Michael Jackson’s Post

The latest unicorn report from Aileen Lee and Cowboy Ventures is mindblowing. Although the number of unicorns increased from 39 to 352 in the last decade, there are some sobering takeaways in this data for founders. Turns out, being a unicorn isn't a good goal. First, remember not all unicorns are created equal. 93% of these companies are unicorns on paper ("papercorns") but there is not necessarily liquidity available yet as they are privately valued. If you try to get liquidity on the secondary market, 40% are trading at below $1B (so not unicorns after all). Another sobering takeaway? Achieve unicorn status too quickly and you can fail. "Fallen unicorns like Hopin and Bird were crowned within one year of founding; car leaser Fair in two years; Convoy and Knotel just three years after founding." Finally, a metric known as "capital efficiency" has plummeted. Capital efficiency is the ratio of valuation to money raised - the higher the better. This is a good reflection of how investors (and founders/employees) will do in terms of an eventual outcome. Enterprise company capital efficiency dropped from 26x to a lame 7x. What should founders do with this information? Focus on growing an efficient business for the best outcome. Don't worry at all about achieving a unicorn valuation on paper as that could mean you have to raise a lot of money to even get that valuation (you don't necessarily get valued until you take in cash). Instead focus on capital efficiency and building a huge business which will get the best returns for you, your employees and your investors. https://lnkd.in/gx6XZCDY

More startups are exiting at a loss than at any point since 2009 - PitchBook The closed IPO window has forced venture investors to take whatever liquidity they can get. The share of exits in which VCs made back less than their initial investment is at the highest level since at least the global financial crisis of 2007-09. Since 2022, 70% of VC-backed exits were valued at less than the capital investors put in. That figure was 58% for the period between 2009 and 2014. Naturally, seed and early-stage startups have higher loss ratios than mature companies. VCs assume that most early-stage bets will either fail or return little capital—but that those will be offset by a few outsized successes. A quarter of Andreessen Horowitz‘s startup investments go to zero, and an additional 25% return less than the amount invested, co-founder Marc Andreessen told Nate Silver in “On the Edge.” Just 10% of their investments produce a return of 10x or more. The founding partner of Union Square Ventures, Fred Wilson, wrote in his blog that he follows a similar calculus: “1/3 are good investments; 1/3 turn into something but you wish you hadn’t made the investment; 1/3 are zeros.” But even for later-stage bets, the stifled exit market has led to higher rates of disappointment. Among companies that raised a Series D and beyond, a majority of exits since 2022 were at a loss. AI chipmaker Cerebras’ recent IPO registration—as well as the recent Federal Reserve interest-rate cut—could spur a rebound in public listings. Across the private markets, M&A multiples have been trending at 15% to 20% below 2021 rates for over a year now, according to PitchBook’s latest Global M&A Report, suggesting that the valuation reset may be complete. https://lnkd.in/gbifqh7H

With all the doom and gloom around VC in 2023, you may be surprised that startup valuations have very sneakily rebounded in 2024 📈 🚫 While this is encouraging for both founders and investors, it is not a return to the ZIRP era of easy money against speculative ideas. Here's what founders need to focus on to secure funding in today's landscape: 1️⃣ Focus on efficiency: highlight your startup's ability to manage costs while driving growth. 2️⃣ Clear path to profitability: investors want to see a solid plan for achieving sustainable profits. 3️⃣ Embrace innovation: particularly in AI and other cutting-edge technologies that command higher valuations. 4️⃣ Market fit: clearly articulate how your product solves real problems in a sizeable market. Not just speculation, but true specificity about customer, problem, and solution. 5️⃣ Traction and growth: Demonstrate consistent growth and key milestones achieved. 6️⃣ Prepare for due diligence: Have your financials, legal documents, and projections ready for scrutiny. Remember, while valuations are up, investors are still selective. Focus on building a robust, efficient business that can thrive in any economic climate. #StartupFunding #VentureCapital #Entrepreneurship #Innovation

In the grand scheme, the rankings of the most-active investors vividly depict the global startup financing scene in 2023. 🌐💼  While the familiar heavyweights persistently supported numerous companies, their activity scaled back — fewer deals and less capital deployment compared to the peak of the boom cycle in late 2021. 📉💸  #StartupInvesting #GlobalFinancing #InvestorInsights https://lnkd.in/dqy6Aiq7

In my years of investing in startups, I've observed countless founders operating under a common misconception—the belief that success hinges predominantly on: —Advanced Technology - Investing heavily in the latest tech (e.g., AI, crypto, etc.) —Winning Product - Assuming a standout product will dominate the market. —Perfect Business Plan - Depending strictly on a well-crafted plan. This approach often falls short of delivering true success. Upon conversing with other investors, I found three less tangible, yet more critical factors that distinguish the most successful ventures: —Faith - A powerful dedication to a compelling vision. —Identity - A strong sense of self and company culture that resonates deeply with the team and customers. —Grit - A Relentless pursuit to overcome challenges and make vision into the best reality. While traditional metrics focus on immediate, quantifiable outcomes, they frequently lead to short-lived ventures that lack impact. Conversely, startups grounded in faith, identity, and humble-grit tend to achieve sustainable success and leave a lasting imprint on their industries. As investors, we must look beyond conventional metrics and consider these foundational elements when backing companies. The true essence of a successful startup lies not just in what they do, but in who they are and how they do it.

👑 Y Combinator remains the King of developer-first investments, but competition is heating up. In the first half of 2024, Y Combinator affirmed its position as the top developer-first investor, participating in 11 transactions. Renowned for propelling tech giants like GitLab, Docker, Inc, or Algolia in their early stages, the Silicon Valley accelerator remains a rite of passage for startups seeking credibility and access to the YC community. However, other investors were also very bullish on developer-first startups. Andreessen Horowitz, Accel and Sequoia Capital also demonstrated strong enthusiasm for developer-first initiatives, making 10, 9, and 8 investments, respectively. These top-tier investors: 1. Proactively Engage: they increasingly invest at inception stages and don't just show up for the later rounds; Andreessen Horowitz, for instance, participated in 4 rounds below $10 million.    2. Scout Globally: their investments span the globe and are not confined to Silicon Valley.    3. Are in for the Long Term: they maintain the capacity to support startups through various stages, effectively reinforcing their investments over time. With 9 out of the top 10 investors based in the US, it's evident that European and Asian founders need a robust US strategy. While relocation isn’t necessary any more, frequent US visits are crucial for cultivating business development and forging relationships with VCs and fellow entrepreneurs. P.S.: Curious about what's driving this trend? Join me for an exclusive webinar on September 18th at 6 PM CET, where I'll dive deep into the Avolta Global Developer-First Transactions - H1 2024 report. Register now to secure your spot and gain insights into the evolving landscape of developer-first startups (link in comments ⤵️)

Amazing examples of how vision and persistence can turn initial rejections into billion-dollar successes! 🚀 It’s a reminder that every “no” could just be one step closer to the right “yes.” At ThriveWize, we help startups and businesses unlock their full potential, especially in the fast-growing Middle East market. Whether you’ve been overlooked or need guidance navigating a new region, we’re here to turn your vision into a thriving reality. Visit www.thrivewize.com @Entrepreneurial Mindset @DecisionMaker DecisionMaker

The Silicon Valley funding pipeline is under pressure like never before. The world of startups is well-accustomed to failure: Approximately nine in 10 shut down. But those failures rarely attract the attention of the broader public. They tend to happen early in a startup’s life—when the people who run it are still in trial-and-error mode. As a company gets bigger and achieves enticing revenue growth, it gets more love from some of the thousands of thick-pocketed venture capital firms that write checks so companies can scale quickly. As those investors pour in more and more capital, failures become less frequent. Or at least they used to. Since the first quarter of 2022, everything has changed. Read more: https://lnkd.in/eJJXUcvJ

In the grand scheme, the rankings of the most-active investors vividly depict the global startup financing scene in 2023. While the familiar heavyweights persistently supported numerous companies, their activity scaled back - fewer deals and less capital deployment compared to the peak of the boom cycle in late 2021. 📉💸 Read more here ↓ https://lnkd.in/dFmbyxsx  #StartupInvesting #GlobalFinancing #InvestorInsights

19 JANUARY 2024 UNICORNS! SUPER UNICORNS ARE REAL (OpenAI to be first!!) The Irrational Fund (IRR) Opportunity https://irr.mmm.page TECHCRUNCH, Eileen Lee of Cowboy Ventures; * The number of unicorns ballooned 14x in the past decade, from 39 to 532! They now serve a wider array of sectors (we’re tracking 19), from climate and crypto to vertical SaaS. * The pendulum swung hard to enterprise, with 78% of unicorns today focused on B2B, the inverse of 2013. * Still, it’s a wobbly, bloated herd that will thin in the coming years (likely to about 350) because … A whopping 93% are “papercorns”: privately valued companies. ________________ 60% are “ZIRPicorns”: Their last valuations were from 2020–2022, when interest rates were near zero, and many of these are running out of runway. ________________ Around 20% of unicorns are on the cusp, valued at just about $1 billion. Around 40% are trading at less than $1 billion in the secondary markets. BUT, there is lots of substance in this herd. And we see evidence of a Software Unicorn Power Law: The U.S. will be home to more than 1,000 unicorns by 2033. * There have been very few exits. Only 7% (35 companies) versus 66% a decade ago. Capital efficiency declined significantly. This will be bad for exits, venture returns, founders and employees. * OpenAI will likely be the first superunicorn of the decade, and AI likely the mega-trend. The Bay Area was home to more unicorns this time around but lost share as other hubs grew. More unicorns means more founders, but some things didn’t change at all. Diversity is still wanted, and there’s a lot of opportunity to improve the composition of founding teams. If the past is a prologue, expect a mixed outlook for the current herd and many more unicorns in the future.