We recently hosted the first episode of a six-part webcast series we’re doing with Silicon Valley Bank. In episode one, Elliot Susel, Lean Startup Co. Faculty Member, spoke with Theron McCollough, Managing Director of Silicon Valley Bank’s Early Stage Practice about the 2019 Startup Outlook US Report they just released.
Don’t have time for the full webcast now? Catch the webcast highlights and tips from their conversation in our companion blog below.
If you’d like to read the full transcript of Elliot Susel’s conversation with Theron McCollough, you may download it.
Helping the Present and Looking to the Future of Startups
In 2004, Theron McCollough joined a startup and never looked back. He has remained in the startup space ever since. Now, as the Managing Director of the Early Stage Practice at Silicon Valley Bank (SVB), his main job is “just helping startups.” He gets to connect companies and people together and help make the introductions that specifically match with what startup founders are building. “It’s what makes me wake up every day,” Theron says, “and I’m excited to come to work.”
In his role at Silicon Valley Bank, one of the things Theron gets to work on is the Startup Outlook Report they release every year. The 2019 report was just released (check it out here), and Theron was able to share some insights about what the report says about the startup world right now.“It’s what makes me wake up every day and I’m excited to come to work.” - @theron Click To Tweet
Good Help can be Hard to Find
Every company, large or small, has to deal with hiring on some level, so it’s not surprising that 82% of the startups that SVB talked to want to increase their workforce (see page 10 of the report). But the report also exposes interesting insight on how challenging these startups thought it was to find workers with the skills to grow their business: 29% found it extremely challenging, 62% found it somewhat challenging, and 9% thought it wasn’t very challenging.
Theron chalks these percentages up to trends in the marketplace and the types of companies people want to work for. The companies in the 9% bracket are most likely in areas like AI or blockchain that are going to be more exciting or may be raising more capital. And even if the companies aren’t the best performing in the market, the people they hire still get the benefit of gaining experience and learning so much in these new and exciting spaces.
So, while the other sectors “are very interesting [and intriguing],” Theron says, from a hiring standpoint, “there’s less volume to choose from.”
Women are Making Up Lost Ground in Leadership Roles
Some of the most encouraging data on the report concerned women in leadership positions (page 11). The percentage of US startups with at least one woman on the board of directors increased to 37% (from 29% in 2018) and at least one woman in an executive position increased by 10 percentage points to 53%.
While this data is good news, Theron looks ahead and wonders what this means for 2020. If the percent continues to steadily increase over the next three to five years, could that create more balance for these companies? He notes that, in the past, having people in the workplace who come from different backgrounds and different perspectives has helped companies flourish.
Raising Funds May be Less Challenging Than You Think
One of the pieces of information that Theron found intriguing was how startups viewed raising funds (page 5). 71% of US startups successfully raised capital in 2018. But more interesting is that one-quarter of those startups say the fundraising environment is not challenging.
Theron chalks a lot of this up to the increased presence of data. “There’s more data for both the investment community as well as the startup community,” he says. Those companies who can gather data that prove the veracity of their product or business will find it less challenging to raise funds.
There also may be more money going around, but that it’s going to companies that have proven product market fit and have proven some sort of revenue. Companies that are pre-seed or are seed companies with no proven market fit or lower revenues generally have a more difficult time raising funds because the money is going to more established companies.“There’s more data for both the investment community as well as the startup community.” - @theron Click To Tweet
A New Look at Long Term Goals
Page 7 of the SVB report focuses on long-term goals. Not surprisingly, a majority of startups say that their long-term goal is to be acquired. But it’s a smaller percentage that is perhaps more interesting. 15% of companies don’t know what their long-term goal is, which is up from the reported 9% from last year. “I think [that] 6 percent increase in one year is a pretty big jump,” Theron says.
But, Theron points out that this may be because there are more options for companies now. Companies may want to do something different than a traditional IPO or raise money a different way.
Or, the other thing he’s noticing is companies who want to maintain or have control of their company. “Once you raise the price round on an institutional round, you can lose that level of control,” he says. So founders are considering all options before going down any specific route.
The Most Promising New Sectors
When it comes to looking ahead to the technologies that are the most promising innovations (page 9), entrepreneurs clearly agree that AI rises above all other sectors. This is something that Theron echoes. “We’re actually doing some deep tech that’s making a meaningful difference,” he says, “So I think there’s going to be a lot more investments that way.”
Looking at the longer term – a decade from now – entrepreneurs think that autonomous transportation has the chance to make the biggest leap in potential, whereas that sector doesn’t even make the top five list for today. This isn’t too surprising, with personal, commercial, and freight industries all standing to benefit from advances in technology and innovation. And perhaps over the course of the next ten years, regulations will relax and people will be more open to autonomous transportation as an industry.
Theron also notes Life Sciences, which came in third on the list of innovations with the most promise for the future, is an interesting subject matter. He points out that, in some cases, we’re currently working with the same technology that we’ve been using for decades and relying on that as the standard, leaving room for technology to help us make a potential improvement.
Get in Touch
Theron knows what it’s like to build a business and to work in the startup sector, so he knows how difficult it can be, but he encourages entrepreneurs to keep going. “Keep it up, and don’t listen to anybody, but listen to everyone at the same time.”
Check out the complete Silicon Valley Bank 2019 Startup Outlook US Report here.
Thanks to Shannon Lorenzen for contributing this piece. If you seek to bring the entrepreneurial spirit to your organization, Lean Startup Co. can help.