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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 – Daphne Ng, CEO of JEDTrade



(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.)

Daphne Ng is the CEO of JEDTrade, a blockchain technology company focused on trade, supply chain, and financial inclusion projects in ASEAN. She is also the Scretary-General at ACCESS and Exco. of Singapore Fintech Association

What makes you do what you do?
I was introduced to blockchain technology in 2016 after I left my corporate banking career after 10 years. It was my mentor who first got me interested in this technology, which I then went on to delve further into, on its potential applications in the lending and trade finance space – domains where I came from.

How did you rise in the industry you are in?
Being in the space for 2 years and actively involved in the ecosystem, I was able to bring on the projects, network and a good degree of thought leadership in this vertical. Early on in the startup journey, our team faced many challenges. And to me, the key to rising above failures are two essential factors – resilience and support. While resilience is innate, I received a lot of help be it in terms of connections or advice. ‘Nobody succeeds without help’ rings very true for me.

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)?
From the start, I focused on my domain expertise in trade finance and the application construct of how blockchain and DLT can be applied to these use cases. Also, my strategy from the start was to build a technology company made up of 80% tech and engineers, which is also our key competitive advantage today. At the end of the day, deliverables are about strategy and execution, which includes building and leading an ‘A’ team.

Do you have a mentor that you look up to in your industries or did you look for one or how did that work?
I have many mentors, which includes our company advisors (all of whom are well-known in this industry) and mostly informal mentors I meet via my connections, and on various occasions and circumstances. Creating opportunities also means putting myself in the right place, at the right time. And in my case, these were mostly organic and genuine friendships formed from the initial connection.

How did you make a match if you and how did you end up being mentored by him?
To me, a match in values is very important. It also takes humility to ask for help and be willing to listen to advice, which is important in order for mentorships to be successful – be it formal or informal.

Now as a leader how do you spot, develop, keep, grow and support your talent?
I love this question! I am passionate about building strong teams and helping my people grow. I abide by the 3Rs when identifying talents: resourcefulness, resilience and right values. And then I invest in the ‘potential’ and this means giving them room to lead, make decisions and take risks.

Do you consciously or unconsciously support diversity and why?
My support of diverse talents, skillsets and characters can be seen in the make-up of our core team – all helming specific roles and each bringing their own value to the table. We need the sum of all parts to build a great company.

What is your take on what it takes to be a great leader in your industry and as a general rule of thumb?
Great leaders emerge in times of failures and challenges, never abandoning the team, and always putting the team’s interests before her own. And I consciously live by these mottos every day.

Advice for others?
My advice to other entrepreneurs: be resolute and dare to be different. If you are going to follow others, then you will end up on the same path as them. No right or wrong; but I would rather chart my own path. This June, we are officially launching our blockchain project, Jupiter Chain (, which have garnered much interest in the industry, even before we made it public. We believe this project is the epitome of marrying innovation with practical implementation, and we want to be the first to truly operationalize blockchain for our ecosystem projects in this region.

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

To learn more about JEDTrade, please click here.

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Callum Connects

Jace Koh, Founder of U Ventures



Jace Koh believes cash flow is the lifeblood of your business. Understanding it will enhance your ability to run and manage your business.

What’s your story?
My name is Jace Koh and I am the Founder of U Ventures. I’ve always been inclined towards investment and entrepreneurship. I’ve played a hand in starting businesses across these industries – professional services, cloud integration, software and music. I believe that succeeding in business is tough, but that’s what makes the rewards even sweeter.

What excites you most about your industry?
Everything excites me. These are my beliefs:

  • Why is accounting important?
    The accounting department is the heart. Cash flow is like blood stream, it pumps blood to various parts of the body like cash flow is pumped to various departments and/or functions in a business. It is vital to the life and death of the business.
  • Is accounting boring?
    Accountants are artists too. They paint the numbers the way they want them to be.
  • What makes a good accountant?
    A good accountant can tell you a story about the business by looking at the numbers.
  • Why is budgeting and projection important?
    Accountants are like fortune tellers, they can predict the numbers and if you wish to understand your business and make informed decisions, feel free to speak to our friendly consultants to secure a meeting.

What’s your connection to Asia?
I was born and raised in Singapore, and here’s where I want to be.

Favourite city in Asia for business and why?
Singapore is my favourite city. We have great legal systems in place, good security and people with integrity. Most importantly, we have a government that fosters a good environment for doing business. I recently went for a cultural exchange programme in Hong Kong to learn more about their startups. I found out that the Hong Kong government generally only supports local business owners in terms of grants. They’ve recently been more lenient and changed the eligibility to include all businesses that have at least 50% local shareholding. But comparing that to Singapore, the government only requires a 30% local shareholding to obtain government support. In the early days of starting a business, all the support you can get is precious. It’s great that we have a government that understands that.

What’s the best piece of advice you ever received?
The best time ever to plant a tree was 10 years ago as the tree would have grown so big to provide you with shelter and all. When is the next best time to plant a tree? It is today. Because in 10 years time, the tree would have grown big enough to provide you shelter and all.

Who inspires you?
Jack Ma. His journey to success is one of the most inspiring as it proves that with determination and great foresight, even the poorest can turn their lives around. I personally relate to his story a lot, and this is my favourite quote from him, “If you don’t give up, you still have a chance. Giving up is the greatest failure.”

What have you just learnt recently that blew you away?
I’ve faced multiple rejections throughout my business journey, and recently came across a fact on Jack Ma about how he was once rejected for 32 different jobs. It resonated very deeply and taught me the importance of tenacity, especially during tough times.

If you had your time again, what would you do differently?
Nothing. I live a life with no regrets. Everything I do, regardless of whether it is right or wrong, happy or sad, and regardless of outcome, it’s a lesson with something to take away.

How do you unwind?
I love to pamper myself through retail therapy and going for spas. I also make a conscious effort to take time off work to have a break outside to unwind as well as to uncloud my mind. This moment of reflection from time to time helps me see more clearly on how I can improve myself.

Favourite Asian destination for relaxation? Why?
Taiwan! Good food with no language barriers and the people are great!

Everyone in business should read this book:
I don’t really read books. Mostly, I learn from my daily life and interactions with hundreds of other business owners. To me, people tell the most interesting stories.

Shameless plug for your business:
We’re not just corporate secretaries, we’re “business doctors.”
U Ventures is a Xero certified advisory firm that goes beyond traditional accounting services to provide solutions for your business. You can reach us on our website:

How can people connect with you?
Converse to connect. You can reach me via email at [email protected] or alternatively, on LinkedIn here:

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:

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