What are VCs looking for? We have the stats

Raising VC funding is always tricky – if it’s your first time, you just don’t know what to expect. Will investors be interested in your company? Will they be interested in you?

CB Insights may have just made the job easier for you. Their newly-released “Venture Capital Human Capital Report” analyses why VCs have invested in businesses – and it always comes down to one thing: the people. You.

CB Insights tracked 185 seed VC and series A investments in internet companies in the first half of 2010, analysing the data behind the investments and the companies’ founders.

“When we ask venture capitalists what gets them excited about the young, emerging and often unproven companies in which they invest, we never hear about deals or dollars,” the report states. “The first answer is frequently ‘the team’ or ‘the founders’.”

This demonstrates just how important a role human capital plays in the future of your company. Bear in mind that these trends only look at successful funding rounds – the trends don’t illustrate unsuccessful fundraising attempts.

Make sure you check out CB Insights’ report below, but in the mean time, here are some of the headline stats:

Race:

  • 87 per cent of founders are white, followed by Asian (12 per cent) and black (1 per cent).
  • 83 per cent of teams are all-white, but all-Asian teams raise more cash ($4m against an average of $2.3m for all-white teams).
Age:

  • 48 per cent of the founding teams fall within the 35-44 age range (unless you’re in New York, in which case average ages are lower than 35 years).
Number of founders:

  • although the majority of companies have two or more founders, over a third are led by one founder. More founders does not necessarily translate into larger funding rounds.
Sex:

  • 92 per cent of founders are male.
  • 87 per cent of teams are all-male but mixed teams raised larger rounds (typically mixed teams raised $4m while all-male or all-female teams raised $2.2m).
Education:

  • 51 per cent of founders hold a master’s or PhD.
  • 64 per cent of founding teams have at least one member who holds an advanced degree (master’s or above).
  • but interestingly, founding teams who all have less than undergrad experience raise the most cash ($4.3m) – this implies little relationship between funding and education.
What do you think of these results? Are you surprised? It’s important to note that there is no suggestion that you must fit into these categories in order to be successful. Trends are trends. Ideas and people are what matter most.

It would be fascinating to see what the statistics would look like for the UK or Europe. Would they be similar? What do you think?

Don’t forget to check out the full report:

CB Insights – Venture Capital Human Capital.pdf

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