What I Learned About Startups by Collecting 30,000 Data Points

I spent four years conducting one of the largest data-driven studies on startups, and here’s what it reveals about the difference between billion-dollar startups and startups that raised VC funding but failed to become one.

The results from the study were shocking and revealed many counter-intuitive insights. So I decided to write a book based on the findings. This is probably the first book that was born on medium!

Myths Debunked

There are over 20 myths that the data dispels which I discuss in the book. Here are three examples.

1) “You need to be a technical founder to succeed”

50.5% of founding CEOs of Billion-Dollar Startups were non-technical. Comparing the unicorns group with the random group (a randomly selected group of startups that raised $3m+ in VC funding), the billion-dollar founding CEOs were slightly more likely to be technical, but still, half the founding CEOs of unicorns were non-technical.

2) “You need to solve a personal problem and have experience in that industry”

With the exception of healthcare and biotech startups, only 30% of the founders of billion-dollar startups in consumer technologies had previously worked in the same industry, and only 40% of founders of billion-dollar startups in the enterprise/SaaS space had worked in the same industry before. Soft skills such as managing a team, sales, and having a strong network and resources were more important factors. Exceptional founders used their resources to learn more than anyone else about the sector they were going to disrupt by doing research and asking the right questions.

3) “Competition is bad”

85% of unicorns had competitors from day one. Over 50% of billion-dollar startups were competing with incumbent, large, and old-school companies when they got founded, and those who did were more likely to become billion-dollar companies. 20% were competing in fragmented markets, those which have a dozen or more competitors, but none of which were dominant. However, only a small fraction of billion-dollar companies were competing with another startup that already had received a lot of funding and they seemed to have had less luck in achieving billion-dollar outcomes.

Confirmed Truisms

The data also confirmed some of the existing beliefs about what makes for a winning startup. Here are three examples:

1) Billion-dollar startups were more likely to save their customers time or money

Not only these two were the most common types of needs addressed by billion-dollar startups, but the companies solving these needs were also more likely to succeed compared with the random group. For example, in the random group, there were more startups going after convenience or entertainment. Examples: UiPath saves their customers time and money or Airbnb that save their customers money.

2) Going after a large market does matter

The companies that ended up becoming billion-dollar companies were more likely to have started in markets that were already large at the time the company was founded. (Defined by the existing demand).

3) Painkillers are more likely to succeed (but vitamin pills work too!)

One strategy is to go after well-defined and deeply annoying pain points felt by customers; like Okta did with identity and password management. In these cases, the product aims to take the pain away. Another is to improve on the way something is done, giving customers better value, efficiency, entertainment, or joy, products like Snapchat or TikTok. These products help the customer gain something rather than take away the pain. They are the so-called vitamin pills. Comparing the two groups, the traditional advice about building something people want and building painkillers is true.

  • Previous entrepreneurial endeavors and their outcomes
  • Origin of the idea, type of pain, competition when it was founded, defensibility factors
  • Fundraising amounts, cadence, and brand of investors

Partner at DCVC ($2Bn VC firm) and author of “Super Founders”. #1 bestseller new release VC book on Amazon. https://getbook.at/superfounders