Myth Versus Data in the Financial Markets

As we’ve all learned over the last year or so, the financial markets are as full of myth, hyperbole, and occasionally outright distortion as any human institution. The market for IPOs is no different.

The traditional scenario is this: a company builds hockey-stick projections showing amazing growth in a few short years to impress potential investors. Venture capitalists kick in funding, and if the company is successful, the VCs, employees and investors all do well. That growth is realized-- but typically in a much longer timeframe than initially projected.

Ellie Fields
2009/09/03

As we’ve all learned over the last year or so, the financial markets are as full of myth, hyperbole, and occasionally outright distortion as any human institution. The market for IPOs is no different.

The traditional scenario is this: a company builds hockey-stick projections showing amazing growth in a few short years to impress potential investors. Venture capitalists kick in funding, and if the company is successful, the VCs, employees and investors all do well. That growth is realized-- but typically in a much longer timeframe than initially projected.

We analyzed the financial statements of over 100 companies to bust the myth of the hockey stick revenue projection. How long does it really take to build a successful company? Of course, being Tableau, we visualized the analysis:

In fact, for most successful tech companies, it took about 9 years to reach $50 million in sales.

The results are published in a new sister blog, IPO Dashboards. We’ve also just posted on what this and current market conditions mean for the VC business model, which typically assumes much faster IPOs. IPO Dashboards also uses some cutting-edge web technology that we’re calling tableau public for now.

Being data geeks, we love busting myths and answering interesting questions. But we were flattered when the Wall Street Journal decided to run this visualization in one of their own blogs, Venture Dispatch. Take a look at IPO Dashboards and if it sparks your interest, leave a comment.

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