In Europe, the startup funding graduation rate is also surprisingly low

We used Crunchbase to look at all European-based companies that raised a Seed round between January 1, 2008, and December 31, 2010. This period is close enough to make any findings actionable, and long enough ago that the companies had time to set their trajectory.

A total of 1092 companies received a seed investment in Europe between 2008 and 2010. Data show that the number of companies securing a Seed round increased yearly from 2008 to 2010. In 2009 the number of seed-funded companies increased by 19%, and in 2010 it increased by 59%. This particular finding is in line with existing research and data; suggesting that securing a Seed round of funding has been more common over the past ten years in Europe.
The countries with most companies securing a Seed investment were the United Kingdom, Germany and France. This is likely related to the maturity of their innovation ecosystems. But still, no direct relationship or correlation was evident. Factors like the gross domestic product, tax system and/or the existence of fiscal benefits might also play a role.
From these 1092 companies, only 217 secured Series A funding and, from those, only 118 secured Series B. The drop-off rate is clear. This trend persists throughout Series C, all the way to Series E, and across all yearly cohorts. Only 20% of the companies receiving seed funding can secure a Series A. We found exponential decay in the startup graduation rate in Europe, shown by applying a logarithmic scale.

The steep drop-off rate, allied with the macro-economic benefits of startups and venture creation, clearly attests to the importance of developing a stable and attractive ecosystem. We must be able to attract more people as potential entrepreneurs. As for governments and institutional players, they must increase capital availability for early-stage investments.

Similarly, for founders who have been able to secure Seed investment, this paints a stark picture. These founders might be tempted to adopt a somewhat narcissistic view and assume that subsequent rounds will be easy to raise. In reality, as shown above, it is quite the contrary. A couple of takeaways would be, as a founder, to start fundraising long before you need any cash and to favor investors who can help you go through future fundraising. Access to later-stage capital is crucial. The latter is also relevant for investors; who must ensure they have enough gunpowder for follow-on rounds and access to later-stage syndication partners.

More data here: http://untamedpotential.com/eu-startup-funding-graduation-rate/