A Study Circulating Silicon Valley Shows That Raising Tons Of Money Can Hurt Startups

When startups raise large rounds of financing from investors, it’s often praised in the press. And in Silicon Valley, founders are often encouraged to raise as much money as possible. But a new study shows that most startups shouldn’t strive to raise gobs of cash, and they can actually exit for more money if they take less funding.

Exitround, a startup that matches early stage companies with potential acquirers, analysed the sales of 200 startups. It worked with startup accelerator programs Y Combinator, Techstars and SoftTech VC to compile the data and only looked at companies with sale prices under $US100 million. Exitround says 88% of all startups are sold for less than that price. The study has been

The study found that startups with the most lucrative exits raised either $US2-3 million or $US5-10 million. They also tend to be about four years old.

From the study:

In Exitround’s analysis, companies that raised $US5 million to $US10 million actually generated larger average exits than those that raised $US10 million to $US50 million. And those companies that raised $US3 million to $US5 million had a lower average exit price than those that raised $US2 million to $US3 million.

Here’s a chart that supports the data.

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