It’s (Still) Getting Easier to Raise Money for a Startupby
Would-be entrepreneurs contemplating a plunge on a startup can take heart. The success rate of companies trying to raise money from angel investors has continually improved since the financial crisis of 2008, when just one-in-10 startups got funded, according to data from the Center for Venture Research at the University of New Hampshire.
Startups pitching angel investors last year had a 21.6 percent success rate, up from 14 percent in 2007, according to the most recent data from CVR, which surveys angel groups and individual investors twice a year. While more startups landed funding—about 71,000 in 2013, up from 57,000 in 2007—the size of the average investment fell 31 percent over the same period, to $351,000 last year from an inflation-adjusted $511,000.
Scott Shane, an economics professor at Case Western Reserve (and occasional contributor to this website), called out those trends in a blog post today, noting that investors’ increased willingness to invest in younger companies would be driving the changes.
Remember that 2007 was the year of the iPhone’s debut. At the time, few people fully understood how many companies would be spawned—and funded with a dash of angel money—to create apps for mobile devices and Web services. One who had an inkling was Y Combinator co-founder Paul Graham. He predicted that falling costs of launching a Web-based company would lead to a proliferation of Internet startups. The CVR data seem to show that a larger pool of companies seeking funding, combined with lower costs to run a startup, has encouraged angels to spread their money around.