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The Truth Behind Billion-Dollar Exits: They're for the One Percent

What do the one percent have in common? In this case, billion-dollar companies.
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What does it take to be part of the one percent? A new report suggests that, for entrepreneurs, the answer is as simple as it is daunting: Build a billion-dollar company. 

Of the 1,824 tech companies that sold or went public in 2013, just 19 (or just over one percent) were worth a billion dollars at the time of the exit, according to new research from CB Insights. This select crew includes heavyweights like Twitter, Zulily, and Criteo.

And while you may similarly dream of launching a billion-dollar business--which is perfectly possible--the reality is, that most exits are dramatically smaller.

Of the 320 exits with disclosed valuations tallied by the researchers, 45 percent were for less than $50 million. Seventy-two percent were for less than $200 million. About a third of all tech companies that sold or went public last year were backed by venture capitalists or other institutional investors at some point in their corporate lives, while two-thirds were bootstrapped.

Most companies were acquired early, after raising a relatively small amount of funding.

  • Of the 350 companies that disclosed how much money they'd raised, 195, or 46 percent, had raised less than $10 million.
  • Of those who had institutional backing, 67 percent of exits came after the seed or series A rounds.
  • A few companies were at the opposite extreme: 29 companies raised more than $100 million before being acquired or going public.

Who's Buying?

The report also listed the most active acquirers of tech startups. The usual suspects rounded out the top five: Yahoo, Apple, IBM, Facebook and Cisco Systems. But among the top 20, there were some surprises: Autodesk, a maker of 3D design software, was the 10th-most-frequent acquirer. Trimble Navigation, which makes GPS receivers, laser rangefinders, and navigation systems, came in at 14th. TripAdvisor was also an active acquirer, at number 17, and advertising and marketing agency Publicis Group came in at number 18.

Last updated: Feb 27, 2014

KIMBERLY WEISUL | Staff Writer | Inc.com Editor-at-Large

Kimberly Weisul is editor-at-large at Inc. and co-founder of One Thing New, the digital media startup that is rebooting women's content. She was previously a senior editor at BusinessWeek.




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