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| 1 minute read

For entrepreneurs, experience matters.

Any investor will tell you that they prefer to invest in a company with experience--someone who has launched a venture before and shown an ability to scale a company. A recent report from PitchBook is shedding some light on just how much of an advantage serial entrepreneurs have. Here are the key takeaways:

1. Earlier investments. Startups with experienced founders typically see their first raise from a VC approximately nine months earlier than first time entrepreneurs.

2. Larger investments. Serial entrepreneurs experience significantly larger deal size from investors--2.5X larger investments with only 5% more equity given up by the founders.

3. Larger valuations. Similarly, these investments report greater value for investors and founders. Pre-money valuations are typically 1.6X larger at early stages. That valuation advantage grows to a 3X at later stages. There is likewise an advantage of  step-ups that are 10-12% larger at both early stage and later stage.

4. Larger dilution. While not necessarily an advantage, it is not surprising that given the larger amounts invested, that serial entrepreneurs experience a 4.0% greater dilution at angel and seed stage investments.

5. Greater Access. It may be cliche, but it's all about who you know. And with experience comes access to a network of top investors. Founders with successful exits no doubt have an advantage when it comes to accessing the these investors. In fact, these founders have a 25.5% greater participation from investors featured on Forbes' Midas List of top investors.

6. Growth begets growth. While it is believed to be significantly under-reported, successful entrepreneurs often go on to reinvest in their communities. 1.9% with an exit will go on to start a new venture. 5.7% will become angel investors themselves. And 1.2% will go on to establish venture capital firms. All of this contributes to creating an entrepreneurial fly wheel effect that allows for exponential growth of a startup ecosystem.

In this note, our analysts examine how entrepreneurial experience affects VC financings, valuations and exits. Prior experience is an asset for entrepreneurs when launching and growing a new venture, and through this new analysis we have been able to quantify exactly how VCs value that experience. We analyze the premiums that investors pay to invest in these experienced entrepreneurs, along with any variance in exit outcomes that investors can expect from serial entrepreneurs. Founding new ventures is not the only way to put entrepreneurial experience to work. Our analysts also explore how successful entrepreneurs use their wisdom and capital to conduct their own investment activity.

Tags

high-growth ventures, technology, business transactions, startup, entrepreneurship, venture capital, investment