Sizing up the largest Seed, Series A, and Series B deals

Two days ago, I wrote about a number of trends underlying venture capital deals the last few years. The short version:

  • The number of deals is down, while capital invested is up, which means the average deal size has increased
  • Looking at the underlying data shows a widening dispersion of deal sizes within round sequences, and the drivers of that variation differed across the rounds.
  • These trends were strongest in earlier rounds, and for that segment of the market, was generally driven by some very large deals at the top (though, deal sizes across the distribution within rounds has been up overall).

Today, I thought I'd go ahead and plot those deals. The charts below show the number of deals at the high end of three funding rounds (Seed, Series A, and Series B) between 2007 and 2017. It shows just how much bigger some of the largest deals within these round sequences has gotten.

That's it... a short post for once.

High-growth firms of the Inc. 5000

High-growth firms of the Inc. 5000

Today, I have a new report out at the Brookings Institution titled "High-growth firms and cities in the US: An analysis of the Inc. 5000." The Center for American Entrepreneurship generously provided funding for the study and Inc. Magazine provided the data.You can read the entire report in more detail with the link above (it's a 15 minute read, max), but here are some takeaways.

Microdistilleries on the rise

Microdistilleries on the rise

Yesterday I wrote about the exponential growth in microbreweries during the last decade. The trend toward small business activity in the brewery industry is an interesting case study because the rest of the economy is moving in the opposite direction—with industry consolidation is on the rise and the rate of business formation near record lows. That got me to thinking: what other industries are experiencing a similar trend of substantial rises in small business activity over a short period of time? I crunched the numbers, and one industry noticeably stood out—distilleries

Craft breweries buck the monopoly trend

Craft breweries buck the monopoly trend

Mounting evidence of widespread industry consolidation has many worried about the future health of the American economy. Excessive industry concentration can have negative effects on innovationjob creationwages, and productivity—hallmarks of competitive markets with many startup companies. But, there is at least one intriguing exception to this trend: microbreweries. I dug into Census Bureau data to find out the magnitude of this trend—looking at brewery industry business counts and employment by firm size.

Immigrant-owned businesses are fundamental to American cities

Earlier this week I read Tech and the City: The Making of New York's Startup Community, by journalist Maria Teresa Cometto and venture capitalist‎ Alessandro Piol. Among many other things, they describe how a preponderance of immigrant-run businesses is attractive to foreign-born high-tech entrepreneurs coming to the United States. Immigrant-owned businesses are one of my favorite things about New York—or any city really. That got me thinking, just how concentrated is New York with foreign-born business owners? What about other American cities? So, I dug into U.S. Census Bureau data to find out.

Immigrant entrepreneurs are vital to American prosperity

Immigration policy continues to vex America. For more than a century, the United States has proudly defined itself as the world’s great melting pot of immigrant cultures and talents. And yet, few issues have more sharply divided the modern political landscape. As policymakers grapple with these difficult questions, two critical realities are too often forgotten amid the haze of fractious political debate — the connection between entrepreneurship and economic prosperity, and the importance of immigrants to American entrepreneurship.

The Rise of the Rest Seed Fund

On Monday, Revolution — the Washington-based venture capital firm lead by Steve Case — announced a new $150 million seed fund dedicated to helping entrepreneurs living outside the well-established startup hubs get their business off the ground. I’ll use this opportunity to share three things stand out in my mind.

Almost half of Fortune 500 companies were founded by American immigrants or their children

The Center for American Entrepreneurship, a non-partisan policy and advocacy organization, published a study today on the founders of America’s most valuable companies—those in the Fortune 500. The results are striking—43 percent of companies in the 2017 Fortune 500 were founded or co-founded by an immigrant or the child of an immigrant, and among the Top 35, that share is 57 percent.

Democrats Want To Shutdown The Government To Protect DREAMers--Here's An Economic Case For Doing So

Democrats want to withhold support for any spending bill that doesn’t establish the legal right of “DREAMers”—the 800,000 immigrants brought here illegally as children—to stay in the United States permanently. Economic history suggests that we may thank them for doing so.

The Other Capital

You hear it in startup communities everywhere: “we don’t have enough capital; if only we had more capital we could achieve X; we can’t grow our company here because there is no risk capital,” and so on. There is no denying that early-stage funding can help startups profoundly. But, let me point to another type of capital that is just as important for a startup community over the long-run. It is also something that local leaders have greater control over. Social capital refers to the set of informal norms and values shared by a group of individuals (a network), which allows them to cooperate and engage collaboratively with greater ease. If it is the network (relationships) that directs vital information and resources (ideas, talent, funding) to company founders, it is social capital—the nature of those linkages—that determines how well information and resources flow through the network.

The Innovation Blind Spot

The Innovation Blind Spot

In The Innovation Blind Spot: Why We Back the Wrong Ideas and What to Do About It, a book released just last week, social entrepreneur and venture capitalist Ross Baird discusses how our blind spots affect how, whether, and to what extent we support the ideas of tomorrow. In it, he describes how mental shortcuts, biases, and funding models prevent us from tackling our most pressing social and economic challenges, instead opting to solve problems that are familiar, and where investment returns are more predictable.

Startups Rising in the Middle East

Startups Rising in the Middle East

Last week my friend Chris Schroeder published a highly engaging article on the state of technology entrepreneurship in the Middle East. If this topic interests you, I encourage you to check him out. Chris is a successful American internet and media entrepreneur turned global startup investor. He’s easily one of the most knowledgable people on the planet about startups and venture capital in the Middle East specifically, and emerging markets more generally.

The article, “A Different Story from the Middle East: Entrepreneurs Building an Arab Tech Economy“, appears in the MIT Technology Review. It highlights some recent successes in the region—including Amazon’s $600 million acquisition of e-commerce platform Souq.com in March, and the $1 billion valuation placed on ridesharing app Careem a few months earlier—and the psychological impact these breakout companies have had on entrepreneurs there.

Is America Encouraging the Wrong Kind of Entrepreneurship?

Is America Encouraging the Wrong Kind of Entrepreneurship?

Last month, economist William Baumol passed away at the age of 95. His death was universally mourned by the economics community, many of whom shared the view that he had passed before receiving a much-deserved Nobel Prize. One of us had the great privilege of working with him, befriending him, and being able to regularly witness his economic wisdom, even in his later years.

Among his many contributions to economics, Baumol is most famously known for his “Cost Disease”, which explains why high-productivity industries raise costs and therefore prices in low-productivity industries. This insight is particularly relevant now, as economic activity has shifted into low-productivity services like healthcare and education, where price increases are devouring public and household budgets, and whose continued low productivity has weighed down U.S. productivity growth overall.

However, a lesser-known work of Baumol’s is equally relevant today, and may also help explain America’s productivity slump. Baumol’s writing raises the possibility that U.S. productivity is low because would-be entrepreneurs are focused on the wrong kind of work.

Feeling Isolated? Build a Diaspora

Talent flight is a real problem. Not just for college towns, but for major cities and regions outside of coastal innovation and knowledge hubs like Silicon Valley and New York. The US Midwest, for example, is notorious for producing high rates of engineering and science graduates from top-flight schools, only to see them flee for the coasts (though, this trend may be changing somewhat).

Over the long-term, city leaders need to think hard about how to make sure that would-be local entrepreneurs and other talented individuals have the resources they need to stay at home. But, let me suggest another course of action that can be taken right away: build a diaspora.

Ridesharing hits hyper-growth

The last year has been rough for ridesharing app Uber, what with a litany of regulatory challenges, lawsuits over intellectual property infringement, and questions about gender relations in the workplace. The new year even brought a Twitter-driven #DeleteUber campaign.

So, how’s the business of ridesharing doing? Well, we don’t have good government statistics for 2016 yet, but we do now have such data for 2015, and these show that the hyper-growth of ridesharing that we documented last year is, if anything, accelerating. In fact, just-released data from the U.S. Census Bureau on “nonemployer firms,” which tracks the activity of freelancers (as in the gig economy), shows that 2015 saw the strongest growth of ridesharing yet. Ridesharing through Uber, Lyft, and other apps showed no signs of plateauing in 2015, and instead, the evolving industry spread—including into new metropolitan areas.

How Big is the Tech Sector?

Earlier today, Tyler Cowen had a post titled "Why are there so few computer science majors?", which was prompted by this Dan Wang post on the subject. Among other things, Tyler wonders if there are relatively few computer science majors simply because the tech sector is actually pretty small. Since I was already working with economic data today for another project, I thought it was worth taking a quick look to find out just how big the tech sector really is.