Fact of the Week: Venture Capital Funding and Advanced Technology Adoption Have a Strong, Positive Impact on Startup Success

Source: Yoshiki Ando, et al., “Technifying Ventures,” (working paper 33993, National Bureau of Economic Research, Cambridge, Massachusetts, July 2025).

Commentary: Start-ups backed by venture capital (VC) funding and utilizing advanced technologies, such as artificial intelligence (AI), robotics, or 3D printing, have a significantly higher chance of success and growth than conventional start-ups, according to a report from Ando et al. Most start-ups barely grow from their original size, employing between 6 and 21 employees on average. However, Ando et al. demonstrate that startup employment increases substantially when firms are backed by VC funding and utilize advanced technology. In a random sample of start-ups collected from U.S. Census Bureau data, just 11.6 percent adopted advanced technology; however, these firms accounted for 39 percent of total employment and 44 percent of total revenue in the sample. Additionally, only 0.64 percent of firms included in the sample received VC funding, yet they accounted for 13 percent of employment and 15 percent of total revenue. There is also a strong positive correlation between VC funding and advanced technology adoption, as firms with VC backing are four times more likely to utilize advanced technology.