I had fun moderating the panel on early stage financing at India Internet Day. Vccircle has an interesting article.

Deal progression

The key issues are as under:

1. Too few deals are progressing from accelerators to angel, and from angel to Series A. Only 5% of deals going from accelerators to Series A might not be very different from success rate without accelerators.
2. Angel stage valuations are stretched relative to Series A valuations. At 20% success in getting to Series A, a Series A valuation of 35 cr would be a breakeven point for angels (7 cr angel valuation is typical). At 20 cr, the stage is not paying back for itself.
3. Its taking too long for deals to progress. While accelerators (admittedly apart from Mukund’s Microsoft accelerator :-)) aim to get to next round of financing as the startup graduates from the accelerator, it is taking an additional year to get to angel financing. Angel to VC is another 2 years on average. This slow progression may also be responsible for higher failure rate. Accelerators might do well to extend the runway.
4. Lot of “recycling” – the same company going from one accelerator to another, from one angel round to another. Again points to the time it takes to build companies, and the need for early stage investors to keep supporting the good ones.
5. Too little mortality – “fail fast” seems to be good advice, but little practice.

Of course, the above applies only to startups which are in the funding play. Note that the data was gathered from about a dozen “premier” accelerators/incubators and angel funds – so while I believe this is directionally right, its not the most comprehensive survey.