Venture Capital Funds Just 23% of INC 200

INC 200 No VC 77 percent

The INC 5000 annually captures data on the fastest growing private companies in the US. We’ve written before about an older study of 100 companies on the INC 500. In that in-depth review, about 80% of the fastest growing companies had no venture capital before they got on the list in 1989.

Since that time, data collection on venture capital backed companies has improved quite a bit. In particular Crunchbase captures details on the vast majority of US companies backed by VC. And of course venture capital has changed quite a bit as well.

We got to wondering: how many companies on the INC 5000 are listed in Crunchbase as having venture capital funding?

We would like to share the early results of cross referencing these two lists. One thing that jumps out: the 2017 statistics are remarkably consistent with the 1989 study! Here’s the data on the top 200 companies on the list – that is, the companies with the highest percentage 3-year increase in revenue. The slowest growing of these firms saw their annual revenue increase more than 20-fold in just three years!

3 Year Revenue Increase
Up to $10M More than $10M All Companies
Number of Companies 94 106 200
Listing in Crunchbase? 33 64 97
Funding in Crunchbase? 13 33 46
$ High Funding  $215,000,000  $1,779,000,000
$ Low Funding  $        212,000  $           285,000
Total Funding $460,912,926 $3,706,474,296 $4,167,387,222
% in Crunchbase 35% 60% 49%
% Funding in Crunchbase 14% 31% 23%
Avg. Funding Per Funded Company $35,454,840 $112,317,403 $90,595,374
Median Funding Per Funded Company $14,127,499 $21,400,000 $17,686,500
Median INC Ranking 126 61 100

We did the math to figure out how much revenue actually increased over the three years for each company. We think that this is a bit better way to sort through the companies that are “significant” in that they are both large in terms of revenue, and growing fast.

Using this as a metric, you can see that roughly half of the companies grew revenue by $10 million or less over three years. The other half grew revenue by more than $10 million.

Crunchbase tries to keep track of venture capital backed companies, as well as “significant” companies of potential interest to their customers, which we guess includes lots of investors. As you can see from this table, Crunchbase has at least a web site listing for about half of the INC 200 – including 60% of the companies growing revenue more than $10 million over three years.

In other words, Crunchbase is doing a pretty good job tracking significant, high growth companies even if they don’t have venture capital (yet).

Equity (and a bit of debt) funding is listed for only about 23% of these 200 fast growing companies. It’s not surprising that the share of VC backed companies is higher for those firms that grew revenue by more than $10 million over three years, but it is still only about one-third of all firms that clocked such a huge revenue increase.

Even the Top 10 fastest growing companies in terms of revenue had venture capital only 40% of the time. These are companies that grew top line annual revenue more than $65 million over a period of three years.

This initial data from the 2017 INC 5000 list validates the results from the 1989 study. Venture capital is not essential for growing revenue fast.

Do these results surprise you?

 

Don Gooding

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