Startup Founders Chase Growth, Acquisition by Tech Giants, Study Finds

While the majority of founders say the tech industry is in a bubble (57 percent of respondents),  nine out of 10 founders believe that it’s a good time to be starting a company and are highly optimistic about their own firms’ futures, according to State of Startups for 2016 from First Round Capital – a seed-stage venture firm. This optimism has over 60 percent of startups focused on optimizing for growth with their eyes towards an exit – 72 percent of respondents predicted increased merger and acquisition (M&A) activity in 2017 – instead of optimizing for profitability (only 39 percent of founders). Nearly 25 percent of all respondents reported wanting to be acquired by one of four companies: Alphabet (11 percent); Facebook (5 percent); Amazon (4 percent); and, Salesforce (4 percent). In addition to their optimism about M&A, approximately one in five founders remain confident about their own company’s future  saying they’re certain they’ll build a billion-dollar company. 

Based upon a survey of over 700 startup founders, the study highlights several interesting trends including:

• Nearly 68 percent of startups have two or less founders;
• 69 percent of founders believe that they will be profitable within three years;
• While only 1 percent of founders project no new hires over the next 12 months, 26 percent of founders will hire between 6-10 new employees;
• Nearly 20 percent of startups performed a RIF (layoff) over the last year;
• Over half of all respondents say that agtech (54 percent) and life science (52 percent) aren't getting the spotlight they deserve;
• For the second year in a row, founders were most worried about finding and hiring the best people; and,
• Nearly 46 percent of respondents indicate that their startup would fail based on two factors – inability to raise follow-on capital (24 percent) or growth stagnation (22 percent).

When considering diversity, most founders agree that the tech industry faces a significant problem. However, only one in five responded that increasing diversity on their staff was a goal. There also is little consensus about the roots of the diversity problem with male and female founders disagreeing on the causes – men are more likely to blame the pipeline into tech while women place greater emphasis on unconscious bias and lack of role models. Respondents do not believe that the diversity problem will be addressed anytime soon. On average, respondents believe the U.S. tech industry is 14 years away from mirroring the gender and ethnic makeup of the country with over one quarter of founders saying they believe parity is more than two decades away. Read the full survey results…