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Ten-year funds take 18 years
The SeatGeek example
SeatGeek shows how long it can run. Founder Collective invested in 2010, still owns every last share, and SeatGeek is now one of the top three ticketing businesses in the world.
Traction beyond revenue
Some of the firm's greatest companies showed tremendous promise long before they hit the standard path of one and a half million to ten to twenty million in revenue. Revenue also isn't the only metric. Traction can show up on dimensions the market doesn't yet recognize: retention in an account is really good, or one customer is now spending four times what it spent a year ago.
Telling the story
The different dimensions of traction are also how an entrepreneur tells a story to get more funding. A go-overnight-or-bust view leaves many orphans behind.
Why do ten-year funds run longer?
A typical venture fund has a ten-year term, with provisions for the manager to extend it by a year or two, often with approval from the fund's investors. Companies now stay private far longer than they used to, since they can raise large rounds without going public. Data compiled by University of Florida finance professor Jay Ritter shows the median age of companies at IPO has risen since the 1990s.
Why do projects cost twice as much?
Psychologists Daniel Kahneman and Amos Tversky named the planning fallacy in 1979: people underestimate the time and cost of tasks even when they know similar tasks ran over. In a 1994 study by Roger Buehler and colleagues, students predicted they would finish their thesis in about 34 days on average. They took about 55 days.
How do investors measure traction beyond revenue?
Net revenue retention measures how much revenue a group of customers produces a year later, counting upgrades and cancellations. A figure above 100 percent means existing customers are spending more than they did a year earlier, even before any new customers arrive. Investors also look at usage, engagement, and expansion within accounts. Public software investors have widely used net retention as a benchmark since the 2010s.
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