Yes, it’s tiny, nominally it’s 1% or so everywhere … but like many statistics, that number is misleading.
Take a look at this funnel from Hunter Walk of Homebrew, a seed-stage venture firm.
Yes, they were intro’d to 1,600 start-ups. But …
First, a whole bunch are simply “not on point”. The team, product, or space obviously does not meet the venture bar. Or, in many cases, the stage is simply off. A seed stage fund meeting a Series B investment opportunity is a waste of time. So Homebrew only met with 476 of these 1,600. Stage 1 of the funnel.
Then, another whole bunch just don’t look exciting. Maybe the warm intro’er isn’t that impressive. Maybe you already met another similar company and didn’t love the unit economics. Etc. etc. You pass before the meeting based on pattern matching.
So like applicants to almost anything, including colleges and incubators, a lot of it is noise.
Here’s the thing:
>> The best companies, that are on-point for venture capital, always get a term sheet. Always. <<
When you get introduced to one that “feels” like it could be one of the best companies, you always take the meeting.
And when as a VC you take the interesting meeting, and you see that yes, it’s potentially one of those outliers, and it fits your stage and investing criteria … the founder’s chance of getting a term sheet, or at least a soft offer, is actually pretty decent.
If you look at Homebrew’s stats, yes ~1600 were intro’d to them. But only 64 were interesting enough, and on-point enough, for both the partners to meet them. And of those 64 — 10 got funded. And I’m guessing they might have funded another 10 of them, but the round was too large, or other structural issues precluded it, but they otherwise would have.
20/64 isn’t that low of odds.
Feels like that for me. Of the ones that really meet all my criteria, and that I really want to do … maybe a third have gone to term sheet / investment.