SOS 2017

State of Startups

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Last year, we launched State of Startups to capture what it means to be an entrepreneur. We asked the leaders of venture-backed companies about everything from the fundraising environment to their working relationships with their co-founders to their office’s price per square foot. Hundreds of founders responded and more than a million people read the results.

This year, we aimed to refresh — and enhance — our in-depth snapshot of founders and startups across the entire tech ecosystem. We asked several of the same questions to track shifting sentiment and trends across years, but also delved into new areas such as how founders pick their lead investor and the perspectives they have on diversity and inclusion.

At First Round, we continue to learn from founders, whether it’s through the First Round Review, our many events or online forums. From August to September 2016, we gathered responses from over 700 founders (from inside and outside the First Round community), who generously shared their observations, opinions and experiences. Here's what they taught us.

The bubble is deflating.

We asked 700+ founders to answer one of the most frequently asked questions we receive: are we in a bubble? Last year 73% said we were. While this year the majority still say yes, it’s closer to a coin flip (57%), down 22% from 2015.

Now’s the time to launch companies and set sail.

Though the majority of founders say we’re in a bubble, 9 out of 10 founders believe that it’s a good time to be starting a company. All aboard!

Nearly 1 in 5 founders say they’re raising a unicorn.

The unbridled optimism that drives founders is alive and well in tech: 18% of leaders say they’re certain they’ll build a billion dollar company. But that’s not to say there aren’t bumps along the way. The same percentage of leaders (18%) also report having executed a layoff in the last year.

More founders see an opportunity for exit.

In 2015, just one in three founders expected the IPO market to improve. This year, the IPO window has opened more; that number has inched higher to 43%. Founders are far more bullish about acquisitions, with 72% predicting increased M&A activity in the year to come.

From A to Z, Alphabet emerges as the acquirer of choice.

We asked founders to write in the name of the one company they'd want to acquire their startup. Out of 150 companies named, Alphabet rose to the top as the most sought-after acquirer.

Investors will hold the upper hand.

We asked founders who’d have the advantage when negotiating deals over the next few years: entrepreneurs or investors? For the second year running, founders point to investors as having negotiating power, and their conviction has strengthened: two-thirds of all founders believe investors will hold more sway. Last year, just over half (54%) of respondents felt similarly.

Men and women disagree on the cause of tech’s diversity problem.

We asked founders to pinpoint the main driver behind women and ethnic minorities being underrepresented in tech. While men and women agreed on some factors, they diverged on others. Men are more likely to blame the pipeline into tech; women place greater emphasis on unconscious bias and lack of role models.

61% of founders say their boards are all-male.

And it only gets less balanced with time. Among respondents' companies, the boards of later-stage startups are almost three times less likely to have a woman on their board.

Founders predict tech will reflect the diversity of the U.S. in 2030.

On average, respondents believe tech is 14 years away from mirroring the gender and ethnic makeup of the United States. Over one quarter of founders believe parity is more than two decades away.

Founders’ top concerns are talent and customer acquisition.

For the second year in a row, founders were most worried about finding and hiring the best people. Last year, founders’ second greatest concern was revenue growth, but in 2016, they worried more about acquiring customers. When it comes to diversity and work/life balance, approximately 1 in 4 founders say they aren’t concerned at all.

Bitcoin is still overhyped and Agtech is underhyped.

Seven out of 10 founders say that bitcoin is overhyped — the second straight year that founders believed the technology has received undue buzz. However, over half of all respondents say that agtech (54%) and life science (52%) aren't getting the spotlight they deserve.

There's still élan for Elon.

Once again, we asked founders to write in which current tech leader they admire the most and we tallied 125 names. The Tesla and SpaceX leader held firm at the top spot (23%), followed by Jeff Bezos (10%), Mark Zuckerberg (6%) and Steve Jobs (5%). The most cited female leader is Sheryl Sandberg, who clocked in at 1% overall, and 5% for female respondents.

Complete Survey Results

While we highlighted a dozen findings, the survey actually yielded many interesting, surprising, non-obvious 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 700+ founders who responded.

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On Leadership

1. How many founders does your company have?

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

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

4. If you're not successful, why do you think that will be?

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On the Market

5. Is now a good time to be starting a company?

6. If you were to start another company today, would it be in the same or a different industry?

7. Are we in a bubble for technology companies?

8. Have you sold any of your shares yet?

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On the Bottom Line

9. Are you optimizing for growth or profitability?

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

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

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

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On Hiring and Firing

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

14. Are you ahead or behind your hiring plan?

15. What’s the hardest executive hire you've made?

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

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On Compensation

17. What’s your policy on employees selling secondary shares?

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

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

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

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On the Office and Culture

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

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

23. What do you consider to be the primary driver of your company's culture?

24. What time do most people leave the office at the end of the day?

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On Diversity and Inclusion

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

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

27. What is the male to female ratio of your board?

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

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On Fundraising

29. What was your last funding round?

30. How long ago did you raise your last round?

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

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

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

34. Has your company ever raised a bridge round?

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

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

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On Exits

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

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

39. Will there be fewer or more mergers and acquisitions for startups over the next 12 months?

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

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On Investors

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

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

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

44. How has the help that your lead investors have provided matched your expectations?

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About the Respondents

45. Are you the CEO, founder or both?

46. Where is your company headquartered?

47. How long ago did you start your company?

48. Are you male or female?

49. How old are you?

50. How large is your team today?

51. What sector best describes the type of company you are running?

52. Which platform are you most focused on?

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


We had some incredible help making this project possible. Many thanks to Pablo Robles for designing and creating all the newsroom graphics, and to Jonathan Moreira for his design work early on. And to Mike Goodwin, our intrepid data scientist, who made sure we did everything right (including our math). We’re also much obliged to our web design firm July Camp. Last but not least, we are grateful to the hundreds of founders who took time to share their profiles and perspectives so that we could reflect back the state of startups in 2016.