A deep dive into the factors that matter and factors that don’t for a startup to succeed
While running a startup, a question that constantly hovers around the entire founding team is what will make the company successful. While one can sit, think and speculate all sorts of reasons like motivation, perseverance, emotional intelligence, intellectual property and what not. The challenge is to find the one that works for the company. Data talks, so here based on an analysis published last year by a venture capital firm First Round Capital, we have listed some of the factors that weigh out most of the speculated ones.
Believe it or not, the importance of having a female co-founder is far more than you might have imagined. The research suggests that companies with at least one female co founder performed 63% better than those having an all male co founding team. Re-emphasizing the importance of female entrepreneurship again, its high time startups bring some gender diversity to the teams.
A young founding team has its own perks. While you might get shooed away by a lot of investors on the basis of your inexperience and the so called immaturity which the investors swear upon, gets filled with age, the research suggests otherwise. Founding teams with an average age of under 25 performed nearly 30% above average. Although the average age of a founder raising capital was 31.5. This suggests that a founding team should have age diversity as well. This balances your chances of getting funded and succeed as a company.
In the startup world, we frequently talk about outliers like Facebook, Apple and Uber who made it big, defying all odds. One thing common in all of them is not only that the founders are college dropouts, it is also the kind of colleges they once went to. The research supports this fact as well. Teams with at least one founder who went to a top school (Ivy League, Stanford, MIT and Caltech) tend to perform the best by a whopping margin of 220%. So even if you decide to drop out and start your own thing, pay attention to the place you are dropping out from.
Having a former employee of a top notch company like Amazon, Apple, Facebook, Google, Microsoft or Twitter (the ones included in the research) as a cofounder increases the success rate by as much as 160%. Interestingly founders with past experiences at any of these companies also landed pre money valuations nearly 50% lager than their peers. The kind of foundational skills these jobs provide clearly makes a difference.
Investors pay more for repeat founders. The pre money valuations of the repeat founders tends to be higher than the first timers. This is because of the fact that repeat founders are priced higher in the market. So having a cofounder with a past startup experience gives you the scope for better valuations.
Being a solo founder is the worst thing you can do to your startup. Teams with more than one founder outperformed solo founders by a humongous 163%. Also solo founders led Startups’ seed valuations were 25% lesser than teams with more than one founder. The data suggests the optimal number of cofounders to be two.