Angel investor, Ron Conway, of investment firm SV Angel has recently completed and audit of the 500 plus companies they have invested in over the last 12 years and has formed some surprising conclusions from the data he found.
Speaking at the Social Currency CrunchUp, organized by TechCrunch, Mr Conway talked about his expectations that he would find a success rate of: 1/3 companies fail, 1/3 investors get their money back and the final 1/3 return double or a Google like result. But that was not what he discovered in analyzing the audit data.
During the Internet Bubble that ran from roughly from 1997 to 2001, the failure rate of startups was 77%. After the smoking crater of of the bubble’s collapse things improved substantially, from 2002 until today the failure rate has been about 40%. Keep in mind that this is a reflection of the SV Angel portfolio, they invest in about 1 out of 40 companies they consider.
Bubble, boom or bust the rate of successful startups has remained roughly the same. He also went on to say that it is a misconception that great company comes along every 10 years. Since Google the rate of great companies coming about has been shortening from 10, to 6 years, then to 4 years and now its about 2 years.
