So we took a look at some of the data from Emergence Capital’s survey of 600+ venture-backed software startups the other day, and they updated it with a bit more data on the Top Decline of Venture-Backed Startups Here:
The summary data of the Top Decline leads to a rough conclusion: only the top 10% or so of venture-backed start-ups can likely raise another VC round. At least for now.
Why not? It’s just math. Roughly, here’s what it takes to raise a VC round. Triple Triple Double Double math, or better:
- Growing very quickly on way to $1m ARR, ideally 20%+ a month
- Growing 8%-10% or more a month after $1m ARR (tripling, ideally)
- Growing 6% a month at $10m ARR (doubling)
- Growing 60%+ annually at $50m ARR or faster, to propel startup to 40%+ growth at $200m ARR to IPO
As you can see above, the Top Decile of Venture-Backed Startups barely hits these growth metrics today. And at the growth stage, top decile may not even be enough to raise another round.
This is roughly what I see in my own portfolio at SaaStr Fund. About 20%-25% are growing like it’s 2021. Well, not quite, but at least close. And can raise VC funding, including growth capital, quickly and effortlessly. The rest? They probably can’t raise an outside round right now.
It doesn’t mean you can’t later. Almost everyone goes through a rough year. And B2B2B may well bounce back next year. That’s my bet.
But at least be very self-aware here. Perhaps 90% of VC-backed start-ups probably aren’t venture-fundable anymore, not right now. Not sure? Ask your existing investors. They will know.
More on that here:
