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The Startup Genome

30 May 2011

In an attempt to understand what makes startups, and their founders, successful, a group of techies have released the Startup Genome report.

No doubt inspired by the comprehensive Human Genome Project, the Startup Genome has attempted to decipher what makes the Steve Jobs, Bill Gates and Mark Zuckerbergs of this world tick - and bring them down from their perch atop the technology-Olympus and back into the realm of accessibility. The Startup Genome asserts that Steve Jobs et al aren't one-of-a-kinds, and in fact don't do anything that radically different from other entrepreneurs.

According to the Startup Genome, what separates the top performers - in any field - "is not a magic formula they possess secret knowledge of, but rather their ability to intensely focus on what matters most and their complete dedication to improving their craft."

You can access the full report here or benchmark your own startup here. After contributing to the project, you will receive:

  • A detailed analysis of your startup personality type, with personalised advice for what to focus on based on aggregate data the startup genome project has collected from more than 650 startups.

  • Access to the full 67 page Startup Genome Report

  • A Startup Genome Special — The 7 Signs of Startup Failure

For a taster, here are the 14 key findings of the report:

  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 percent 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 co-founders 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 two 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 percent more money, have 2.9x more user growth and are 19 percent 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 percent.

  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 four different major groups of startups that all have very different behavior regarding customer acquisition, time, product, market and team.

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