TEN Capital’s Predictors of Funding
TEN Capital has helped entrepreneurs raise funding since 2009. From the data collected over the years, we’ve been able to predict who should and should not raise funding based on the average of all the companies raising funding.
In analyzing the data we found the variables we tracked did a good job of predicting the firms that did not receive funding. In other words, this collection of variables would seldom (<1% of the time) yield a false negative. In our analysis only a small number of firms that “should” not have received funding actually received funding.
Additionally, some variables were much more powerful than others when predicting a funding event.
- Type of Business: Firms in the “consumer” industry were 22 times more times likely to receive funding.
- Stage: firms that had received previous institutional funding were 16 times more likely to receive funding than those that did not.
- Clear Competitive Advantage: Firms that stated a clear competitive advantage were 4 times more likely to receive funding.
- Problem to solve: If the problem was perceived as relatively easy to solve, the firm was 3 times more likely to receive funding.
- Team: More experienced teams were 3 times more likely to receive funding.
- Fundraise: firms that had raised any previous funds were 2.5 times more likely to receive subsequent funding.
- Sales: it seems that firms with more established customer bases were actually a bit less likely to be funded.
Variables that were not significant predictors:
- Level of detail of financials
- Broad vs. narrow target market
- Whether or not the firm was currently in business
- Whether or not the firm had an exit plan
- Level of IP
- Whether or not the firm had a prototype
- Level of competition identified.