The era of unicorn startups has created a distorted view of entrepreneurial success. All the talk about billion-dollar exits has inflated the numbers that..
The era of unicorn startups has created a distorted view of entrepreneurial success. All the talk about billion-dollar exits has inflated the numbers that define a win. Starting and selling a company for $100 million dollars is an outlier event in terms of pure entrepreneurial probability, but such outcomes are viewed as well short of success in many corners of today’s startup world.
This bizarre belief isn’ t universal, but a surprising number of VCs and industry observers are thoroughly unimpressed by low nine-figure exits.
In our hype-driven society, this actually isn’ t so surprising. Political reporters want to write about the president and the Supreme Court, not state government. Likewise, tech journalists want to write stories about companies that spell million with a “B.” Investors at billion-dollar funds want to deploy $50 million into winning companies, and $100 million exits are seen as consolation prizes instead of reasons to cheer. In this echo chamber, a $100-plus million exit seems like a jumbo-sized acqui-hire.
To put this reality distortion into context, we examined the outcomes of a special segment of the successful founders over recent decades — those who have become VCs. Looking at a broad cross-section of top VC firms, we identified 63 investors who have a background in starting companies. Only 11 of those founders-turned-investors have built enterprises that have IPO’ d or sold for more than $1 billion.
Many of the most successful investors built exceptional startups, which only by today’s distorted standards look like “modest” economic outcomes. Y Combinator’s Paul Graham is one of the most influential venture capitalists of the last 10 years, yet his startup Viaweb sold for “just” $49 million. Viaweb was a success by any realistic standard, but perhaps not by today’s hyped success narrative and fundraising stockpiles. The company only raised $2.5 million before its sale — a pretty impressive return and an amazing precursor to what was to come for Paul Graham. It turns out that “small” exits can lead to big things.
