What Percentage Of Silicon Valley Startups Ever Make A Profit?

I was talking to a friend of mine who had recently sold his company for $300M. He said to me, “Brett, I’ve never been involved in a company that made a profit.”

And I would bet over 95% of all startups, including the ones that have gone public, are never profitable. Just look at this data on IPOs from 2012–2015:

Year % Of IPOs That Were Profitable At IPO.(1)

2012 44%

2013 28%

2014 17%

2015 26%

A very small percentage of startups IPO. The majority (over 90%) fail. So the 95% number is probably right.

But just think about only one in four companies are profitable at IPO. One in four.

And therein lies the problem:

You don’t have to be profitable to make money!

The importance of being profitable will not change until the public’s appetite for non-profitable public companies wanes.

Sadly, the public truly pays the price because there’s a huge difference in the return for a profitable versus unprofitable IPO. Companies that were cash-flow negative had a 24% median decrease in value after three years versus a 111% median increase in value after three years.(1)

For a much more detailed look, read: Why You Should Ignore The Rise Of The Unicorns - Brett J. Fox

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1. Data from http://site.warrington.ufl.edu/...