8 Takeaways From First Round Capital’s “State of Startups 2015” Report

They say we're in a tech bubble, funding will get harder, and that virtual reality, wearables and Bitcoin are overhyped.

Are we in the midst of a tech/startup bubble? Founders say so and also believe it’ll be much harder to get investment cash in the next few years.

The not-so-rosy predictions come from the State of Startups 2015 report from First Round Capital, a seed-stage venture firm with offices in Philadelphia, New York and San Francisco. The organization interviewed more than 500 startup founders in the First Round community and found these troubling trends:

Funding will get more difficult. Although 80 percent of founders say they’ve raised their goal in their last round of funding, nearly 100 percent of them expect fundraising difficulty to remain the same or get harder.

We’re in a bubble. Although one-third of respondents didn’t have an opinion on the subject, 73 percent of founders who responded said we’re in a tech bubble. “Interestingly, this depends on the type of company they’re running. Enterprise company founders deny the bubble twice as often as their consumer company peers,” the report said. “Given that twice as many enterprise founders also think they’ll be profitable in the next year, their outlook is more optimistic on the whole.”

Driverless cars are underhyped. Virtual reality is overhyped. Even though everyone has a computer in their pocket, the founders said mobile is still today’s most underhyped technology. It also said autonomous vehicles are under-hyped and primed for growth. What’s overhyped? Wearables, Bitcoin, virtual reality and the sharing economy. In that order.

Power is shifting from entrepreneurs to investors. When asked who has held the negotiating power in recent years, 63 percent said entrepreneurs have had the upper hand, compared to 37 percent who said investors have the advantage. But when asked about the dynamic over the next few years, the balance shifts. Just 46 percent say entrepreneurs will have more power and 54 percent say investors will take the lead.

Women-led companies are more diverse. 87 percent of women-led companies have diversity initiatives in place but only 62 percent men-led companies do.

Nobody has a clue about the market for taking companies public. About a third said there would be more IPOs next year, a third said fewer IPOs, and the last third said they thought things would stay the same.”There doesn’t seem to be a ton of clarity around this topic — even among late-stage companies, there’s still no consensus,” the report said.

Top concern isn’t revenue or work/life balance, it’s hiring the right people. Hiring top candidates was by far the founders’ biggest concern. It was followed by revenue growth, acquiring customers, creating culture and raising follow-on capital. Work/life balance? It ranked just 8th.

The love Elon Musk. I mean, who doesn’t? The Tesla founder was by far the most admired tech leader getting votes from 22 percent of the founders surveyed. The next most popular CEO was Jeff Bezos of Amazon (7.5 percent) then Mark Zuckerberg of Facebook (3.3 percent.)

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