Your chances of becoming a unicorn? Just over 1%
"A million dollars isn't cool. You know what's cool? A billion dollars."
The Social Network is a pretty silly movie. But in addition to be being beautifully shot the film also captured -- and probably helped create -- the new obsession with starting not just a successful business, not just a wildly successful business, but a stupidly ridiculously successful business worth a billion dollars. Investors are kept up at night thinking about the billion dollar companies -- today we call them unicorns -- that they missed out on. (Just ask Jeremy Levine). In fact, thousands of startups get funding each year based on the premise that all it takes is one unicorn to make a portfolio -- hence why many have concluded we're in a bubble. When Silicon Valley's creators tried to conjure up a plausible reason for why its fictional startup Pied Piper would struggle to raise $10 or $15 million, the answer they got from most insiders was, "Oh, there's no reason." Indeed, there are more venture-backed private companies that have joined "the three comma club" than ever before -- almost 100 at last count.
But what are the chances of an early-stage company achieving this rarefied status? Despite the media's unicorn-mania, the odds of a company that attracted early funding five years ago of becoming a unicorn today is only... 1.28 percent. That's according to new data from that seemingly endless treasure trove of fascinating statistics, CB Insights.
Even if an entrepreneur or investor is lucky enough to be involved in a legit unicorn, the chances of achieving a successful exit are miniscule. As First Round Capital's Josh Kopelman* noted in a recent tweetstorm, "231 companies raised more than $40 million in growth rounds in 2014, by comparison, 240 venture capital-backed IT companies have gone public in the last 10 years."
Kopelman added: “If there is one thing we can learn from the public IPO market, it’s that our industry isn’t always very good at pricing large companies."
In other words, even at the most unicorn-y of times, exits are still exceedingly rare and the chances of growing into a billion dollar company are just one in 100. But hey, it's still better odds than winning the lottery ,which I guess lends some legitimacy to this crazy venture capital racket, right?
[illustration by Brad Jonas]
- Disclosure: Josh Kopelman is a personal investor in Pando