4 Factors That Predict

Startup Success, and One

That Doesn’t [Harvard

Small Business]

What makes a venture capital investment successful? Some of the most

interesting data on this question comes from an analysis published last

year by the venture capital firm First Round Capital.

The firm’s unique data set comprises information on over 300 companies

and nearly 600 founders, including founder characteristics such as age,

gender, education, firm location, and prior work and startup experience.

The study found several correlates with success — some reassuring, some

surprising.

• First, it found that high-performing investments tend to have at least one

female founder.

• The data also shows that younger founders and founders with prestigious

educational backgrounds or prior experience in large technology

companies tend to be more successful. There’s evidence that startup

success is somewhat geographically diverse, not limited to Silicon Valley.

• Younger founding teams outperformed older ones. The research also

looked at founder age, education, and experience. The average age of an

entrepreneur is approximately 40, and there is reason to think that

entrepreneurs improve with age.

• Teams with at least one founder who went to an elite school (defined by

First Round as Ivy League, Stanford, or MIT) tended to perform better.

• In First Round’s portfolio, 38% of the companies had one founder that

went to one of those schools; the study found that those companies

performed about 220% better than other teams.

• First Round found that teams with at least one founder coming out of

Amazon, Apple, Facebook, Google, Microsoft, or Twitter performed

160% better than other companies.

• Founding teams with experience at any of those tech companies also

landed pre-money valuations nearly 50% larger than their peers.

• First Round companies started outside New York City and the San

Francisco Bay Area performed just as well as those founded in traditional

new-venture hubs. Twenty-five percent of the investments in the data set

were outside these cities and, on average, performed slightly better than

the rest.

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