Saturday, August 1, 2015

Which School Produces the Most Successful Startup Founders?

With startups becoming a larger and larger segment of the American economy, we looked to answer a question we figured would be relevant to a lot of people: what makes a successful startup?

There are many factors that can define "success" in entrepreneurship; we use money, namely venture funding, as our metric for success. We know that there are many philosophical arguments against this, but use it because of its ability to be quantified. We've already looked at which industries and states generate the most venture funding.

This week, we look at the founders themselves. What characteristics do founders of richly funded startups have in common? What can people looking to found a startup do to optimize their chance of success?

The data we work with this week comes from the Crunchbase API. We look at the top 5000-funded startups over the past 15 years and the education of each of their founders.

Looking at sheer number of founders per school out of this space of top 5000-funded startups, we see:
  1. West coast schools are highly represented. Stanford beats its runner up, MIT, by 43%. Berkeley is also 4th most represented. UCLA, USC, and CalTech closely follow.
  2. Ivy League schools are featured prominently in the top 15 schools, including Harvard, Cornell, Yale, UPenn, Columbia, and Princeton. This indicates that the prestige of the school may have an impact upon attracting venture funding, or that the rigorous level of education may produce capable startup founders.
  3. Business schools (Harvard, Wharton, Stanford) and engineering-focused schools (MIT, CalTech,  both feature prominently. There is no huge divide between the "egg-heads" and "talkers" - both are valuable to the startup industry.
  4. There is a large number of international universities on the list, including a noticeable number of graduates from Tel Aviv University, which is 7th on the list. This is attributed to its entrepreneurial culture.

We also looked at the average number of college degrees attained for each startup versus its amount of funding received. There did not appear to be a strong correlation between earning more degrees and the amount of funding received - the amount of funding looked relatively consistent across different numbers of degrees received on average.

In terms of average amount of funding graduates from each school gets, Harvard, MIT, and Stanford get a standard amount of funding. Indian Institute of Technology has a disproportionately high average funding as well as a large number of founders. Hanzhou Normal University and Zhejiang University of Technology are off the charts for average funding received. This is attributed completely to Jack Ma and Eddie Wu founders of Alibaba.

So what's the secret?

To best prepare for founding a successful startup, it appears that founders get a boost from graduating from prestigious universities, west coast universities, engineering-specialized universities, and/or business schools. The number of degrees does not really matter, and there are always rarities coming from relatively unknown colleges, but receiving a spectacular amount of funding.