VCs are involved in 50% of startup IPOs

This week we examine the importance of VC investments in startup success.

In today’s insights 🔍 

• VC Backed IPOs
• How VCs Support Startups
• Institutional vs Government VC

Read Time: 2.5 minutes

VC backed startup IPOs 🚀

Less than 1% of startups receive VC investment. Despite this, VCs are investors in over 50% of startups that IPO.

In Europe, close to 45% of startup investments are either failures, or have a return of less than 2x of capital. Only 7% of successful startups exit through an IPO.

With this, VCs have an important role in identifying and supporting high-potential startups; their involvement often signals confidence to the market and is an important determinant for follow-on capital and additional investors.

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How VCs Support Startups 🧩 

VCs actively take a larger role than just their initial investment, with 84% involved in providing follow-on financing, ensuring the ventures they back are well-resourced for growth. In addition, 74% take board seats, providing strategic direction and governance.

This engagement indicates VCs’ broader role in startup success; they don't just finance but also attract investor interest and provide strategic support for a successful exit process.

Weekly Startup News 🧑‍💻

Spain-based Onum raises $28m Series A
Data analysis startup Onum has raised a $28m Series A led by Dawn Capital just seven months after its launch in aim to expand to the US

Paris-based HysetCo raised £200m for expansion
Hydrogen rental taxi firm raises capital to expand refueling network beyond Paris where it provides hundreds of taxi drivers with their cars

Fintech funding reaching its lowest level since 2017
Funding for fintech startups crashed by 16% for Q1 2024 reaching the lowest level since 2017, according to CB Insights’ State of Venture Report.

Institutional vs Government VCs 🏛

In Europe, government VCs provide 24% of total startup investments, yet tend to have a less active role in continuous support of these ventures. Their involvement in follow-on financing is lower at 64%, compared to 84% for institutional VCs, suggesting a more conservative approach post-initial funding.

This conservative approach could stem from government VCs’ mandate to catalyze sector-wide impact, prioritizing a broad distribution of funds over deep engagement with fewer startups.

Our 2023 Startup Analysis

In Q3 2023, we unpacked the European startup investment trends, noting a downturn amidst economic challenges.

If you haven’t yet, now’s the time to catch up on our insights before we release our comprehensive 2023 recap report.

SearchVentures Insights

In 2023, VCs backed less than 1% of startups yet were active investors in over 50% of startups that had an IPO, showcasing their strategic impact on successful exits. Institutional VCs, more than their government counterparts, focused on follow-on support, underlining their active role in startups’ growth and market success.

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See you next week

Cheers,

Odin Lund & Hariprasad Mohandas