital will depend on the level of maturity of the company. When a company is very young or in the creation process but not yet operating, the chances of obtaining venture capital are much lower than when a company has revenue and employees.

The chances of a startup succeeding will depend on other characteristics, like the product, team and quality of application. For example, graduates of accelerator programs seem to have much better chances – 59% of them receive follow-on funding within 12 months, although though not always from venture capitalists.

Some companies do not need venture capital to succeed, because they are bootstrapped by the owner’s personal wealth, by angel investment, or by borrowing. Furthermore, some companies earn enough revenue that they do not require external investment.

How much work is it to apply for venture capital?

The chance of venture capital is low, while the average payoff is high. So a reasonable question to ask is: “how long will it take to find out whether I can get venture capital?”

Many business activities must be performed before a venture capital application will be taken seriously. To get funded, you usually need to to show that you have a talented team, a prototype and traction. The chance of success may be greater and the preparation time less if you are personally connected with venture capitalists. If one is not personally connected to venture capitalists, it is still important to research venture capitalists before applying; many applications are thrown out because they do not fit the fund’s market area policies.

Another way of considering when companies tend to receive venture capital is looking at the stage of first-time venture capital deals. PWC reports that of 1,350 occasions where a company receives their first venture capital, 225 are given in the seed or startup stage. CB Insights gives a higher figure of 843. This means that at least one third of startups that eventually receive venture capital startups use alternative means of funding to progress through the seed and startup stages. So seed funding can include angel investors and incubators. This means that many companies have to operate for years before obtaining venture capital.

Overall, for founders who are not personally connected with venture capitalists, months to years of work are usually required before funding as obtained.


Venture capital founders earn millions of dollars on average. However, venture capital does not assure success – most founders exit with no equity. Applying for venture capital takes months to years, and the prospects of ever succeeding are low (1% of companies that want venture capital will ever get it). Although applying to venture capital can be valuable, it is not an easy or reliable way to achieve startup success.


About the Author

This article was written by Ryan Carey of 80,000 hours. 80,000 is a platform that intensively researches into how graduates can make the biggest difference possible with their careers, both through overall career choice and within a given field. They work with academics at the University of Oxford, and have given one-on-one coaching to over 200 people. see more of Ryan’s work.


Women on Top in Tech – Laina Raveendran Greene, Co-Founder at Angels of Impact



(Women on Top in Tech is a series about Women Founders, CEOs, and Leaders in technology. It aims to amplify and bring to the fore diversity in leadership in technology.)

Here is our interview with Laina Raveendran Greene, Founder of GETIT Inc. and Co-Founder of Angels of Impact, an impact network focused on women social entrepreneurs helping to alleviate poverty. She is an entrepreneur and social impact investor, whose passion is female empowerment, and enabling women to be key agents to help alleviate poverty in Asia.

What makes you do what you do?
As a minority female Singaporean from relatively humble beginnings, I have never taken anything for granted. I learnt early on that I have to work doubly hard to overcome the “glass ceilings” but if I persevere, I can succeed. That is why I chose to focus on helping women-led social enterprises as I know how hard things are for them and I hope to make things a little easier for them.

How did you rise in the industry you are in? 
I rose by being courageous enough to push against the “glass ceiling” and seizing opportunities open to me no matter where they were. Early on, I realized I would have better opportunities overseas, so I worked in many countries, including Switzerland, USA, and Indonesia and used these opportunities to learn and open new avenues for myself. I now come back to Singapore with many more networks and skill sets.

Why did you take on this role/start this startup especially since this is perhaps a stretch or challenge for you (or viewed as one since you are not the usual leadership demographics)?
Yes, as a minority Singaporean, it may appear that I am not the usual leadership demography in Singapore. In my own way, however, I think I have amassed my own international accolades and work experience such as serving as the first Secretary General for the Asia Pacific Internet Association, CEO of one of the first few tech startups in Singapore in the early 90s, being on the International Steering Committee of the Global Telecommunication Women Network, and most recently selected as one of the 2nd cohort of Edmond Hillary Fellows in New Zealand.

I am now moving to the next phase of using these networks and skills to help other women to social enterprises, which seem to be exactly what I want to do in my next phase of life (after more than 25 years of global work experience).

Do you have a mentor that you look up to in your industries or did you look for one or how did that work? 
It was harder in my younger days, as one of the few women in tech to find mentors but today I do.  Men were reluctant to mentor me for fear of rumors.

How did you make a match if you did, and how did you end up being mentored by him? 
I found my mentor when I was taking an executive program at Stanford. He was one of the keynote speakers and I went to talk to him. Intrigued by my background, when I asked if he would mentor me, he said yes. I meet with him at regular intervals and I always ensure I have put his ideas to test before reporting back to him. I feel that I value his time if I do actually listen and act on his advice.

Now as a leader how do you spot, develop, keep, grow and support your talent? 
The key qualities I look for is an eagerness to learn and humility to be open to new ideas. Also, when asked to be a mentor, I usually give homework and see how proactive they are. Only the ones who do their homework, take the advice and act on it, are the ones I actively mentor.

Do you consciously or unconsciously support diversity and why?
I consciously and unconsciously support diversity, as I see the importance of diversity on true innovation. You never get anything new, talking to like-minded people. It is always good to have different perspectives to create new ideas. I am also an active supporter having faced racial and gender discrimination in my life and want to ensure that others are given a better chance.

What is your take on what it takes to be a great leader in your industry and as a general rule of thumb? 
A great leader to me is one who has empathy and humility, and a genuine spirit of service. Today’s challenges such as climate change and social injustice, requires many players to apply their knowledge and skills to solve and have a sense of ownership in solving these issues

Advice for others?
The only advice I can think of is do what you are strongly passionate about. You need to persevere to succeed so it helps if you truly care about the endeavor you are working on.

If you’d like to get in touch with Laina Raveendran Greene, please feel free to reach out to her on LinkedIn:

Continue Reading

Callum Connects

Denise Morris Kipnis, Founder & Principal of ChangeFlow Consulting



Denise Mossis Kipnis’ curiosity in people and the world, lead her to set up ChangeFlow Consulting.

What’s your story?
I’m driven by curiosity. Having been the only one in a room who looks like me for most of my life, I developed a curiosity about who stays, who leaves and who thrives in minority/majority situations including when and how connection and collaboration happen. I was a systems thinker long before I knew what that was, always asking why and so what; and seeing the pieces, the whole, and the places in between. So helping people and organisations move through the complexity of transformation feels natural to me.

What excites you most about your industry?
I see change and inclusion as two sides of the same thing; I don’t practice one without the other. Some people see change as death, as loss, as exhausting. And it can be. But I see in the work I do as an opportunity for something new or hidden to emerge. When an organisation understands that it is first a group of people, who themselves represent and belong to groups of people, and it begins to tackle what it would mean to understand and learn from all that talent, all that diversity, to have them all working for and not against the organisation, to truly unleash all that their people have to offer; that’s magic.

What’s your connection to Asia?
Change and inclusion are personal values as well as professional strengths. For me, living and working outside of the States was a bold experiment to see whether any of the stuff I’d learned about change and inclusion would work outside of the US. My husband and I targeted Asia specifically: it would be the greatest contrast, culturally speaking, for me; and a unique career springboard for him.

Favourite city in Asia for business and why?
Although I’ve practiced in other cities, I am biased towards Singapore. In some ways it’s what Los Angeles is to the rest of the United States, a microcosm of sorts. The regional/global nature of it means that so many different nationalities and cultures are represented. As a result of this mix, you never know what you might get. In some situations, cultural dynamics are obvious, sometimes subdued. The variability is compelling.

What’s the best piece of advice you ever received?
“Never ask anyone to do anything you wouldn’t do yourself.” Michael Rouan.

Who inspires you?
Often it’s a “what” not a “who.” I can get inspiration from a passage in a book or a situation in a movie, as well as a turn of a phrase or watching people interact. I often make the biggest connections between the various threads I’m working on when I’m sitting in someone else’s event.

What have you just learnt recently that blew you away?
I’m honestly not blown away by much. Instead, I’m struck how circular things can be: ideas often come back around with a slightly different twist and I watch the way it shakes things loose for people. I recently sat through a workshop on Self as Instrument, and despite being thoroughly versed already, I learned something. In preparing for a panel on design thinking, I unearthed a new language to describe things.

If you had your time again, what would you do differently?
You’ve caught me at a good time. I’m sitting in appreciation and gratitude for all my experiences, because I wouldn’t be who I was today if all that has happened, didn’t. And yet one thing comes to mind: It wasn’t until I redesigned my website two years ago (shout out to Brew Creative!) that I realised I hadn’t made explicit agreements with my past clients as to what I could share publicly about our engagement, or whether I could use their logos in my promotional materials. In my business, confidentiality is so important, and yet I need to be able to talk about the work as reputation and experience leads to the next success, and so on. It turned out a lot of the contacts I had known had left the organisations where the work was done, so they couldn’t help at that point. So the practice I’m carrying forward is to get those agreements up front, and to make sure my relationships in client systems are broad as well as deep.

How do you unwind?
Science fiction, puzzles, wine.

Favourite Asian destination for relaxation? Why?
Home. I don’t travel to relax, I travel to learn and explore.

Everyone in business should read this book:
Built to Change, by Ed Lawler and Chris Worley. To my knowledge, it’s the first pivot from advising organisations away from stability and toward dynamism, from strategic planning to strategizing as an action verb; to blow up the traditions and rigidity that impede organisations from developing change capability.

Shameless plug for your business:
We’re taught that there are two kinds of people: those who see forests, and those who see trees. There is a third type, my type, and we see the ecosystem. Worms, climate, birds, the spaces in between. This is the perspective organisations need to be successful in solving complex problems and thriving in change.
ChangeFlow uniquely blends four disciplines (two of which are multi-disciplinary in themselves): organisation development, culture and inclusion, change management and project management.

How can people connect with you?
LinkedIn Company page:
Email: [email protected]

Twitter handle?

This interview is part of the ‘Callum Connect’ series of more than 500 interviews

Callum Laing is an entrepreneur and investor based in Singapore. He has previously started, built and sold half a dozen businesses and is now a Partner at Unity-Group Private Equity and Co-Founder of The Marketing Group PLC. He is the author two best selling books ‘Progressive Partnerships’ and ‘Agglomerate’.

Connect with Callum here:
Download free copies of his books here:

Continue Reading