What does the data say about the likelihood a Founder will succeed?
Data and Insights from Ali Tamaseb, Author of Super Founders
By Collin West
Venture Capital can be a challenging industry, partly due to the long time horizons. If you decide to pursue an investment, it can take weeks/months to complete diligence and could be 7-10 years (or longer!) before you even know if you picked a winner.
Due to this, traditional venture investors tend to create a series of mental heuristics, or pattern recognition, that they use to inform their decisions - But what does the data say? Which of these heuristics correlate with success? Which don’t?
Ali Tamaseb spent over 4 years painstakingly asking questions and finding the answers. Tamaseb collected over 30,000 data points comparing all the unicorn startups that were founded in the past 15 years with those that raised some VC funding but failed to reach a unicorn outcome. In his book, Ali discusses the outcomes of the data-driven research as well as interviews founders of companies such as Zoom, GitHub, and Cloudflare. Here is our Q&A with Ali about his book Super Founders.
What skills matter in a founder or founding team?
Billion-dollar startup founders are pretty evenly split between technical (49.5%) and non-technical (50.5%) founders, which is surprising given the lore around the importance of technical founders. Moreover, the data shows that only 40% of founders of billion-dollar startups had worked in the same industry before.
That means 6 out of 10 built a billion-dollar unicorn in a totally new space. Soft skills such as managing a team and having a strong network were more important than domain expertise. After all, you can always hire domain expertise down the road.
Exceptional founders used their resources to learn more than anyone else about the sector they were going to disrupt.
Are there myths surrounding founders? What were some that you uncovered?
First, we found that age was a non-factor. The median age for starting a unicorn was 34 years old. But more important than age was what someone has been doing the last 5 years.
So it’s not so much that you should back younger founders or older founders but understand their track record, regardless of age.
The founders of unicorns are more educated than the general population, but they did not all come from an Ivy League pedigree. Instead, many were serial entrepreneurs and had started companies before. We found that unicorns take a long time to build, so either founders stuck with an idea for years or started many, many companies before getting it right.
Did the data shed light on hiring a CEO vs. keeping the founder?
Yes, 65% of successful unicorns have founder CEOs as opposed to 47% in unicorns that failed.
The impact of a Founder CEO cannot be overstated. At exit, 72% of all unicorns kept their original founders. We think this is because founders optimize for the long-term good of the business.
A founder CEO thinks about the long-term vision, they’re looking out 10 years. You would not have Amazon today if you did not have Jeff Bezos at the helm thinking about ways of constantly improving the customer experience and allocating capital to long-term bets.
Conclusion
Ultimately, we highly recommend you read the book. We felt the book had two key takeaways worth reading about more deeply.
First, there is a path for founders but the path requires grinding. Many successful startups required years and years of ups and downs. Age and industry experience didn’t matter as much as network, grit, and risk-taking.
Second, any decision - with a human involved - will be biased in some way. VCs are not immune to this. We hope the message to VCs is clear: It’s important to meet founders, understand the company, but also leverage data insights to help hone your decision-making.