2015 ● 2016

State of Startups

2017

Every year, we survey as many venture-backed startup founders as possible to figure out what it's like to run a technology company right now. This year, we got more responses than ever before — 869 — giving us an even more precise pulse on what entrepreneurs think, feel, fear, and value. As we have since 2015, we're excited to present the results here — starting with the trends and insights that stood out as important or counterintuitive.

Before we do, though, we want to acknowledge the significance of two ongoing conversations in our industry — both of which are heavily represented in the results we chose to feature. The first is about diversity and inclusion, which we incorporated into last year's survey to get founders' perspectives on root causes and possible solutions. And the second is about sexual harassment. We included a number of questions about this issue in 2017, and the results were stark.

At First Round, whenever we ask founders what data they most want and need, they almost always say the same thing: they want to know what other entrepreneurs are thinking and doing (and whether what they're doing is normal or in line with their peers). To answer these questions, we're pleased to publish the industry's largest set of data specific to the founder and startup experience — we hope you find it informative and insightful.

1

Over 50% of the 869 founders who took the survey have been or know someone who's been sexually harassed in the workplace. Unfortunately and unsurprisingly, the results to this question were extremely gendered — 78% of female founders said they've been or know someone who's been sexually harassed, compared to 48% of male founders.

They also split on public perception of the issue. 70% of female founders said sexual harassment in the industry is still underreported vs. 35% of male founders. And men were 4 times more likely than women to say the media's overblown the issue (22% vs. 5%).

2

Female founders' top solutions: more women VCs and pressure from limited partners to prevent bad behavior (tied with blacklists publicly calling out offenders). Male founders' top solutions: sensitivity training and more media coverage of incidents when they occur. Both genders agreed that decency pledges alone won't cut it — only 1% of women and 4% of men thought they were the best solution.

3

With Bitcoin and Ethereum hitting record highs, and ICO financing outpacing early-stage venture this year, the founder community seems to be embracing this new form of funding. The most eye-popping stat: in Q2 and Q3, a whopping 90% of the $2.3 billion raised by blockchain startups came through ICOs.

4

26% of founders said someone's perceived or known political affiliation would influence whether or not they'd offer them a job. 30% said an investor's politics would affect whether they'd take the money. And 37% said they'd be swayed in choosing a board member based on the person's political views.

5

Despite giants like Amazon and Google making bold moves this year, only 5% of founders said they think they'll fail because a competitor outdid them. Many more respondents said they fear not raising enough follow-on capital (22%), missing product-market fit (17%), growth stagnating (15%), or hiring the wrong people (11%).

6

In 2015 and 2016, engineering leaders were far and away the hardest executive hires to make. But this year, the tables turned, and sales leaders became the most coveted and difficult hires (with 26% saying sales was the hardest vs. 24% saying engineering). This looks like the start of a sea change as more enterprise companies enter the fray, compete for talent, and see firsthand how costly a bad VP of Sales hire can be.

7

Compared to their peers who think fundraising's a piece of cake, founders who struggle made the same mistakes more often: 3x as many said they monetized too late; 2x more chose the wrong co-founder; almost 2x more pursued the wrong business model; 40% more of them botched their go-to-market strategy; and 40% more let their burn rate get too high.

8

For the last two years, the majority of founders (64% in 2015 and 61% in 2016) said that entrepreneurs had more influence when negotiating terms with investors. This year, for the first time, this power dynamic has flipped, with 53% of founders saying investors now have more sway. Notably, this is a shift that 67% of respondents said they saw coming last year.

9

66% of women respondents said they think their gender made it more difficult for them to raise venture capital. So, it's not surprising that female founders are also much more likely to say that investors hold the power in negotiations — they have every year.

Kudos to the third of male respondents who acknowledged that gender probably helped their fundraising ability. To the 12 men who said it hurt their chances... really?

10

By far, good character stood out as the No. 1 criterion founders said they look for in a lead investor. 28% said so, compared to the runners up: partner expertise (15%), deal terms (14%), and long-term funding potential (11%).

Complete Survey Results

See below for everything from how often companies rely on bridge loans to how many founders believe they’ll be CEO in a decade. We've also broken out the demographics and attributes of the 860+ founders who responded.

On The Market

1

Is now a good time to be starting a company?

2

Are we in a bubble for technology companies?

3

Rank these technology trends from underhyped to overhyped:

*

Get hyped.
While we've watched autonomous vehicles and the on-demand economy become less hyped (and thus more mainstream), VR/AR, the Internet of Things, drones and — interestingly — Bitcoin have become more overhyped each year.

4

Do you expect it to get harder or easier to raise venture capital in the next 12 months?

5

Do you think ICOs pose a legitimate alternative to venture capital funding?

On Leadership

6

If you have at least one co-founder, how would you define your co-founder relationship?

7

Do you think you'll still be CEO in 10 years?

8

As a founder, how do you allocate your time percentage-wise?

9

How concerned are you about the following issues?

*

Hiring: top of mind, low on the to-do list.
3 out of 4 early-stage founders (series A or earlier) say hiring is their #1 concern, but the same amount say they spend less than 20% of their time on it.

10

Which of the following mistakes have you made in growing your business? (Check all that apply)

On Fundraising

11

In your last round, did you raise more or less than you targeted?

12

How long was your entire fundraising process for your most recent round?

13

How many firms did you pitch when raising your last round?

*

Making the rounds
1 out of 4 early-stage founders pitched more than 20 investors during their last fundraising round.

14

Has your company ever raised a bridge round?

15

Has your gender helped or hindered your ability to fundraise?

16

How challenging do you think it will be to raise your next round of capital?

On Investors

17

Over the past few years, do you think power has generally been in the hands of entrepreneurs or investors?

18

Over the next few years, do you think power will be more in the hands of entrepreneurs or more in the hands of investors?

19

What was the most important factor in picking your lead investor?

On Exits

20

Compared to today, over the next 18 months...

21

How do you think the number of M&A deals for startups will change over the next year?

22

If you intend to go public, how long do you think it will be until your IPO?

23

How confident are you that you're building a billion dollar company?

*

Commonalities of confident founders.
Leaders who believe they're building unicorns say they plan to hire 20+ people in the next year 2x as often, are more likely to have formal D&I plans, and give employees more time to exercise their options.

24

If you're not successful, why do you think that will be? (Choose one)

On The Bottom Line

25

How many years until you think you'll be profitable?

26

Are you optimizing for growth or profitability?

27

How is your burn rate different now than it was a year ago?

28

Do you consider curbing burn rate to be a critical priority?

*

Prioritizing D&I.
Fewer founders who say they're very concerned about their burn rate have formal D&I initiatives at their companies.

29

What’s the price per square foot at your current office this year?

On Hiring and Firing

30

Is it easier or harder to recruit talent this year than last year?

31

Are you ahead or behind your hiring plan?

32

How many people do you think you're going to hire in the next 12 months?

33

What’s the hardest executive hire you've made? (Choose one)

34

What is the average tenure of a non-executive employee at your company?

35

Have you done a RIF (layoff) in the last year?

36

A person's political affiliation would influence how you think about:

On Compensation

37

How much does a mid-level engineer at your company make (salary + bonus)?

38

How much equity does a mid-level engineer at your company receive?

39

What’s your policy on employees selling secondary shares?

40

How much time do employees have to exercise their options after leaving the company?

On Diversity And Inclusion

41

What is the male to female ratio of your board?

42

What is the male to female ratio of your entire team?

43

In the past year, has your company talked about diversity and inclusion internally or externally?

44

Does your organization have a strategy to promote diversity and inclusion?

*

D&I, gradually.
17% of founders say they now have a formal plan at their company to improve diversity and inclusion — just 3% up from 14% last year.

45

What is the primary cause of underrepresentation of women and minorities in tech? (Choose one)

46

When do you think the tech industry will become representative of the general population when it comes to gender and race/ethnicity?

*

Off track.
We got feedback from several respondents who said we should have included “We're not on this trajectory” as an answer to this question. We'll make sure it's there next year.

On Sexual Harassment

47

Have you or has someone you know personally experienced sexual harassment in the workplace?

48

How big in scope is the problem posed by sexual harassment in tech?

49

What do you think will be the most effective way to address sexual harassment in the technology industry?

About The Respondents

50

What was your last funding round?

51

Where is your company headquartered?

52

I identify as:

53

How old are you?

54

How long ago did you start your company?

*

Hardware, hard raise.
Hardware founders are 2x more likely to say they'll have a tough time raising their next round of funding.

55

How many founders does your company have?

56

How large is your team today?

57

Which sector best describes the type of company you are running?

58

Which platform are you most focused on?

Feel free to download or embed the full deck of findings.

A team of phenomenal people made this year's State of Startups possible. Many thanks to Andreas Weiland, Jarom Vogel and July Camp Design for building this beautiful site. And to Mike Goodwin, our indefatigable data scientist, who made sure we did everything right (especially our math). Last but not least, we're grateful to the hundreds of founders who took the time to share their perspectives so that we could create an accurate snapshot of startup life in 2017. You're the best.