A startup formula for success may never be found, but the Harvard Business Review has determined that there are indeed factors that can effectively predict startup success. By looking at data from venture capital firm First Round Capital covering more than 300 startups and almost 600 founders, HBR was able to find the traits and factors that strongly correlate with startup success. Some of the factors may surprise you.
What factors predict startup success? Keep reading to find out.
4 Factors That Predict Startup Success
In the field of entrepreneurship, women are outnumbered by two to one although their numbers are rapidly rising. Startups that have at least one female founder make up around 18% of VC-backed ventures in the United States. Surprisingly, that 18% outperforms the all-male startups seeking investments by an astounding 63%. For the low percentage of startups that have female founders, this is an incredible finding.
Having a female founder is a clear factor that affects the likelihood of long-term startup success. As the Harvard Business Review notes, “Simply stated, women are great technology entrepreneurs, and more of them need to be funded.”
Experience at big tech companies
Startups with founders that have worked at big tech companies – Apple, Facebook, Google, Amazon, Microsoft, Twitter, etc. – ended up performing 160% better (according to investment amounts) than their peers without similar experience.
Founders that have worked at “marquee” technology companies may or may not earn experience that is directly applicable to running a startup – the difference that makes them more likely to receive funding and be successful long-term is essentially the benefit of the doubt they receive from investors. These founders can name-drop a well-known tech company and effectively put potential investors’ minds at ease.
Founder age correlates strongly with startup success. While the average age of an entrepreneur is 40 years old, in the technology startup world, younger founders have the edge. Consider the founders of companies like Facebook, Google, and Microsoft. Their founders had an average age of around 23.
In the study cited by Harvard Business Review, founding teams with an average age of about 25 outperformed older teams by around 30%. Data showed that the closer founders were to the age of 30, the better they performed and the more successful their startups went on to be.
Founders from top-ranked schools
Finally, startup founders that graduated from Ivy League and top-ranked schools were more likely to be successful long-term, making graduate school a reliable predictor of future success. In this study, founders that attended an elite college (Stanford, MIT, Harvard, etc.) performed around 220% better in funding rounds than their non-elite educated peers.
The correlation between experience at top tech companies did not necessarily indicate that it was the experience there that made founders more likely to be successful – in fact, it’s probably that including that information in their startup portfolio made those founders more attractive to potential investors. Such is the case with the school attended – it could be that potential investors’ confidence is increased in founders from elite schools and not that the education itself prepared individuals for success.