US Startups Expect Business Conditions to Improve Despite Increased Uncertainty

Silicon Valley Bank releases 10^th annual Startup Outlook report series based on nearly 1,400 survey responses from technology and healthcare executives in major innovation hubs

SANTA CLARA, Calif., February 20, 2019 - Silicon Valley Bank (SVB), the bank of the world's most innovative companies and their investors, released the 10^th anniversary edition of its Startup Outlook Report today. The 2019 report series finds that despite economic and political uncertainty across the globe, startups are generally optimistic about their business opportunities, and they plan to raise capital and expand their workforces this year.

Based on a survey of 1,400 startup founders and executives primarily in the US, the UK, China and Canada, Startup Outlook reveals respondents’ thoughts on business conditions, funding, exits, hiring, workforce diversity and public policy issues. The reports also gauge the concerns of US and Chinese startups about trade tensions, the impact of Brexit uncertainty on UK startups and the sentiment of Canadian startups about government support. All four country reports also look at gender parity in tech leadership roles for each country. 

“It’s difficult to build and scale companies under the best circumstances,” said Greg Becker, CEO of Silicon Valley Bank. “With added uncertainty related to economic and political volatility, it’s even more of a challenge. The good news is, overcoming challenges is what drives entrepreneurs. Startups tell us they are optimistic about opportunities to fund their businesses, expand their workforces and continue innovating.”

“While much has changed in a decade, hiring top talent has been cited as a top challenge since our first report, and it’s the same in the UK, China and Canada. Entrepreneurs seldom speak with one voice, but this report underscores the unified need to find solutions to accessing talent — or risk a slowdown in innovation.”

US Findings

Following are the key findings from the US survey, which is based on responses from 809 executives at US technology and healthcare startups. Most US Startup Outlook 2019 respondents are founders or executives of companies with fewer than 25 employees and less than $25 million in annual revenue. Reports covering the UK, China and Canada are available here.

Business Conditions

• Sixty percent of US entrepreneurs expect business conditions in 2019 to improve this year compared with last year.
• Nine percent, a slight increase from last year, believe that business conditions will worsen.

Raising Capital

• Raising capital has grown easier over the past two years. Seventy-one percent of US startups surveyed successfully raised capital in 2018. Of those, 24 percent say the current fundraising environment is not challenging, compared to 12 percent two years ago.
• VCs and private equity firms have been investing larger rounds in fewer deals, focusing on high-performing startups. However, pre-revenue companies and those with less revenue describe raising capital as considerably more challenging.
• Venture capital remains the go-to source of funding, with half of US startups expecting their next source of funding come from VCs — a steady level over the past three years.

Exits

• As in past years, acquisition remains the most common path to an exit, with half of US startups saying their realistic, long-term goal is to be acquired. The percentage of respondents saying they plan an IPO (18 percent) or staying private (17 percent) remains steady.
• An increasing number, 15 percent, say they do not know their expected exit path, underscoring the difficulty of planning an exit amid increased market volatility.
• Nearly 90 percent of US startups believe that M&A activity will increase or stay the same as 2018.

Promising Technology Sectors

• US entrepreneurs say AI and big data are the technologies with the most promise today.
• Looking ahead a decade, they anticipate AI to remain the most promising technology followed by autonomous transportation.

Hiring & Diversity

• More than 80 percent of US startups say they are hiring, but 91 percent say that finding workers with the skills necessary to grow their business is somewhat or extremely challenging.
• The percentage of startups with at least one woman on the board of directors has increased to 37 percent — the highest level since Silicon Valley Bank started tracking this in 2015.
• The percentage of startups with at least one woman in an executive position is 53 percent, up from 43 percent in 2018.

Public Policy

• Half of US startups say they are concerned that trade policy between the US and China will hurt their businesses in 2019. In comparison, two-thirds of Chinese startups express concern about a negative impact.
• Access to talent is the top policy concern for US startups, in line with findings from previous years.
• Concern over healthcare costs for employees and cybersecurity also rank highly. Additionally, more startups are citing consumer privacy as a concern than in the past.

For additional survey results, including a closer look at hiring, fundraising and respondents' views on public policy issues, please visit: https://www.svb.com/startup-outlook-report-2019.  SVB will publish an in-depth report on Women in Technology Leadership in H1 2019.

Follow the conversation on Twitter at @SVB_Financial with #StartupOutlook

About Silicon Valley Bank
For more than 35 years, Silicon Valley Bank (SVB) has helped innovative companies and their investors move bold ideas forward, fast. SVB provides targeted financial services and expertise through its offices in innovation centers around the world. With commercial, international and private banking services, SVB helps address the unique needs of innovators. Learn more at svb.com.