Content by Tucker J. Marion
In today’s world, more and more startups are clamoring for attention. As venture capital firms strive to find the next big thing, they often find themselves struggling to predict which startups are destined for success and which are not. Last year, First Round Capital published a study in which they examined over 300 startup companies and the characteristics of their founders. Tucker J. Marion of the Harvard Business Review took a look at this data, and found four factors that correlate with startup success.
1. Diversity: The analysis found that companies with at least one female founder outperformed those with all male founders by 63%.
2. Youth: Despite the fact that the average age of entrepreneurs in America is 40, First Round found that teams of founders with an average age below 25 had a return on investment that was 30% higher than the average startup teams.
3. Education: Although the success of college dropouts like Mark Zuckerberg and Bill Gates has been well publicized, the data shows that having an education from an elite university is a huge correlate of success. 38% of First Round’s investments had at least one founding member from one of these institutions, and these investments performed more than twice as well as those without one.
4. Experience: Organizations that had at least one member with prior work experience at a big name technology company outperformed other companies by 160 percent and received substantially higher pre-money valuations.
Interestingly enough, First Round found no correlation between the location of a startup and its success, seemingly debunking the myth that Silicon Valley is the main cradle of startup growth. It is, at the same time, important to note that while this study found correlations, they are not necessarily causations. Startups with one or more of these qualities in their founding teams are by no means guaranteed success. Nonetheless, there is a definite correlation between these elements and success, and thus they should be things that investors should keep an eye on.
Read the whole article here.