VC-Backed Company Exit Rates

Understanding exit-rate likelihood is key to making an investment decision regarding your stock comp

Pre-Read: Key Questions This Article Answers

• How likely is it that my VC-backed company will eventually have a liquidity event?

• What are the odds that my VC-backed company will fail?

• Can I see real data detailing the percent of VC-backed companies that succeed?

Liquidity Event Odds Are (Unfortunately) Against You

One of the key decisions a tech professional working for a VC-backed Pre-IPO company needs to make is whether or not to purchase some/all of their options. Opting to purchase (or not) your stock options is first and foremost an investment decision (i.e. do you want to pay money to purchase equity ownership in the company at a specified price). And when making any investment decision, the more relevant data you have, the better the decision you are likely to make.

While data on the VC industry exists in spades (simply Google it), it's also somewhat surprising difficult to find high-quality, aggregated data that breaks that data down into what most of tech professionals trying to decide what to do with their options really want/need to see: At each company stage, what are the average odds of a successful outcome (i.e. an exit)?

Source: https://medium.com/journal-of-empirical-entrepreneurship/dissecting-startup-failure-by-stage-34bb70354a36

The Best Publicly-Available Data We’ve Found Is in the Table Above

The data above is accessible via a Medium article, and also generally jives with other data we've seen on the topic (but which we don't have the rights to reproduce).

If/as you are making a decision regarding exercising (or not) your stock comp, it's sometimes easy to proverbially "drink the Kool-Aid" regarding your company's business prospects (and most founders/CEOs are almost required to have a bit of a zealot-like belief that your company can be the next Google). But the reality is very different; most companies fail.

This doesn't mean yours will fail; and if your company does achieve success the payoff can be huge. But having functional data detailing approximate odds of success across the entire VC industry will likely improve your decision making and help "remove the Kool-Aid effect". And if you're using our simple (but powerful) framework to value your company, this data will likely be helpful as you consider what the probabilities are of each type of outcome you've selected.

Additional VC Industry Data Sources to Consider

• LTSE Equity. LTSE has built a free publicly available tool to help individuals estimate the value of their startup equity, including odds of exist (by company stage).
• Pitchbook is one of the leading data providers of VC industry investment data and returns.
• Crunchbase is a another major player and leading data provider of VC-backed company information and holistic VC industry investment data and returns.
• KPMG Venture Pulse is a (typically) quarterly publication providing a lot of great VC industry data, conducted by one of the "Big 4" accounting firms.
• Ernst & Young VC Insights is a another (typically) quarterly publication providing a lot of great VC industry data, conducted by one of the "Big 4" accounting firms.