Some founders toil for years to secure a meager seed round. Others seem to go from launch to a massive fundraise in no time. Why is that, and how does one get into that second group?
There’s no single formula, of course. But data indicates it helps to be famous, involved in a hot technology sector or working to cure cancer.
Those are the findings from a Crunchbase News analysis of the fastest growing North American startups by capital raised. Our dataset included companies founded in 2015 or later that have raised $100 million or more in venture funding to date. We looked for patterns that could shed some light on why some startups are able to take off so quickly.
These fast growers constitute a fairly small club. Our list includes just 39 companies, after culling some corporate spin-outs.
The top companies span a broad variety of sectors, from autonomous driving to insurance tech to cancer immunotherapy. And although it’s a varied group, we did see some commonalities.
So, if you’re hoping to raise $100 million in less than three years, here are some top traits shared by companies that have recently reached that milestone.
Trait No. 1: Focus on cancer immunotherapy
Cancer immunotherapy has been a hot startup investment space for a number of years now. Over that time, companies in the field — which develop therapies to corral the body’s own immune system to destroy cancer cells — have generated both enormous returns and remarkable clinical trial results.
That progress shows little sign of slowing, which may be why it’s the most highly favored field in the Crunchbase fast-growing companies list. We identified at least seven companies in the space — Tmunity Therapeutics, Neon Therapeutics, Gritstone Oncology, Forty Seven, Arcus Biosciences and FLX Bio — that have raised $100 million or more in less than three years (another, Celularity is focused broadly on placental stem cell therapies, with some immuno-oncology applications).
Beyond immunotherapy, we found that the fight against cancer accounts for about a quarter of fast growers. Funding for the space comes primarily from traditional venture firms, but we also see corporate and philanthropic investors in the mix.
There also are big exits to be had. Last month, for instance, immunotherapy pioneer Juno Therapeutics sold to pharma giant Celgene in a deal valued at $9 billion. Five years earlier, Seattle-based Juno launched as a venture-backed startup; it went public less than two years later with a multi-billion-dollar valuation.
Trait No. 2: Have a well-known founder
If you want to raise a lot of money, it helps to look like you don’t need it.
Often, the companies that raise huge sums quickly have well-known, previously successful entrepreneur founders. Two examples from this past month are Katerra and Celularity.
Katerra, which is aiming to disrupt the industry, raised a staggering $865 million in a SoftBank-led round last month. It helps that the company’s co-founder, Michael Marks, was formerly longstanding CEO of Flex (previously Flextronics), one of the largest global electronics manufacturers. Another co-founder is Jim Davison, who earlier launched Silver Lake, the largest technology buyouts firm.
Essential, the mobile phone and device startup led by Andy Rubin, creator of the Android operating system, is another case in point. Rubin’s track record with Android certainly contributed to the company’s ability to raise $330 million in less than two years of operation.
In the chart below, we look at five fast climbers with well-known founders:
Trait No. 3: Have expertise in self-driving cars
There’s a talent shortage in the autonomous driving sector, just as automakers are competing fiercely to get the technology road-ready. For those with in-demand skills, that has translated into enormous investments for comparatively immature companies.
In our fast-climber list, we counted at least three companies: Argo AI, Pony.ai and Nauto. Of those, Pittsburgh-based Argo scored the largest sum, a $1 billion financing from Ford that has the startup developing technology for its vehicles.
The others didn’t do too badly on the fundraising trail either. Pony.ai, which has teams in both Silicon Valley and China, raised $112 million in Series A funding last month to build out a platform connecting a self-driving car’s sensors, software, cameras and other technologies. Nauto, meanwhile, has closed on nearly $175 million to date for its AI-powered connected camera technology.
Trait #4: Structure as a biotech platform company
Biotech is heavily represented in the fast-climber list, and the type of startup that seems particularly prevalent is what’s commonly called a platform company. For our purposes here, we’re using the term “biotech platform company” less as a rigid category and more as a description of a startup that deploys its expertise toward therapies for a wide number of possible ailments.
Celularity, which is investing placental stem-derived treatments for everything from immuno-oncology to nerve and tendon repair, would fit this description. So could GRAIL, which has raised $1.3 billion for cancer diagnostics; Evelo Biosciences, a developer of therapies based on the human microbiome, and others.
The platform approach has become increasingly popular with biotech investors of late. While there are challenges in managing a broad array of clinical trials and R&D efforts, the reward is greater potential for successful outcomes in one or more areas.
Trait #5: Get to know ARCH Venture Partners, SoftBank and Celgene
A few investors showed up as particularly active in backing members of the fast-climbers list.
SoftBank was the most predictable member, as the firm has spent the past year shaking up the venture industry as it deploys its $100 billion Vision Fund in an unprecedented spree of huge financing rounds. The firm backed five members of our fast climber list. (See the five here.)
ARCH Venture Partners, a big name in biotech, among other sectors, was another repeat backer of fast climbers, investing in four members of the list. (See the four here.)
Celgene was a surprise addition to our most active funders list. In addition to being one of the biggest acquirers in biotech of late, the company has also been an important strategic investor. It backed funding rounds for four of our fast climbers, including Celularity, which is expanding on much of Celgene’s work in the placental stem cell sector. (See the four here.)
We’ll plan to revisit the fast-climber list in a year or so to see what’s changed. For now, however, we’ll venture to make one prediction about who will be scaling up next.
Looking at the current list, we see at least two insurance-focused companies, Lemonade and Bright Health. Insurance has been a particularly popular space for early-stage deals over the past couple of years, so it’s likely other companies with high levels of initial traction will score big rounds in the coming months.
Even so, it’s probable biotech, with its historically high scaling costs, will remain the top sector for fast climbers.