Startups In The Startup Genome

Based on the first Startup Genome report we are releasing a new survey for entrepreneurs to assess their startup. Entrepreneurs that fill out the test will be given their startup personality type, with personalized advice for what to focus on based on aggregate data from the startup genome project. The data we collect with this survey will allow us to give entrepreneurs even more granular feedback.

In the 20th century large companies became dramatically more efficient as a result ofscientific management. This was arguably one of the biggest causes for the explosion of wealth the world saw in the last century. The Startup Genome Report is a major step towards triggering the same transformation for entrepreneurship and innovation. In a time where progress seems to be slowing down, this could unlock another century of transformative growth and prosperity.

Following are 14 more of our key findings. If you would like to read the full report, you can download it here.

1. Founders that learn are more successful: Startups that have helpful mentors, track metrics effectively, and learn from startup thought leaders raise 7x more money and have 3.5x better user growth.

2. Startups that pivot once or twice times raise 2.5x more money, have 3.6x better user growth, and are 52% less likely to scale prematurely than startups that pivot more than 2 times or not at all.

3. Many investors invest 2-3x more capital than necessary in startups that haven't reached problem solution fit yet. They also over-invest in solo founders and founding teams without technical cofounders despite indicators that show that these teams have a much lower probability of success.

4. Investors who provide hands-on help have little or no effect on the company's operational performance. But the right mentors significantly influence a company’s performance and ability to raise money. (However, this does not mean that investors don’t have a significant effect on valuations and M&A)

5. Solo founders take 3.6x longer to reach scale stage compared to a founding team of 2 and they are 2.3x less likely to pivot.

6. Business-heavy founding teams are 6.2x more likely to successfully scale with sales driven startups than with product centric startups. 

7. Technical-heavy founding teams are 3.3x more likely to successfully scale with product-centric startups with no network effects than with product-centric startups that have network effects.

8. Balanced teams with one technical founder and one business founder raise 30% more money, have 2.9x more user growth and are 19% less likely to scale prematurely than technical or business-heavy founding teams.

9. Most successful founders are driven by impact rather than experience or money.

10. Founders overestimate the value of IP before product market fit by 255%. 

11. Startups need 2-3 times longer to validate their market than most founders expect. This underestimation creates the pressure to scale prematurely.

12. Startups that haven’t raised money over-estimate their market size by 100x and often misinterpret their market as new.

13. Premature scaling is the most common reason for startups to perform worse. They tend to lose the battle early on by getting ahead of themselves.

14. B2C vs. B2B is not a meaningful segmentation of Internet startups anymore because the Internet has changed the rules of business. We found 4 different major groups of startups that all have very different behavior regarding customer acquisition, time, product, market and team.

http://startupgenome.cc/discover-the-patterns-of-successful-internet

Europe is not the good land for VC

 Ilja Laurs is CEO and founder of GetJar. He submitted this story to VentureBeat.

I had become certain that the VC model — the economic paradigm I had learned was far and away best for IT companies — could not be implemented effectively in Europe thanks to two factors: Europe’s heavily government-controlled business environment and lack of VC experience.

I’ll explain. First off, the long work hours required to jump start a new tech company under the VC model are not permitted by European laws, which usually only allow employees to work 40 hours per week. Those already scarce hours are often consumed by another aspect of the strictly controlled European work environment: report filing, certification courses and tax inspections — all of which are conducted with much more rigor than in the U.S.

During the startup phase, a European company is subjected to a stringent level of control. In addition to endless paperwork, a full-time accountant must be hired immediately. If, for example, form 140B-3.6 isn’t filled out by a certain time on a certain day, a company owner can be fined or even jailed.

To say the least, these rules are not VC-model friendly. They take attention away from a startup’s main objectives, add a level of stress not conducive to creative thinking and actually discourage the formation of IT startups.

Europe’s controlled business environment prohibits the level of experimentation necessary for VC-backed enterprises, particularly in regards to hiring and firing. While American employees who don’t work well in furthering the company’s goals may be terminated without warning, European employees, once hired, can rest safely in their jobs for an extended period.

While this is a benefit to the employee, the inability of employers to view a newly hired employee as participating in an audition of sorts hinders the creative freedom of the company and can lead to long-term stagnation, both consequences that operate in direct opposition to the VC model.

In addition to the issues stemming from a strictly controlled workplace, Europe’s efforts in VC suffer from an extreme naiveté. As the birthplace of the VC model, the U.S. has considerably more experience in VC enterprises, and, as such, operates with a more mature view. In the most intimate way, American VCs have seen the rise of Google, Twitter and Facebook. They know the ins and outs of their formation, they are familiar with the risks they took and they know the intricacies of their success.

Also, thanks to their experience, VCs in the U.S. understand that the parameters of the classic business model do not apply to the businesses they back. While European boards are focused on profits and revenue from the get-go, their U.S. counterparts realize that money often takes its time coming. In fact, I have noted time and time again that European valuations of IT companies are two to three times lower than those in the U.S.

The best opportunity for vc funding