February 18th, 2014

Does location matter for fundraising? Looks like Portland startups who secured Series A have a 50% chance of getting Series B


Does location matter for fundraising? Looks like Portland startups who secured Series A have a 50% chance of getting Series B

While it’s not nearly as common of a conversation as it once was—thanks in part to the performances of steadfastly Portland companies like Elemental Technologies, Puppet Labs, Urban Airship, Cloudability, and others—many Portland entrepreneurs have concerns—if not unmitigated fear—that remaining headquartered in Portland could curtail their ability to raise capital for their startups. New research from Tomasz Tunguz may provide a little peace of mind.

According to his findings, “A startup’s headquarters location seems to have no impact on the company’s ability to raise a Series A.”

How did he come to this conclusion?

Using Crunchbase data, I charted the financing follow-on rates across the 12 US cities in which at least 10 seeds, 3 Series As and 3 Series Bs have occurred in the Crunchbase data set from 2005-2014. The first two charts below contrast the success rates of post-seed startups raising an A having raised a seed and raising a B having raised an A. The third chart shows the success rates of raising a B having raised a seed round.

Follow on rates by City

Now my rose-colored-glasses-wearing Silicon Florist self looks at that chart and says “If you can get to Series A, you’ve got a 50% chance of getting to Series B, if you need it.” And that’s pretty darn impressive. And a good signal for companies in Portland who are raising capital.

Of course, lest we not forget, my more cynical self says “Maybe it’s easier for Portland companies to find success with Series B, because it’s so damn hard for them to secure Series A funding in the first place.”

Whatever the case, it’s nice to have folks crunching this sort of data. And even nicer to have Portland showing up on the chart.

But what’s the real moral of the story here, kids? That’s right. Update your damn Crunchbase profile. Or create one in the first place. Because, like it or not, people are using that information to judge our startup scene and its performance.

For more details, read Tomasz’s post The Impact Of A Startup’s Location On Its Ability To Raise Capital.

(H/T Mattermark)

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Background that may help (or may not)

4 Responses to “Does location matter for fundraising? Looks like Portland startups who secured Series A have a 50% chance of getting Series B”

  1. ᙇᓐ M. Edward Borasky (@znmeb) says:

    Oh … and while you’re at it, update your Crunchbase profile! ;-)

  2. Amber Case says:

    I was about to say the same thing: “Maybe it’s easier for Portland companies to find success with Series B, because it’s so damn hard for them to secure Series A funding in the first place.”

    Series A is super hard. A lot of uncertainty has to be vetted out of a startup before a Series A can happen. Once that’s done, the company is usually far enough along that it can secure the next round, hopefully as growth capital.

  3. Jmartens says:

    Amber is right, Series A is damn hard! I’d love to know what the odds are for seed companies in Portland to raise a Series A. Also, seems that if you raise a Series A and can’t get a Series B, you still have a great shot at a small acquisition.

  4. Rick Turoczy says:

    Thanks for validating that point, Amber and Jeff!


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