Pitch y Venture Capitalists

Cómo los capitalistas de riesgo realmente evaluan tu elevator pitch 
Harvard Business Review





Antes de que Lakshmi Balachandra ingresara a la academia, pasó algunos años trabajando para dos firmas de capital de riesgo, donde rutinariamente presenció un fenómeno que la desconcertaba. Los CV recibirían un plan de negocios de un empresario, lo leerían y se emocionarían. Ellos harían algunas investigaciones sobre la industria, y su entusiasmo crecería. De modo que invitarían al fundador de la empresa a una reunión formal, y al final no tendrían ningún interés en hacer una inversión. ¿Por qué una propuesta que parecía tan prometedora en el papel se convirtió en un no inicio cuando la persona detrás del plan en realidad lo lanzó? "Eso es lo que me llevó a buscar un doctorado", dice Balachandra, ahora profesor asistente en Babson College. "Quería romper y estudiar la interacción entre el CV y ​​el empresario".

Incluso antes de comenzar sus investigaciones, Balachandra tenía algunas intuiciones. La mayoría de los empresarios creen que la decisión de inversión dependerá principalmente de la sustancia de su tono, la información y la lógica, generalmente presentada en una cubierta de PowerPoint. Pero de hecho la mayoría de los CV revisan las cubiertas de la echada de antemano; El encuentro en persona es más acerca de hacer preguntas, ganar claridad y valorar personalidades. Para entender mejor esas dinámicas, Balachandra pasó casi 10 años capturando lo que ocurre en las reuniones de tono y cuantificando los resultados. Algunos patrones eran evidentes desde el principio. Por ejemplo, los empresarios que se ríen durante sus lanzamientos tienen más éxito, al igual que las personas que nombran a sus amigos que tienen en común con los CV. Pero después de profundizar, sacó cuatro conclusiones generales:

La pasión está sobrevalorado.

Trabajando con grabaciones de video de 185 minutos de duración durante un Concurso de Emprendimiento del MIT (con VCs reales como jueces), Balachandra hizo que los codificadores apaguen el sonido y usen sólo las imágenes para evaluar cuán energético y positivo o negativo cada fundador apareció. Tanto en los CV como en los emprendedores, la sabiduría convencional sostiene que la "pasión" es un atributo positivo, que conoce la alta energía, la persistencia y la compromiso. "Hay esta mitología que quieren ver que te mueres por hacer este negocio y trabajar duro", dice Balachandra. Pero cuando los codificadores analizaron sus evaluaciones a la luz de que las start-ups fueron elegidas como finalistas en la competencia, encontraron que lo contrario era cierto: los jueces prefirieron un comportamiento tranquilo. Los estudios de seguimiento mostraron que la gente iguala la calma con la fuerza del liderazgo. Por lo tanto, moderar el entusiasmo y el proyecto de preparación de piedra fría en su lugar.

La confianza supera la competencia.

En un segundo estudio, Balachandra trabajó con una red californiana de inversionistas ángel que se reúnen mensualmente para escuchar los lanzamientos de 20 minutos de las nuevas empresas. Inmediatamente después de cada lanzamiento, los inversores rellenaron encuestas detalladas sobre sus reacciones e indicaron si querían enviar la empresa a la debida diligencia (el siguiente paso antes de invertir). Los resultados mostraron que el interés en un start-up fue impulsado menos por juicios que el fundador era competente que por las percepciones sobre el carácter y la confiabilidad. Balachandra dice que esto tiene sentido: un CEO que carece de una competencia basada en habilidades, como un fondo financiero o técnico, puede superar eso a través del entrenamiento o contratando el talento complementario adecuado, pero el carácter es menos maleable. Y porque los inversionistas ángel a menudo trabajan de cerca durante varios años con los empresarios en empresas de alto riesgo, buscan pruebas de que sus nuevos socios se comportarán de manera honesta y directa que no aumentan los riesgos. De hecho, la investigación demostró que los empresarios que proyectaban confiabilidad aumentaron sus probabilidades de ser financiados en un 10%.

Hacer de coach importa.

Particularmente entre los inversores ángel, que se involucran más temprano que los CV tradicionales, las decisiones no son impulsadas sólo por los beneficios potenciales; Son impulsados ​​por el ego también. La mayoría de los inversores ángel son empresarios experimentados que quieren ser mentores prácticos, por lo que prefieren las inversiones donde se puede agregar valor. Para que eso suceda, un fundador debe ser receptivo a la retroalimentación y tener el potencial de ser un buen protegido.

Balachandra llegó a esta conclusión realizando encuestas y evaluando sesiones de video con la misma red de inversionistas de California. Los codificadores examinaron los videos para los comportamientos, tales como asentir y sonreír en respuesta a las preguntas, indicando que los fundadores estaban abiertos a las ideas. Cuando el análisis y los resultados de la encuesta indicaron que eran, y cuando el inversionista tenía experiencia en la industria relevante-dándole el conocimiento que podría agregar valor- la compañía era más probable pasar a la diligencia debida.

Los estereotipos de género juegan un papel.

En el primer trabajo de Balachandra en capital de riesgo, rara vez se encontró con otras mujeres, ya sea entre los CV o entre empresarios; De hecho, dice, el 94% de los capitalistas de riesgo son varones. En su investigación, ella y sus colegas usaron videos de la competencia del MIT para probar la percepción de que los CV son sesgados contra las mujeres empresarias. Los codificadores anotaron si el presentador era masculino o femenino y luego medían si exhibían comportamientos estereotípicamente masculinos (como la fuerza, la dominancia, la agresividad y la asertividad) o estereotípicamente femeninos (calor, sensibilidad, expresividad y emotividad). El análisis reveló que, aunque el género por sí solo no influyó en el éxito, las personas con un alto grado de comportamiento estereotípicamente femenino tuvieron menos probabilidades que otras de tener éxito en el lanzamiento. "El estudio muestra que los CV son sesgados contra la feminidad", dice Balachandra. "No quieren ver comportamientos particulares, así que si eres demasiado emocional o expresivo, deberías considerar practicar para evitar esas cosas".

Lo más importante para los empresarios es esto: Debes acercarte al proceso de lanzamiento menos como una presentación formal y más como una conversación improvisada en la cual la actitud y la mentalidad importan más que los fundamentos del negocio. Escucha con atención las preguntas que te hacen y reflexiona en tus respuestas. Si usted no sabe algo, ofrezca descubrir-o pregunte al inversionista qué él o ella piensa. No reaccione defensivamente a preguntas críticas. Y en lugar de obsesionarse con los detalles de su plataforma de tono, Balachandra aconseja, "pensar en ser tranquilo, fresco y abierto a la retroalimentación."

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5 pasos a cumplir de intentar convencer a inversores

Deja de promocionar si usted no tiene estas 5 cosas que los inversores buscan
La prmoción (pitching) es lo que hace todos los emprendedores usan para recaudar dinero de los inversores. 5 consejos aprender cada emprendimiento debe tener antes de lanzar a los inversores.
Por CHIRAG KULKARNI - Inc




La inversión semilla es generalmente el primer dinero que se pone en una empresa y puede ser el comienzo de un viaje emocionante para una empresa. A pesar de que estamos en una crisis de financiación, o un período de tiempo en que la financiación puede ser escaso, los emprendedores siguen promocionando como locos y gastando su tiempo y energía en inversores de las primeras semillas convincentes para poner en sus dólares en lo que podría ser una oportunidad de mil millones de dólares .
Existen múltiples posibilidades de financiación que podría recurrir a y tener éxito como empresario, pero una de las formas más comunes es a través de una incubadora como 500 nuevas empresas, TechStars, frente a Y Combinator.
Me senté con Arjun Dev Arora, emprendedor en serie y empresario residente en 500 nuevas empresas, un acelerador de fase semilla en San Francisco y Mountain View, California, para discutir las 5 cosas que los inversores busquen el.

1) Un equipo fantástico

Como la mayoría de los ángeles proclaman, el equipo hace la diferencia entre el éxito y el fracaso. Algunas de las ideas más exitosas ya se han intentado antes, pero todo se reduce a la verdadera materia y el talento del equipo que puede tomar una idea y ejecutar en él.
Después de haber invertido en múltiples nuevas empresas de tecnología, Arjun menciona que siendo conducido, adaptable, elegante, y el valor de conducción son la mayor importancia cuando se trata de el éxito de la empresa.

2) Indicadores fuertes de de ajuste producto / mercado 

La mayoría de los empresarios piensan que el momento en que han llegado con una idea de mil millones de dólares que los inversores estarán acudiendo a ellos, pero no se dan cuenta la cantidad de trabajo que se debe hacer para que el proceso de recaudación de fondos más fácil.
en forma de producto / mercado es cuando nuevas empresas tienen una alta participación con su producto junto con las personas que están dispuestos a pagar por ello. Esto se convierte en extremadamente importante porque es un gran indicio de éxito y muestra los inversores que existe una demanda adecuada para lo que se está construyendo.
Aunque hay algunos inversores que inviertan porque les gusta el equipo y creen que será un éxito, una mayoría podría ser vacilante. Al comprobar sus números, usted tiene una mayor probabilidad de alcanzar un máximo su interés.

3) Pensamiento sistémico

Uno de los aspectos más difíciles de iniciar un negocio es la comprensión de cómo construir y perfeccionar los sistemas para todos los procesos con un ojo para el diseño. El pensamiento sistémico es lo que Arjun describe como una habilidad para la creación de sistemas en su comercialización, ventas, desarrollo de productos, o cualquier cosa que pueda ser sistematizado a la vez que prestar atención a lo que quiere el cliente.
Con demasiada frecuencia, los inversores ven los productos que han construido sistemas refinados, pero carecen del atractivo estético que obliga a los clientes a limitar el uso del producto, o la inhibición de la empresa.

4) Mercado masivo

Sea o no le gusta, el negocio de la inversión es para mostrar un retorno que es mayor que la cantidad que los inversores han puesto en. Steve Blank empresario, exitoso, autor y profesor de la Haas School of Business de la Universidad de California en Berkeley , la Universidad de Columbia y el Instituto de Tecnología de California (Caltech) menciona que los inversores de fondos y las empresas están esperando un evento de liquidez.
Por estas razones, que tiene un mercado lo suficientemente grande da su oportunidad de inicio para crecer y hacer frente a enormes problemas. Uno de los mayores errores Arjun dice es que el mercado tiene que ser enorme en la actualidad.

5) Fuerte creatividad y diseño 

No es todo acerca de la tecnología pesada, presionante, y ventas. la creatividad cerebral correcta y un ojo estético es tan importante como un enfoque centrado en el impulsado de la optimización de proceso.
Una gran regla de oro es tener al menos un diseñador, pirata informático, y buscavidas en el equipo.
Si cree que su puesta en marcha tiene lo que Arjun está buscando, se aplican a la siguiente tanda de 500 nuevas empresas!

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Emprendedores israelíes obtienen financiamiento para centro de datos Stratoscale

Israeli entrepreneurs nab $10M for data center startup Stratoscale (exclusive)


Stratoscale founders Ariel Maislos and Etay Bogner

Christina Farr


One of Israel’s most successful entrepreneurs is back with a stealthy new startup, dubbedStratoscale, which is building new software for large data centers.

Silicon Valley and Herzeliya, Israel-based Ariel Maislos spent a decade in the Israeli army developing data virtualization technologies, before starting several companies. One of these startups, Anobit, was bought by Applefor nearly half a billion dollars in late 2011, one of its largest acquisitions to date.

With his latest venture, Maislos is developing modern virtualization technology with chief technology officer Etay Bogner. Bogner is also a successful entrepreneur; his previous company Neocleus was acquired by Intel.

“We believe that data centers are growing larger,” said Maislos in a phone interview from his Silicon Valley office. “We see that as a huge opportunity.” Maislos and his investors believe that data centers based on single-server virtualization have become inefficient.

According to Maislos, companies like Facebook and Twitter aren’t buying individual machines anymore, but today’s operating centers are still optimized for single machines. Stratoscale is building the new operatng center for the new moder data-center setup, which will theoretically bring faster performance and lower power usage.

Stratoscale’s founders had no shortage of interest from investors. Until now, the company has been a self-funded effort. However, Maislos told me he believes in the “VC model,” meaning the guidance, the capital and the customer connections that are offered by the top firms. Today, he closed a $10 million round led by Silicon Valley firms Battery Ventures and Bessemer Venture Partners.

Battery’s Scott Tobin will join the Stratoscale board. He’s worked with both the Stratoscale founders at their previous companies.

Stratoscale is still developing its technology and reaching out to potential customers. “We are trying to do is simplify the data center and virtualize it at a different scale — on a larger scale than a vendor like VMware,” he said. Maislow is making a firm bet that hardware will become commoditized, and the real opportunity is software infrastructure for scalable computing.

“Under this system, each workload can run on the best matching hardware. All available resources are used, and a unified compute and storage infrastructure is achieved,” he explained.

With the funding, Maislos is expanding the team. He’s currently in Silicon Valley screening potential candidates.

Venture Beat

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¿La oferta atrae a la demanda? (2/2)

Part II: How VCs Test Market Demand

ED ZIMMERMAN: My last WSJ Accelerators piece focused on how successful repeat founders tested their offerings/company prior to their launch. In this installment, we turn to how VCs test market demand for a product when conducting diligence prior to investing. While this is important for founders like those discussed in the last article, without the track record those founders had, diligence on market adoption becomes even more important.

So, what if you’re not David Chesky of HDTracks, Matt Keiser of LiveIntent, Amanda Hesser & Merrill Stubbs of Food52 or Craig Danuloff of Rewind.Me? What if, instead, you’re an unproven founder? How will VCs test the market demand for your company before investing?

To pull back that particular curtain, I called Ian Sigalow, co-founder and general partner at Greycroft Partners, an early stage tech VC. 2012 has been kind to Sigalow and his colleagues, as they’ve just closed on their third fund ($175M) and scored major exits when portfolio companies Buddy Media and Vizu were recently acquired. Greycroft initially invests $500K to $5M and typically increases that position over time. The fund also has a seed program which, Sigalow says, generally focuses on repeat founders re-entering a market in which they’ve proven themselves.

Sigalow would have sat out Rewind.Me, which raised before launching a product. When Greycroft eyes a consumer-focused startup “we need to see user traction — I can’t look at a product and say ‘this will be the next great thing’ because there are elegant products that never get adopted and crappy products that do.”

In fact, when Sigalow looks at a company likeHDTracks, which targets consumers, he fragments the market into two groups: companies charging consumers, and those making money based on large-scale user adoption (for instance, an advertising-based model). “If it’s monetized by advertising, then a few hundred users makes it hard for us to tell whether it will work (because the company will need millions of users). If, alternatively, (users are) paying a subscription each month, a few hundred users is probably adequate for us to determine what works.”

What about B2B companies (called “enterprise” businesses) like LiveIntent? While a fund like Greycroft may need hundreds of paying or 30,000+ free consumer users to feel like there’s sufficient traction, for enterprise companies, the fund may find sufficient traction with only half a dozen large customers using a product for free in beta.

Sigalow explains that for products sold as “freemiums” (the company provides a base product for free and charges for enhanced versions), Greycroft, not surprisingly, looks at whether customers want to pay for it.

Once they’ve decided they like a company enough to commence diligence, the Greycroft team compiles a list of dozens of people in their own network — experts as well as actual and potential customers in addition to references and customer contacts provided by the startup. Each call may take around half an hour to cover whether customers would pay for the service, to whom they’d recommend it and why, and who else they considered (or would consider) using.

Sigalow doesn’t just rely on the phone. Greycroft heavily uses Instant.ly, an online offering from Los Angeles-based uSamp. Instant.ly “has a 10 million person panel so we can target by age, geography, relationship status, job title, etc. and get thousands of survey results back in real time as if they were our own contacts.” You can specify how many survey results you want and, because Instant.ly usually has some 4,000+ users on its site, you can begin seeing results almost immediately. A few hundred responses from people Greycroft doesn’t know complement the data gleaned from calling their own network.

Sigalow underscored that “some funds like to risk more capital at an early stage. Seed funds, of course, are often doing pre-product.” Angels too invest pre-product, as I did when I invested in Rewind.Me and LiveIntent, but Sigalow’s detailed explanation is not far from how other Series A investors approach diligence prior to funding a promising startup.

Intrigued by Instant.ly, I reached out to uSamp founder Matt Dusig to see how the tester had done his own market testing before launching Instant.ly. “We built an entire business before building Instant.ly” he said, referring to uSamp, which “provides online market research panels and SaaS technology for global market research.” USamp receives inbound requests from corporations looking for market research. Those clients repeatedly told uSamp “we love working with the marketing agencies we use, but sometimes we can’t wait a month or longer for feedback, we want it instantly.” So it was less a question of Dusig testing the market and more of the market shouting at him, which, of course, is a great way to find a hole in the market. Much has been written about “founders in search of a problem” rather than those motivated by an existing problem.

Now that startups have become stylish, there’s a concern that people spend too much time seeking a problem rather than building useful experience and contacts which then would, almost in the ordinary course, reveal problems that desperately demand solving. USamp is definitely in the latter category. In fact, when asked, Dusig explained that prior to founding uSamp, he and his cofounder had built and sold another market research firm and then moved into another online business during the post-sale noncompete period (again, knowing what the market needed trumped testing).

This model of the repeat founder doubling down in a space he or she knows is precisely what VCs crave and, of course, that’s why Sigalow’s fund led the second venture round into USamp, which has now raised approximately $20M from Greycroft,DFJ Frontier and, more recently, Adam Marcus at OpenView Venture Partners.

So are you going to test the market or let the market shout at you? Please post a comment if you have questions or thoughts about the way investors diligence startups or if you have some great ideas and tools for testing the market for consumer or enterprise tech companies. We’ll do our best to answer!

WSJ

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5 cosas que busca un inversor en un emprendedor

Straight from the VC’s mouth: 5 things I look for in a CEO

This guest post was written by Mitch Rosich, a partner at Athenian Venture Partners.

I’ve worked with many IT companies over the course of my career. Between two decades of experience in product and engineering development and a decade in venture capital, I’ve experienced working with a variety of leaders, some more effective than others.

IT startups need a lot of positive ingredients to get off the ground, including a sustainable vision, focused and realistic goals and, perhaps most important, a deep management bench. Since it is just starting to build towards the future, the IT startup needs a leader with a set of attributes that can contribute to leading the company to success. In the startup stage, the company is constantly evolving and lessons are being learned, and the CEO must be able to show the way during this change, sink with the ship, or be cut loose so that the right leadership can steer clear of the perils being faced.

Based on working with dozens on C-level executives, here are some characteristics that I have identified that contribute to producing an effective IT startup CEO:

• Experience growing a small, preferably venture-backed, company
  The reality is that the skills needed in a large company don’t always translate into success at a small start-up. We have found situations where CEOs who operated effectively within the infrastructure of a large organization cannot manage within the fluidity of a more bare-boned organization. Conversely, CEOs with start-up experience tend to be more adaptable without an established framework already in place to ground them and guide them.
• Demonstrated execution ability
  A start-up is all about execution and getting to the end goal as quickly as possible. Some CEOs are strategic, and some are tactical.  A more strategic CEO may be able to look at the big picture, yet not be able to get from where they are at present to the end goal. This ability to execute plans is absolutely critical in a small company environment.
• Ability to attract and retain top talent, and experience leading such talent
  The saying “A managers attract A talent, and B managers attract C talent” is absolutely true. This takes knowledge and experience on the CEOs part, but also respect. Management teams want to work for CEOs whom they respect and admire. Certain CEOs have this reputation, and they draw others in. This is absolutely critical. In a small company, a CEO also has to be willing to pare down the poor performers. No one can ever be 100 percent perfect with hiring. While leadership respect is earned through good hires, others in the organization gain as much or more respect when ineffective employee situations are dealt with quickly and professionally.
• Vision and ability to adapt and change if the vision is off-target or market conditions change
  Plans are very rarely perfect the first time around. With a start-up, effective CEOs must have a unique vision, and see things that others don’t. They must be able to solve problems in unique ways. However, even visionaries are rarely 100 percent correct in what they perceive the market conditions to be, and what will drive customers to their product. A good CEO must listen to what his or her customers are saying, and accept that their vision may have to change and adapt to such customer-driven market conditions. In other words, the CEO must recognize the need to change, and be willing to change.
• Ethics, integrity, confidence and ability to earn trust and respect
  Small companies are inherently transparent – everyone sees what everyone else is doing, from top to bottom. Similar to ineffective job performance, questionable ethics and integrity also can’t be hidden from the rest of the team.  Because the expectation amongst most start-up employees is that everyone is working hard and fully committed to the company’s success, if integrity is compromised in any way – particularly by the top leader – the effect is more profound. Too often, the people with true integrity leave, and the ones without it stay – resulting in a corrupted culture often heading down the path of disaster. Sometimes VCs find out about this in diligence – for example, during document review in which ethical breaches by the prospective portfolio company are uncovered – which will most likely result in the VCs walking away from the deal.

Mitch Rosich began consulting for Athenian Venture Partners in 2000, joining the firm as a partner in the IT investment practice in 2002. In addition to a decade of technology venture capital experience, Rosich has over two decades of industry experience in product and engineering development, and in the management of 3 start-up technology companies, including Omnia, which Rosich and his team sold to CIENA for $498M. Rosich has been awarded 11 computer technology patents for software and hardware, 8 of which have been used in commercial applications. Currently, he represents Athenian as a director on the boards of Manta Media and Comet Solutions, and as an observer on the board of Sendio.

Venture Beat 

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Financiamiento: Globant obtenía fondos de riesgo

Globant cerró una nueva ronda de inversión por u$s15 M

24/03/2011 Esta financiación permitirá a la compañía argentina continuar con su crecimiento e impulsará su plan estratégico de adquisiciones en América latina y EEUU

Por

La empresa de software y servicios informáticos Globant anunció que los grupos inversores Riverwood Capital y FTV Capital finalizaron una nueva ronda de inversión en la compañía por u$s15 millones.

Esta financiación permitirá a Globant continuar con su fuerte crecimiento y propulsará su plan estratégico de adquisiciones a través de América Latina y Estados Unidos.

Ésta es la tercera ronda de inversión que realiza Riverwood Capital y la segunda de FTV Capital.

Martín Migoya, CEO de Globant, expresó que la compañía tiene "grandes planes para el 2011, y esta nueva ronda de financiación será vital para continuar nuestro crecimiento".

El lanzamiento de ocho estudios permitió a la firma aumentar el nivel de innovación y servicios de valor agregado.

"Además de fomentar el crecimiento orgánico, queremos expandirnos a través de adquisiciones de compañías que compartan nuestra pasión por la innovación”, dijo Migoya.

Globant emplea a 2 mil profesionales, con centros de desarrollo en 8 ciudades de América Latina (en la foto, oficinas en la Costanera porteña) y oficinas comerciales en Estados Unidos e Inglaterra.

Desarrolla productos de software para empresas como Electronic Arts, Disney, Google, Coca Cola y Sabre, entre otras.

La empresa ha construido un fuerte portafolio de servicios basándose en sus estudios: Mobile, Luminous Gaming, High Performance Computing, Consumer Experience, Business Productivity, Creative & Social, Sustainable Infostructure y Quality Engineering.

iProfessionals

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Los emprendimientos fallan en un 75%

The Venture Capital Secret: 3 Out of 4 Start-Ups Fail

By DEBORAH GAGE

It looks so easy from the outside. An entrepreneur with a hot technology and venture-capital funding becomes a billionaire in his 20s.

But now there is evidence that venture-backed start-ups fail at far higher numbers than the rate the industry usually cites.

About three-quarters of venture-backed firms in the U.S. don't return investors' capital, according to recent research by Shikhar Ghosh, a senior lecturer at Harvard Business School.

Coming Sept. 27

The Wall Street Journal reveals its third annual ranking of the top 50 start-ups in the U.S. backed by venture capitalists.

Compare that with the figures that venture capitalists toss around. The common rule of thumb is that of 10 start-ups, only three or four fail completely. Another three or four return the original investment, and one or two produce substantial returns. The National Venture Capital Association estimates that 25% to 30% of venture-backed businesses fail.

Mr. Ghosh chalks up the discrepancy in part to a dearth of in-depth research into failures. "We're just getting more light on the entrepreneurial process," he says.

His findings are based on data from more than 2,000 companies that received venture funding, generally at least $1 million, from 2004 through 2010. He also combed the portfolios of VC firms and talked to people at start-ups, he says. The results were similar when he examined data for companies funded from 2000 to 2010, he says.

Venture capitalists "bury their dead very quietly," Mr. Ghosh says. "They emphasize the successes but they don't talk about the failures at all."

There are also different definitions of failure. If failure means liquidating all assets, with investors losing all their money, an estimated 30% to 40% of high potential U.S. start-ups fail, he says. If failure is defined as failing to see the projected return on investment—say, a specific revenue growth rate or date to break even on cash flow—then more than 95% of start-ups fail, based on Mr. Ghosh's research.

Failure often is harder on entrepreneurs who lose money that they've borrowed on credit cards or from friends and relatives than it is on those who raised venture capital.

"When you've bootstrapped a business where you're not drawing a salary and depleting whatever savings you have, that's one of the very difficult things to do," says Toby Stuart, a professor at the Haas School of Business at the University of California, Berkeley.

Venture capitalists make high-risk investments and expect some of them to fail, and entrepreneurs who raise venture capital often draw salaries, he says.

Consider Daniel Dreymann, a founder of Goodmail Systems Inc., a service for minimizing spam. Mr. Dreymann moved his family from Israel in 2004 after co-founding Goodmail in Mountain View, Calif., the previous year. The company raised $45 million in venture capital from firms including DCM, Emergence Capital Partners and Bessemer Venture Partners, and built partnerships with AOL Inc., ComcastCorp., and Verizon Communications Inc. At its peak, in 2010, Goodmail had roughly 40 employees.

But the company began to struggle after its relationship with Yahoo Inc. fell apart early that year, Mr. Dreymann says. A Yahoo spokeswoman declined to comment.

In early 2011 an acquisition by a Fortune 500 company fell apart. Soon after, Mr. Dreymann turned over his Goodmail keys to a corporate liquidator.

All Goodmail investors incurred "substantial losses," Mr. Dreymann says. He helped the liquidator return whatever he could to Goodmail's investors, he says. "Those people believed in me and supported me."

Enlarge Image

Alison Yin for the Wall Street J

Daniel Dreymann's antispam service Goodmail failed, despite getting $45 million in venture capital.

How well a failed entrepreneur has managed his company, and how well he worked with his previous investors, makes a difference in his ability to persuade U.S. venture capitalists to back his future start-ups, says Charles Holloway, director of Stanford University's Center for Entrepreneurial Studies.

David Cowan of Bessemer Venture Partners has stuck with Mr. Dreymann. The 20-year venture capitalist is an "angel" investor in Mr. Dreymann's new start-up, Mowingo Inc., which makes a mobile app that rewards shoppers for creating a personal shopping mall and following their favorite stores.

"People are embarrassed to talk about their failures, but the truth is that if you don't have a lot of failures, then you're just not doing it right, because that means that you're not investing in risky ventures," Mr. Cowan says. "I believe failure is an option for entrepreneurs and if you don't believe that, then you can bang your head against the wall trying to make it work."

Overall, nonventure-backed companies fail more often than venture-backed companies in the first four years of existence, typically because they don't have the capital to keep going if the business model doesn't work, Harvard's Mr. Ghosh says. Venture-backed companies tend to fail following their fourth years—after investors stop injecting more capital, he says.

Of all companies, about 60% of start-ups survive to age three and roughly 35% survive to age 10, according to separate studies by the U.S. Bureau of Labor Statistics and the Ewing Marion Kauffman Foundation, a nonprofit that promotes U.S. entrepreneurship. Both studies counted only incorporated companies with employees. And companies that didn't survive might have closed their doors for reasons other than failure, for example, getting acquired or the founders moving on to new projects. Languishing businesses were counted as survivors.

Of the 6,613 U.S.-based companies initially funded by venture capital between 2006 and 2011, 84% now are closely held and operating independently, 11% were acquired or made initial public offerings of stock and 4% went out of business, according to Dow Jones VentureSource. Less than 1% are currently in IPO registration.

—Vanessa O'Connell contributed to this article.
Wall Street Journal

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