8 Startup Funding Statistics That Will Surprise You

Startups are a vital part of the global economy, driving innovation, creating jobs, and transforming industries. However, starting a new business comes with its own set of challenges, particularly when it comes to startup funding.

In this article, we will explore 8 eye-opening statistics related to startup funding. These statistics shed light on the financial realities faced by entrepreneurs and highlight the barriers they may encounter in their pursuit of funding. Understanding these statistics can provide valuable insights for aspiring entrepreneurs, investors, and stakeholders in the startup ecosystem. Let’s get to it.

More than three-quarters of new business founders use personal savings as a source of initial funds—regardless of how much funding they raise externally. It shows the financial challenges faced by aspiring entrepreneurs, who at one stage or another turn to their own personal finances to fund their business ventures.

However, relying on personal savings also comes with risks. Many entrepreneurs invest their entire life savings into their businesses, putting their personal financial security at stake. The lack of external funding can limit the growth potential of the business without additional capital. Additionally, if the business does not perform as expected, entrepreneurs may face financial hardships even personal bankruptcy. Bear in mind, there are many other funding options available if you know the right contact and where to look .

Obtaining venture capital (VC) funding is a highly competitive and challenging process for startups. In fact, the statistics reveal that less than 1% of startups receive VC funding . Data from the Kauffman Firm Survey (the longest and largest longitudinal study of entrepreneurs to date) also shows that less than 5% of startup funding came from VCs (Robb and Robinson, 2012).

With numerous startups vying for limited investment opportunities, VC firms receive countless pitches and business plans. This makes it extremely challenging for any single startup to stand out from the crowd. The due diligence process conducted by VC firms can also be time-consuming and rigorous, looking for the key indicators of start-up’s future success .

Bytedance , a Chinese technology startup, currently holds the distinction of being the highest-valued private startup in the world (Valuation of $75 billion). According to Crunchbase , ByteDance has raised a total of $9.5B in funding over 12 rounds. Its innovative and highly popular mobile apps, includes TikTok, the short-form video platform that has taken the world by storm. Bytedance has rapidly grown into a global tech giant, with a diverse range of products and services by millions of users worldwide.

Startups with two co-founders or more, as opposed to a single founder, have been found to raise significantly more capital, often up to 30% more . This phenomenon can be attributed to several factors that make startups with two co-founders more attractive to investors.

Having co-founders brings a diversity of skills and perspectives to the startup, each with complementary skill sets (such as technical expertise paired with business acumen, or operational experience combined with creative vision). This diverse skill set allows the startup to tackle challenges from multiple angles, increasing its chances of success. Investors often value this diversity as it can lead to a more well-rounded and resilient startup.

Multiple founders can improve the overall credibility and risk mitigation of the startup. Investors may view a startup with more than 1 co-founders as having a higher likelihood of success, as it demonstrates that the founders are not alone in their vision. This increased credibility can lead to greater investor confidence and a higher likelihood of receiving funding.

Despite progress in recent years towards gender equality, female-led startups continue to face challenges in securing venture capital (VC) funding compared to their male counterparts. Women-led startups received just 2.3% of venture capital funding in 2020.

Research indicating that male entrepreneurs are more likely to receive funding compared to female entrepreneurs. Studies have shown that investors tend to have unconscious biases that favor male entrepreneurs. This bias can result in female-led startups receiving less funding or being overlooked in the investment decision-making process.

Investors tend to invest in entrepreneurs who are similar to themselves in terms of gender, ethnicity, and background. There is a lack of gender diversity among VC investors, with men representing the majority of VC decision-makers. As a result, female entrepreneurs may face challenges in building networks, establishing relationships, and gaining access to investment opportunities that are more readily available to male entrepreneurs.

The technology sector, including sub-sectors such as software, AI, biotechnology, and others, has historically received a significant portion of venture capital (VC) funding. As of 2021, the technology sector has consistently accounted for a significant portion of global VC funding. For example, in the United States, the technology sector received the highest share of VC funding in 2020. According to PitchBook , a leading data provider for VC and private equity markets, software startups alone accounted for over 40% of total VC investments in the U.S. in 2020.

Similarly, in Europe, the technology sector has also been a major recipient of VC funding. According to a report by Dealroom.co and Atomico , technology startups in Europe received over €41 billion in VC funding in 2020, with software, AI, and biotechnology being among the top sectors in terms of investment.

Seed funding is typically the initial round of investment that a startup raises to develop and validate its product or service. Seed rounds are often led by angel investors, early-stage VC firms, or specialized seed-stage investment funds.

The amount for an average seed round funding can vary widely. The average seed round funding typically falls within the range of $1 million to $3 million . It’s worth noting that the average seed round funding amount can vary significantly depending on the startup’s industry, location, and the specific circumstances of the fundraising efforts.

ESG (Environmental, Social, and Governance) factors are increasingly becoming a prominent consideration in investment decisions.  Europe appears to be experiencing a fly wheel of successes. There is ever-increasing scale-up capital and the industry is embracing ESG integration, particularly in terms of governance factors surrounding diversity and inclusion.

Investors are increasingly recognizing that startups that prioritize ESG factors are better positioned for long-term sustainability and success. These companies are better positioned to manage regulatory changes, mitigate operational risks, and build resilient and responsible businesses. Investors are increasingly factoring in these potential financial benefits when making investment decisions, as they seek to maximize returns and manage risks associated with sustainability and societal challenges.

There is also a growing demand from consumers, employees, and other stakeholders for responsible and sustainable business practices. Consumers are increasingly seeking products and services from companies that align with their values; employees are increasingly looking for purpose-driven workplaces.

There you have it: Eight startup funding statistics that test preconceived notions of how raising capital for a startup typically works. At the end of the day, there’s a lot to learn from these numbers beyond simply realizing that startup funding isn’t all rosey and glorious.

Though startup funding is extremely challenging, Version28 can help you provide every step of the way, whether it is VC funding, government grants, angel investors or private financing. Our experience in funding and marketing start-ups to consumers as well as investors means we could be the partner that helps you go from idea to IPO.

Get in touch with our team of experts today for a free 30-min consultation ?

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