Matan Hazanov’s Post

1% of VC-backed startups will make it past $100M ARR. But does that make the other 99% a failure? Let’s look at the numbers: • 117K startups founded between 2005 and 2022 • 31% (37K) were VC-backed • 12% (13K) raised $3M+ • 1.8% (243) made it past $100M ARR or achieved a $1B+ exit • 0.5% (71) had a $1B+ exit without reaching $100M ARR • 1.2% (168) made it past $100M ARR • 109 of the 168 did it in less than 10 years 💡 Every company is unique, but we can identify key markers of capital-efficient, venture-scale growth to give startups a better roadmap and increase their chances of success. Why do VCs care about $100M if only 1% make it there? Venture capital is a power law game. VCs know only a small percentage will reach $100M, and their job is to identify those with the best chances. Betting on anything less would limit their fund’s potential. Series A is where VCs build conviction on a startup’s potential to reach $100M. Does that make the other 99% a failure? Absolutely not ❌ Many companies achieve great outcomes at smaller revenues, especially if they balance growth and profitability. Venture isn’t a $100M or bust game. We need clear milestones to understand our journey and make informed decisions. Where can you start? Focus on unlocking milestones and keep your cap table light until you’re ready for step: Problem-Solution Fit Go-to-Market Fit - unlocks Series A Scale PMF #1 - Series A use of funds Scale PMF #2 Credit: Michael Ho Follow JayaSankar Subburaj for daily insights on Startups and Venture Capital. #VentureCapital #Startups #funding #investment

The US has more startups than VCs can support, really? Over 55,000 VC-backed companies are operating in the US right now with only 2.000 active VCs. Most startups are thus aggressively competing for funding in a slow dealmaking landscape. Approximately 3,200 startups failed in 2023. The remaining startups may better opt to bootstrap their growth instead of waiting for another funding round and to reduce cash out by applying relevant strategies. This is why Investment Advisors with all their experience, quality and network can make a difference for startups and for VCs. #startup #ventures #venturecapital #vc #investment #funding https://lnkd.in/gFJimp5s

Fundraising in 2024: Essential Strategies for Hardware Startups Given their unique challenges and opportunities, navigating the fundraising landscape can be particularly daunting for hardware startups. Drawing on the invaluable insights from Susanne Stock-Jakobsen’s latest article, here’s what we at Kavedon Kapital think hardware founders should focus on this year: - Understanding the Ecosystem: Hardware requires a nuanced approach. Susanne outlines key factors differentiating the hardware space from software ventures, such as longer development cycles and higher initial costs. This understanding is crucial for effectively communicating with potential investors aware of these challenges. - Tailored Fundraising Strategies: As the article suggests, hardware startups need to target investors who specialise in or are familiar with the hardware landscape. This specialisation is critical because these investors, with their deep understanding of the industry, are more likely to appreciate the value proposition and patience required for hardware development. - Prototyping and MVP Importance: Demonstrating a tangible prototype can significantly enhance investor confidence. This is not just about showing the potential of a product but about proving it can be manufactured at scale without compromising quality or cost-effectiveness. This strategy has been proven time and again to be a game-changer for hardware startups. - Use of Emerging Technologies: Integrating AI and IoT within hardware can not only enhance product offerings but also attract a broader range of tech-focused investors looking for innovative applications in traditional industries. For a deeper dive into the strategies tailored specifically for hardware startups, check out Susanne Stock-Jakobsen’s full article here: Fundraising in 2023/24: The Essential Guide for Hardware Startup Founders (https://lnkd.in/djBRQUeh). Kavedon Kapital’s Take: The right preparation goes a long way in securing the necessary capital for hardware innovations. Understanding your sector’s specific demands and how they align with investor expectations is more crucial than ever. #Revveon #kavedonkapital #kavedon #tech #funding #venturecapital #venture #vc #startup #startups #founders #investing #investor #community #diversity #circularvc #circularventure #circularity #entrepreneurs #investment #entrepreneur

Amidst falling startup valuations, investors have a rare chance to back emerging ventures on their terms. While startup investment has experienced a decline compared to previous years, this trend could signal an opportunity for savvy investors to identify potential winners and secure favorable deals. 💡💰 At Enfinia Growth Partners, we view this shifting investment landscape as a positive development for both investors and startups. 🌟 Despite the temporary dip in valuations, the underlying potential of innovative startups remains strong. With strategic guidance and prudent investment decisions, investors can capitalize on this opportune moment to support promising ventures and drive long-term growth. 🚀✨ By partnering with Enfinia Growth Partners, investors can gain access to our expertise and insights, empowering them to navigate the dynamic startup ecosystem with confidence. Together, we can seize the moment and unlock the full potential of startup investment in today's ever-changing market. 💪🌐 #StartupInvestment #VentureCapital #EnfiniaGrowthPartners

Day 21: #30DaysOfStartups - 𝗪𝗛𝗔𝗧 𝗔𝗖𝗧𝗨𝗔𝗟𝗟𝗬 𝗔𝗥𝗘 𝗔𝗡𝗚𝗘𝗟 𝗜𝗡𝗩𝗘𝗦𝗧𝗢𝗥𝗦? Since we had a pretty nice talk about what were VCs, it was important to tell you all about what an Angel is 'not the kind in fables and stories' but still not less than them when it comes to raising money for startups. These people are saviours when it comes to pre-seed/seed funding, though many may go beyond just the early stage. 𝗪𝗵𝗮𝘁 𝗶𝘀 𝗮𝗻 𝗮𝗻𝗴𝗲𝗹 𝗶𝗻𝘃𝗲𝘀𝘁𝗼𝗿? Affluent individuals (YES. Very rich people to put it simply!) who invest their own money in startups at a very early stage (seed, pre-seed) when most traditional investors are hesitant. They also place riskier bets than bigger firms which puts them in a very sought-after category of investors for new budding startups. 𝗕𝘂𝘁 𝘄𝗵𝘆 𝗔𝗻𝗴𝗲𝗹𝘀 𝘄𝗵𝗲𝗻 𝘆𝗼𝘂 𝗰𝗮𝗻 𝗴𝗼 𝘁𝗼 𝗮 𝗴𝗶𝗮𝗻𝘁 𝗳𝗶𝗿𝗺? Why would a startup not want to get backed by the biggest billion-dollar funds right? The point here is about flexibility, market cap, market fit and overall positioning of the startup in the mainstream market. Let me elaborate: 𝗔𝗻𝗴𝗲𝗹𝘀 𝗼𝗳𝘁𝗲𝗻 𝗶𝗻𝘃𝗲𝘀𝘁 𝗶𝗻 𝗮 𝘀𝗺𝗮𝗹𝗹𝗲𝗿 𝗽𝗼𝗿𝘁𝗳𝗼𝗹𝗶𝗼 𝗼𝗳 𝗰𝗼𝗺𝗽𝗮𝗻𝗶𝗲𝘀, making each investment a more significant portion of their overall capital that can lead to a more close connection and personalized guidance to the company, which is what they might need to stand up in the market. 𝗔𝗻𝗴𝗲𝗹𝘀 𝗴𝗲𝗻𝗲𝗿𝗮𝗹𝗹𝘆 𝗵𝗮𝘃𝗲 𝗹𝗲𝘀𝘀 𝗱𝗲𝗳𝗶𝗻𝗲𝗱 𝗲𝘅𝗶𝘁 𝘀𝘁𝗿𝗮𝘁𝗲𝗴𝗶𝗲𝘀 and might be more flexible in terms of acceptable exit options (acquisition, IPO, secondary sale). 𝗔𝗻𝗴𝗲𝗹𝘀 𝗽𝗿𝗼𝗰𝗲𝘀𝘀𝗲𝘀 𝗮𝗿𝗲 𝗼𝗳𝘁𝗲𝗻 𝗹𝗲𝘀𝘀 𝗰𝘂𝗺𝗯𝗲𝗿𝘀𝗼𝗺𝗲 due to limited financial data and the early stage of the venture. They rely more on the founder's vision, passion, and team capabilities. 𝗦𝗼 𝗵𝗼𝘄 𝗱𝗼 𝘁𝗵𝗲𝘆 𝗺𝗮𝗸𝗲 𝗽𝗿𝗼𝗳𝗶𝘁𝘀? 𝗧𝗵𝗲 𝗵𝗼𝗹𝘆 𝗴𝗿𝗮𝗶𝗹 *𝗘𝗾𝘂𝗶𝘁𝘆*- so like how a normal investment flow would work, they too take some percentage of equity from the company in exchange for the funding they provide. 𝗔𝗰𝗾𝘂𝗶𝘀𝗶𝘁𝗶𝗼𝗻: When the startup is bought by a larger company, the angel investor sells their shares at a premium, hopefully much higher than their initial investment. 𝗦𝗲𝗰𝗼𝗻𝗱𝗮𝗿𝘆 𝗦𝗮𝗹𝗲: The angel investor might sell their shares to another investment firm specializing in buying stakes in private companies. 𝗔𝗻 𝗲𝘅𝗰𝗲𝗽𝘁𝗶𝗼𝗻 𝘁𝗼 𝘁𝗵𝗲 𝗻𝗼𝗿𝗺𝗮𝗹 𝗳𝘂𝗻𝗰𝘁𝗶𝗼𝗻𝗶𝗻𝗴 𝗼𝗳 𝗮𝗻 𝗮𝗻𝗴𝗲𝗹 𝗶𝗻𝘃𝗲𝘀𝘁𝗼𝗿 is when some angel groups or angel investors with significant capital pools might have a risk appetite closer to VC firms. Both Angels and VCs invest and take some stake in the company in return, the only difference mostly lies in the fact that their functioning varies greatly. Some mentionable Angel investors would be: Kunal Shah, Vijay Shekhar Sharma, Varun Alagh, Ramakant Sharma, Jasminder Singh Gulati, Anupam Mittal the list continues. #angel #Investor #growth #startup

🔹 𝐍𝐞𝐰 𝐓𝐫𝐞𝐧𝐝 𝐢𝐧 𝐘𝐂 𝐒𝐭𝐚𝐫𝐭𝐮𝐩 𝐅𝐮𝐧𝐝𝐫𝐚𝐢𝐬𝐢𝐧𝐠 Here’s a snapshot: 💲 𝐒𝐦𝐚𝐥𝐥𝐞𝐫 𝐑𝐨𝐮𝐧𝐝𝐬: Many YC startups are looking to raise $1.5M - $2M with a $15M valuation, giving up only 10% of their company. 💰 𝐋𝐞𝐚𝐝 𝐈𝐧𝐯𝐞𝐬𝐭𝐨𝐫 𝐂𝐨𝐧𝐮𝐧𝐝𝐫𝐮𝐦: These startups often don’t have a lead investor and are mainly backed by multiple angels. 💸 𝐒𝐞𝐞𝐝 𝐈𝐧𝐯𝐞𝐬𝐭𝐨𝐫 𝐇𝐞𝐬𝐢𝐭𝐚𝐭𝐢𝐨𝐧: Traditional seed investors usually require 10% equity, making it tough for them to invest in these rounds. 📈 𝐌𝐚𝐫𝐤𝐞𝐭 𝐀𝐝𝐣𝐮𝐬𝐭𝐦𝐞𝐧𝐭𝐬: YC encourages founders to raise only what they need, reflecting current market conditions. 💱 𝐕𝐚𝐥𝐮𝐚𝐭𝐢𝐨𝐧 𝐃𝐢𝐟𝐟𝐞𝐫𝐞𝐧𝐜𝐞𝐬: Despite seeking less money, YC startups aim for higher valuations compared to non-YC startups. 🔮 𝐅𝐮𝐭𝐮𝐫𝐞 𝐅𝐮𝐧𝐝𝐢𝐧𝐠 𝐂𝐡𝐚𝐥𝐥𝐞𝐧𝐠𝐞𝐬: Smaller rounds might lead to issues securing additional funds before Series A, especially without institutional backers. This trend shows YC founders adapting to market realities but also highlights potential funding challenges ahead. Will this new approach pay off? 🚀 #Startups #Fundraising #VentureCapital #YCombinator #SeedFunding #StartupTrends #TechNews #Entrepreneurship #Investment #StartupEcosystem #Innovation

Valuations of startups have quietly rebounded to all-time highs. Some investors say the slump is over. The last couple of years have been relatively difficult for venture-backed companies. Very few startups were able to raise funding at prices that exceeded their previous valuations.  Now, approximately two years after the venture slump began in early 2022, some investors, like IVP general partner Tom Loverro, are saying that the worst of the downturn is behind us and the startups that survived should shift from cash preservation mode to spending money on growth.  According to PitchBook data, valuations for all but seed-stage companies dropped in 2023 compared to the year prior. But during the first six months of 2024, prices investors were willing to pay for new deals of U.S.-based companies not only recovered, but also reached an all-time high for median early- and late-stage deals, according to the latest report from PitchBook and the National Venture Capital Association. Choo said that the number of companies that can raise capital at higher valuations has increased since the beginning of the year. She pointed to U.K. challenger bank Monzo, which grabbed a valuation of over $5 billion in March, a nearly 15% increase from the $4.5 billion investors assigned it in early 2022. Samir Kaji, founder of Allocate, a startup that allows family offices and wealth advisers to invest in VC funds, is also optimistic that valuations and the fundraising environment have improved for startups this year. “Things are much more sanguine than I’ve seen since the beginning of 2022,” he said. “The capital markets are coming back slowly, and if you can achieve real growth and fundamentals, there is going to be capital for [your startup].” But those “all-time” high valuations are somewhat misleading, said Kyle Stanford, lead U.S. venture capital analyst at PitchBook. That’s because deal volume is still sluggish. There were fewer companies that raised a new round with a known valuation in the first half of 2024 than is typical for a six-month period. PitchBook’s valuation dataset consists primarily of strong companies that were able to grow into their previous valuations, but startups that couldn’t secure funding at a higher valuation might have been left out of this data. Many took unpriced rounds through convertible notes, insider rounds or delayed raising capital altogether, Stanford explained. “It’s a good market right now, if you are a strong company, but if you’re struggling to hit growth targets you had set out before the pandemic, it’s a really hard market,” he said. Kaji echoed this sentiment, but his take was a little more upbeat. He said that while startups are still divided into “haves” and “have-nots,” the group of companies that can potentially raise at higher valuations has grown larger in 2024. https://lnkd.in/enVWvChq

“Startup Raises Series A Funding at $15 Million Valuation.” “Company Inching Toward Unicorn Status with $95 Million in Funding.” “Startup's Seed Funding Success: $7 Million Raised” Do these headlines seem familiar? They are a part of my world as a Venture Capitalist. In the startup world, funding is often lauded and equated with success. It's easy to equate funding and valuation with success because they are simple metrics and publicly accessible. But they’re far from the full picture. When I look at funding and valuations, I see them as a noisy signal—they are meaningful information but imperfect predictors of long-term outcomes. Understanding the quality of Revenue, Competitive moats, Team scalability, etc., is important to complete the story. Investors may misread this information, or they may have imperfect diligence and overlooked critical patterns that point to problems or potential. This is why there is a wide disparity in valuations in private early-stage companies. Data shows that 44% of startup failures are due to running out of cash, despite often having raised millions. Lasting value generators are not new: customer loyalty, operational efficiency, and defensible innovation. ▶️ Growing fast and raising a lot of money can make sense when there is a clear, scalable opportunity and a defined path to profitability  ▶️ Prudent growth is more appropriate when the market is uncertain, and the company needs to stay agile  ▶️ Regardless of what investors may advise, founders must rely on their own confidence in the business’s growth trajectory In my entrepreneurial journey during the internet boom days, I wasn’t confident about the scale of growth we were advised to target. My board and I had disagreements, but I stood firm in my belief that we should not push for higher growth expansion. Eventually, we sold the business for a great valuation because we did not have cash flow stress in a difficult market. It wasn’t an easy decision, but it was the right one for everyone. Having those difficult conversations to find alignment is crucial, even if it means making tough decisions that go against the tide. Lasting value creation depends more on internal resilience than external cash injections. When assessing startups, I focus less on their last round and more on their ability to withstand volatility. Do they have the flexibility to pivot when the market shifts? Are they obsessed with solving a real problem rather than just inflating their valuation? Valuation and funding are stepping stones. Ultimately, what matters most is whether a company can create value that outlasts hype cycles. #startups #business #funding #venturecapital #leadership

LPs are prioritizing returns over investment theses or social initiatives. The current venture-backed startup ecosystem is facing significant challenges: 1. Many startups are over-funded. 2. Founders often lack personal financial investment—time alone doesn’t demonstrate true commitment. 3. Generating and prioritizing sales is frequently overlooked or misunderstood. With the era of cheap capital coming to an end, real valuations based on tangible sales and profits will surpass lofty ideas and theories. As a result, more than half of venture funds and their startups are likely to disappear in the coming years as LPs become more selective and less inclined to back what VCs are offering. This shift will ultimately rebalance the market.

Summary: The article discusses the recent trends in startup valuations and fundraising in the venture capital world. The author argues that while the past couple of years have been difficult for many startups, there are signs of improvement and optimism for the future. Key takeaways: The venture slump that began in 2022 may be coming to an end, with some investors believing the worst is behind us and startups should focus on growth rather than cash preservation. While valuations did drop in 2023, they have since recovered and reached an all-time high for median early- and late-stage deals in 2024. Stronger companies with potential for growth, particularly those in the AI sector, are seeing higher valuations and fundraising success. Counter arguments: The data on valuations may not accurately represent the full scope of the market, as many struggling startups may have taken unpriced rounds or delayed raising capital. While there is optimism for certain companies, the overall market remains challenging for those struggling to hit growth targets set before the pandemic.