The Politically Incorrect Guide to Venture Capital

By Kate Lister on 15 January 2011 (Updated 17 February 2011) 0 comments
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Looking for venture capital for your Internet company? If you’re white, between the ages of 35 and 44, and a former CEO or company founder, a recent report by CB Insights suggests you have a better chance than most.

Keep in mind that figures lie and liars figure and coincidence does not imply causation. But, that said, here’s an interesting look at the demographic and geographic breakdown of who won VC favor in the first half of 2010.

The "Race" for Funding

All-Asian founder teams won the big bucks (about $4 million per deal), nearly twice that of all-white or mixed-race teams on average. California VCs shelled out 25% more for Asian founders than Caucasian ones.

Don’t know any Asians? Go east, young entrepreneur. New York and Massachusetts VCs put 30-40% more in Caucasian-led firms than those with Asians at the helm.

If your team is comprised of mixed races, California is the place to go. They beat the all-white teams there, but still ate the dust of Asian founders.

Do Entrepreneurs Improve with Age?

Overall, businesses led by 35- to 44-year-olds got the biggest slice of the VC pie and young entrepreneurs (ages 18 to 25) got the smallest. In terms of deal size, 45- to 54-year-olds won too, raising on average $1 million more per deal than the lowest-average-deal-size group, 26- to 34-year-olds. But geographic differences were substantial.

Entrepreneurs born before nudity found its way to feature films got the best reception in Massachusetts, where the majority of VCs partnered with older entrepreneurs (45- to 54-year-olds). A full 46% of investees were around when Neil Armstrong made the first footprints on the moon. By contrast, California’s “seasoned citizens” grabbed only 18% of deals, and New York’s accounted for just 14%.

For those whose footsteps arrived on the planet after Apollo 11 but before A Star is Born hit the silver screen, California was the place to go. There, 35- to 44-year-old founders accounted for almost half the deals. The Big Apple was a good place for seed funding for this group too, but New York VCs were equally enamored with 26- to 34-year-olds. 

California was apparently the wrong place to try to raise money for those hatched before Wayne’s World. Not a single 18- to 25-year-old on CB Insights’ radar successfully wooed a VC in the first half of last year. In Massachusetts, while young entrepreneurs still took last prize in overall funding, on a per-deal basis, surprisingly, they were able to raise as much as those in their parents' age group.

Experience Counts

Forty-six percent of VC dollars in the CB Insights survey went to founders who had led prior ventures. The next most favored backgrounds — sales and marketing, product development, and engineering — took less than 15% of deals.

Are Two Heads Better Than One?

Most successfully VC-financed Internet companies had one or two founders (37% and 40%, respectively), but the prize in terms of deal size goes to foursomes.

California VCs went for two founders more than half the time, but the big bucks still went to the four-founder deals. In Massachusetts, more than half the deals and a quarter of the money went to one-person ventures. But in Beantown, threesomes led in deal size.

Oddly, just 200 miles south, two-person ventures accounted for the majority of the deals (by a small margin over one-person ventures), scoring over half the New York VC booty.

Figures Lie and Liars Figure?

Okay, it’s true that this is a small, un-statistically sound sample and one deal in any particular region could skew the whole mess. But still, no money went to 18- to 25-year-olds in New York? That tells you something about attitudes, chances, and possibilities, doesn’t it?

If I was an internet entrepreneur eager for the attention of a VC — make that the checkbook of a VC — I’d be combing the historical deal data for where my venture would have the highest chance of success.

By the way, while CB Insights’ free paper didn’t report on gender biases in VC investments, it referenced an intriguing category for ventures led by "mixed-gender" founders. If you’re wondering what that means, as I was, you’ll have to sign up for their subscription service (or read the definitions section of the free report).

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