Ten years is a long time. When we started First Round in 2005 with the idea to fill the gap between individual angel investing and Series A investing, many on Sand Hill Road dismissed our model as a “cute” novelty. Boy how times have changed. What began as a crazy, contrarian idea has now led to a Series Seed Surge — in the last 4 years alone, over $4 billion has flowed into seed stage and 200 new firms have been formed.
Venture capitalists are constantly telling the entrepreneurs they invest in to make data-driven decisions. But as an industry, we haven’t been very good at doing it ourselves. Now that we have the analytics and numbers to take a closer look at ourselves and our business, we decided to give it a try. We were able to sit down with 10 years worth of our proprietary investing data in front of us — since we've been capturing data about founding teams in our community since we made our very first investment in January 2005.
We believe that seed investing is much more an art than a science — and there’s no such thing as a formula for success — but analyzing this unique data set of 300 companies and nearly 600 founders turned out to be a fascinating exercise. We looked at the founder characteristics that accompanied successes and not quite successes. Of course there were counterexamples and outliers (we actually removed the biggest outlier of all, Uber, from the study), but some definite themes emerged.
After diving into the data and testing various assumptions, we've surfaced “10 Lessons” that we want to share with the whole industry.
To be clear, we recognize that our data is still a small subset of the overall market — and (we hope) we’re better venture capitalists than statisticians — but the analysis provides an interesting and unprecedented window into the question: “What does a great seed investment look like?”
To simplify things, we evaluated every company’s performance by looking at how much their value has grown (or shrunk) between our initial investment and their fair market value today (or at exit). See below for more details on our methodology -- we recognize it’s far from perfect, but it’s the clearest.
And looking through this lens, some interesting themes emerged...
Thanks +Peter Friedman