Today, the Palo Alto office of law firm Dorsey & Whitney is releasing findings from its first survey of startup CEOs, 363 of whom answered numerous questions about raising venture capital.
Among the most surprising findings of the survey — of mostly consumer Internet CEOs, all of whom have raised money in the last 12 months — are that an investor’s brand, proximity and global presence simply aren’t that important.
Indeed, three-quarters said that a tier-one “brand name” VC was only “somewhat important” or “not important.” Meanwhile, three-quarters of the CEOs said that investors’ geographic proximity to the startup was between “somewhat important” to “not important.” And 70 percent of the CEOs rated an investor’s global presence and expertise as “somewhat important” to “not important.
“CEOs are educating themselves on their options when it comes to funding,” Ted Hollifield, a Dorsey & Whitney attorney who focuses on venture financings, told peHUB. “They know what they want and they aren’t having to look at proxies like a strong brand name or whether an investor is attached to another hot company. I was kind of gratified that people are really valuing operation expertise [over brand].”
Matt Bartus, another startup attorney at the firm, said of startups’ international ambitions — or apparent lack thereof: “Whether or not they think they are going to be a big company, I think they’re rightly focusing on what they can accomplish in the near term. If our survey were focused on Series C companies, they might value [global presence] more in an investment partner.”
Hollified and Bartus could well be right. Certainly, entrepreneurs have far more information about a wide array of investors at their disposal. They’ve always valued their autonomy. And young startups have plenty to contemplate without throwing a global expansion strategy into the mix.
Still, it’s hard not to wonder what the survey tells us about the current economy. It’s not astonishing that consumer Web CEOs are in the driver’s seat when it comes to funding options right now. It also seems the case that an investor’s brand, proximity, and global presence matter less to startups that are eyeing an exit from the get-go.
Among the survey’s other findings: just over 17 percent of respondents said they received funding from a traditional venture firm, and 26 percent of the CEOs said they plan to seek less funding from friends and family.
Amid the criteria cited for taking money from a particular investor were valuation, dilution and liquidation preferences. Interestingly, brisk deal-making, and investors who don’t pressure startups to take more capital than is necessary, were among the mostly ranked criteria. In fact, the latter two criteria ranked as “somewhat important” to “very important” by 91 percent and 92 percent of respondents, respectfully. Meanwhile, fully one-third of the CEOs called valuation “somewhat important” or “not important.”