Tag Archives: Paul Kedrosky

Where Startups Get Their Money

Where do young companies get money? I ran into this three-minute video over the weekend. It’s a great summary. If you’re not already up to speed on the range of startup options from personal savings to venture capital, just watch this:

(Note: Here is the link to the original on YouTube: https://www.youtube.com/watch?v=U470xXKfDyE)

My thanks to the Kauffman Foundation for providing this, and kudos to narrator Paul Kedrosky, a well-known expert on venture capital. 

It does, however, skip over the influence of angel investment, which stands somewhere between friends and family and venture capital. Angel investors generally focus on seed money – early investment for startups at early stages of growth – for amounts less than $1 million. Several experts have different definitions of angel investment, on how many angel investors exist, and how much money they invest. As I write this, the latest available statistics come from 2013. Approximately 300,000 angel investors invested about $25 billion in 71,000 startups, mostly for seed financing and early stages. Venture capital invested about $30 billion that year, but in only 4,000 companies. (For more on that, here’s a link to a draft chapter from my latest book, on Lean Business Planning: Angel Investment.) 

I wonder if that’s just to simplify the landscape as Kauffman explains it, or, possibly, because so many people bunch venture capital and angel investment together, as if they were the same thing. 

And, changing the subject, I found this interesting number to reinforce what the video is saying. Wells Fargo Bank did a study of startups about 10 years ago and found that the average startup cost in the U.S. is $10,000. 

3 Surprising Notes from a Paul Kedrosky Keynote

I’ve been a reader of Paul Kedrosky for several years now, so it was a privilege to listen to his 3.5 reasons for optimism last Friday at the Bend Venture Conference in Bend, Oregon. Paul posts at Infectious Greed and appears often in the media.

I admit its sorely tempting, but, after reflection (and some drafts), I’m not dumb enough to attempt to summarize somebody else’s brilliant 45-minute talk into a post like this. However, I can’t resist sharing at least these three high points and surprises.

1. The uninvention of fire

Consider this an opening salvo, which managed to wake up a sleeping crowd at barely after 8 a.m. on a sunny Friday morning. It worked something like a whack on the side of the head. For me at least. And maybe the coffee helped too.

FIRE = finance + insurance + real estate. For a generation or two now, a high percentage of our smartest people have been going from the high-status educational institutions into those FIRE industries. Now, after the fall, that’s less likely. Or so we hope.

2. Those population statistics

I’d heard somewhere that 40% of the people who ever lived are still walking around, alive today. No, as it turned out, or at least Paul K. seemed convincingly sure of himself as he said it, only 8% of the people who ever lived are alive today.

However, 50% of the lawyers who ever lived are alive today. And 75% of the scientists and engineers are alive today. You decide: good news, bad news, both? Which is which?

3. BioTech as attractive nuisance

Happily, the key visual on this theme is available here on Infectious Greed. It’s a very powerful image, showing that investment in BioTech hasn’t yielded a proportionate amount of new discoveries. I hadn’t heard the term “attractive nuisance” before, but it fit the context pretty well.