Ever wonder where CEOs who have been successful raising money for ventures are going these days when they want to raise capital?
A survey of 363 CEOs by Silicon Valley law firm Dorsey & Whitney found they received it from a combination of individual angels or several angels (59%), friends and family (32%), or from early-stage VC firms (19%). Just over 17% had received funding from a traditional VC firm. When these startup CEOs seek a new or next round of funding, they expect funds to come from individual angels or several angels (68%), early-stage VC firms (39%) or super angel funds (37%). With the availability of more funding choices, startup CEOs plan to seek less funding from friends and family (26%). Seeking funding from traditional VC firms increased marginally to 22% compared to the others in a second round.
While CEOs still find traditional deal terms like valuation, dilution, liquidation preferences and board control as very important elements in completing a deal, the survey illustrated the importance of the speed at which the deal can get done and whether the investor understands the startup's funding requirements and encourages them to not take more or less than what the business requires. Respondents collectively ranked these two factors between "somewhat important" to "very important," at 91% and 92%, respectively.
Other findings include:
- While valuation rated important, a full 32% of CEOs said that this factor was only "somewhat important" to "not important."
- Roughly 64% of the respondents are seeking $1 million or less in funding, underscoring the new funding requirements of today's tech startups.
- Another key factor startup CEOs value is that they want to feel that the investor really wanted the deal. Collectively, 87% of respondents weighed this factor as "somewhat important" to "very important."
- Startup CEOs value an investor that has a focus and expertise in their industry. Almost 85% rated this factor as "somewhat important" to "very important."
- 48% of respondents ranked prior relationships with an investor as "not important."
- Although traditional VCs have an advantage in their ability to invest in future rounds compared to angels and super angels, 33% of respondents ranked this factor as only "somewhat important.
- The perception of the investor's brand does not appear to carry the same prestige and value with today's entrepreneurs. Approximately 75% thought that a tier-one "brand name" VC was only "somewhat important" to "not important."
- Despite U.S.startups eyeing international markets, and presumably valuing investors who can help them break into these emerging markets faster and more successfully, 70% of CEOs rated an investor's global presence and expertise as "somewhat important" to "not important." Geographic proximity to the startup company also did not prove to be a critical element, as 74% rated this as only "somewhat important" to "not important."