5th Jan 2016 marked an important milestone for our company. We are officially 5 years old ! Happy Birthday, TreeBox !
Time really flies. I have been in this “roller-coaster” ride for more than 5 years. Comparing back when we started on 5th Jan 2011, I can still remember the decision where the 5 founders formed the company and decided to give “it a shot”. We have nothing back then, except ideas. We have no money, no office, no staff. Just ideas and armed with a belly of fire that we can try “a shot”. Not knowing what was ahead of us, we formed the company and started the bootstrap process.
Winding forward to today, 5 years down the road. I can’t imagine the journey that we have travelled 5 years ago. It amazed me when I looked back. But instead of talking about my battle scars, I can’t help but some questions began to pop in my mind.
- Is there an average age of a startup?
- How long would a startup last?
- Is there any trend or statistics on startup survival?
- Is there a correlation between the amount of money raised versus startup survival?
I did a “quick-and-dirty” research and surprisingly, not easy to find data. Probably very few reports were made on the average age of start up. There was much news about the success of startup “ABC”, “XYZ” but very few talked about the death of startups.
I managed to gather some information – bits and pieces, here and there. Let me start with this statistics:
- Measuring the age of startup based on the fund raised. There were statistics to show that 55% of the failed startups raised less than USD1mm and 70% of the failed startups raised less than USD5mm. On average, failed startups raised USD11mm while the median was USD1.4mm.
- Statistics showed that most startups died within 20 months from the last fundraising round. 71% of the startups lasted less than 2 years from the last fundraising.
Now this is interesting. In my humble opinion, these figures showed two important indications: whether a startup raised enough money to survive and whether a startup can consistently raise money to survive. This prompted me to search for another set of data points – what about “successful” startups?
Here we go:
- For US successful startups that exited, they have raised an average of USD41mm and exited on average more than USD200mm.
- The average age of successful startups that exited through acquisition is 7 years and through IPO is 8.25 years.
Do these figures further reinforce the idea that startups need money? This is an oxymoron. Startups, of course, need money. But I remembered when I embarked on this entrepreneurship journey, there were two schools of thoughts presented to me. The first school of thought – raise money, continuously raise more money. The second school of thought – don’t raise money. Raise a little bit and try to make the business survive.
No one doubts that money is blood to startups. Hence, the key question is whether a startup should continuously raise money and raise enough money to survive and eventually get bought over. From the statistics, it does suggest that those startups that successfully raised more money do have a better chance to succeed and those that continue to raise money successfully for years, will have better chance to survive.
I remembered an advice from a respected mentor to me. He said, “your job as the CEO of a startup is to constantly raise fund and make sure you execute well with the fund raised.”
Looking at our company now, we are in a good position. Revenue is coming in, we are gaining traction and momentum. But we have big plans and to rely on our own cash to fund the growing plans, this may not be the best option for us. We may need to look at raising more money to fund our expansion plans this year.
We have passed the 5th year. Nothing states that success is guaranteed. But on the bright side, we are closer to the average age of a successful startup being acquired or IPO. We are on the right side of the equation and measuring tape.
Cheers to 2016 !
With best regards