The Startup Velocity Question: What Hinders Acceleration in VC Funded Companies?

I have been running 1Mby1M since 2010. I find myself saying to entrepreneurs ad nauseam that VCs want to invest in startups that can go from zero to $100 million in revenue in 5 to 7 years.

Startups that do not have what it takes to achieve velocity should not be venture funded.

Experienced VCs, over time, have developed heuristics to gauge what constitutes a high growth venture investment thesis. 

However, 9 out of 10 venture-funded startups do not attain the kind of velocity that yields Unicorn valuation.

Nonetheless, many startups have sought financing and many VCs have funded them.

As of December 2023, 54,000 venture-funded startups exist in the United States alone. Globally, the number is closer to 75,000. In addition, there are 7000 incubators and 3000 accelerators in the world that have offered some funding to startups. Across all these categories, the number of funded startups is closer to 250,000.

The vast majority of these funded ventures are not gaining velocity.

What happens to venture funded startups that fail to accelerate after Seed, Series A, Series B or later rounds of funding?

Among other things, they fail to raise additional funding.
Runway runs out.
Companies fold up or get sold for cheap.
Entrepreneurs lose years of their lives.
Hopefully they learn.
If they have the energy, they start another company.

Yet, given that VCs invested in these companies after significant due diligence, these companies were considered high potential once upon a time.

It is worth considering what went wrong.

Is it Technology?
Is it the Product?
Is it the Market?
Is it the Sales Team?
Is it Positioning?

What CAN be fixed?
What CANNOT be fixed?
What is the RIGHT funding strategy at this juncture?
What is the RIGHT exit strategy?

A diagnostic is necessary.

The Human Element needs to be managed. 

Let us dig deeper.

In this series, we discuss the nuances of the velocity question.

Key Takeaways:

• VCs seek startups capable of reaching $100 million in revenue within 5-7 years.
• 9 out of 10 venture-funded startups fail to achieve unicorn valuation.
• Factors hindering acceleration can include technology, product, market, sales team, or positioning issues.
• A thorough diagnostic is crucial to identify and address velocity challenges.
• The startup ecosystem includes a vast number of funded ventures, many of which struggle to gain significant velocity.

My Question to You:

What do you think is the most critical factor hindering YOUR startup velocity? 

If you think you need help, consider 1-on-1 Private Consulting with me. I will diagnose and create a path forward in an hour.

Photo Credit: NASA-Imagery from Pixabay

This segment is a part in the series : The Startup Velocity Question