If you follow tech start ups, especially those clustered in the almighty Silicon Valley, San Francisco Bay Area, then you’ve likely heard of the Silicon Valley Bank. If you’ve not, there’s not that much to it except that someone rightly saw, in 1982, the explosion of companies and set up a bank in the area to collect deposits for all the funding venture capitalists were putting in these firms. Eventually, as the IPOs started rolling in, they also began to offer private banking services to the newly minted millionaires and billionaires. Decades later, the bank has become a globally recognized Behemoth, having funded close to 30,000 start ups from San Francisco to Beijing.
Anyhow, the bank has this survey it gathers every year on the outlook for start ups around the world. This year, it interviewed over 900 executives to publish the Outlook for start ups in 2016.
Some key trends we observe:
- It’s not fucking cheaper to start a company. Yes, upfront capex like websites, servers and basic prototyping has come down by a lot, but talent is scarcer, so hiring is tougher, and more expensive. The plethora of companies available for funding also means that the traction bar is set so much higher: where $20M in recurring revenue would set you on an IPO path, these days, you need to show that amount to by late Series A or B at the most. IPOs are now for greater than $100M-$200M revenue earners. Tough.
- Ain’t no women, bih. 66% of companies had no women on their board, 46% had no women in executive positions, and only 26% have any programs in place to address that.
- Funding is becoming a bit more challenging. 82% said getting funds is becoming harder, which is about 8-10% more than said so last year. However, the general sentiment is that the really good companies aren’t struggling to raise. This was confirmed by the recent news that Slack raised money recently at a $4.8 billion valuation which is a nice jump from around $2.6 bn a year ago.
- A little over half of start up founders said their goal was to be acquired. M&A is looking more and more like a better exit.
All in all, there’s a lot of insight into the space that one can gain from the report. My interest in SVB is more directly concerned with their money making operations in the wake of the increasing slow down in funding and the knocks unicorns have been taking lately.
Perhaps I’ll write about the Bank in more detail as I do my research. But don’t bet on it, especially if nothing particularly fun or interesting shows up.
You can take a look at the full Startup Outlook here. There’s one for the US, the UK and China which says it all about where the smart money is looking to cash out in. Enjoy the read.