First, employees do often judge the success of the business at least in part on the external measure of valuation in a financing round. Second, even if that valuation looks great in the absolute sense (or in the relative sense, compared with your previous round of financing), employees are likely to compare it to other companies that have raised money recently, in many cases independent of whether those companies are relevant benchmarks. Third, never underestimate the value of always maintaining momentum in the business, one measure of which may be a successful financing round
the advice we often give to entrepreneurs is to think about your next round of financing when you are raising the current round of financing. What will you need to demonstrate to the next round investor that shows how you have sufficiently de-risked the business, such that that investor is willing to put new money into the company at a price that appropriately reflects the progress you have made since your last round of financing?
Successful venture-backed companies have had an outsize positive impact on the US economy. According to a 2015 study by Ilya Strebulaev of Stanford University and Will Gornall of the University of British Columbia, 42 percent of all US company IPOs since 1974 were venture backed. Collectively, those venture-backed companies have invested $115 billion in research and development (R&D), accounting for 85 percent of all R&D spending, and created $4.3 trillion in market capitalization, which is 63 percent of the total market capitalization of public companies formed since 1974.
We talked earlier about Accel Partners and their tremendous success in early-stage investing at Facebook. Well, alongside that fund investment, the firm's managing partner at the time, Jim Breyer, invested about $1 million of his own money for a 1 perce stake in the company.
I'd love to hear the inside baseball story about LoudCloud. We now live in a world where AWS/GCP/Azure seem practically ubiquitous. Same vision. Was LoudCloud simply too early or were other factors at play?
When too much money is chasing too few deals, there's only one possible result: Because we have too few entrepreneurs, we can't put enough money to work. Instead, it's wasted on bidding up the prices of the few available assets rather than funding the kinds of organizations that are actually needed.
Think about this: venture-backed companies now spend 44 percent of the entire R&D budget for American public companies. The 665 public companies that are VC-backed make up a fifth of the total market capitalization of public companies.