The 10 Year Project

What we’ve learned from 10 years and over 300 investments.

10years.firstround.com© 2015 First Round Capital

We believe that seed investing is much more an art than a science — and there’s no such thing as a formula for success.

But as First Round celebrates our 10-year anniversary this year, we thought it could be interesting to publicly share some insights.

We have a unique data set of detailed information on our community of over 300 companies — and nearly 600 founders. We wanted to look at the founder characteristics that accompanied successes and not quite successes.

Of course there were counterexamples and outliers, but some definite themes emerged.

Here are 10 of them.


10years.firstround.com

Women are WinningCompanies with a female founder performed 63% better than our investments with all-male founding teams.

F I N D I N G # 1

+63%


Startup Fortune Favors the YoungThe average age of a First Round founder is 32. But teams with an average founder age of under 25 (when we invested) perform nearly 30% above our average.

+30%AVG.

F I N D I N G # 2


Where You Went to School MattersFirst Round companies with at least one founder who attended an Ivy League school, Stanford, MIT or Caltech performed 220% better than other teams.

F I N D I N G # 3

HARVARD

COLUMBIA PENN

CORNELL

+220%


The Halo Effect of Former Employers is RealFounding teams with experience at Amazon, Apple, Facebook, Google, Microsoft or Twitter built companies that performed 160% better than others in the First Round community.

F I N D I N G # 4

+160%Performance

Valuations+50%


Investors Pay More for Repeat FoundersOur investments in repeat founders didn't perform significantly better than our investments in first-timers — because their initial valuations tended to be 50% higher.

F I N D I N G # 5

Valuations+50%


Solo Founders do Much Worse than TeamsTeams with more than one founder outperformed solo founders by a whopping 163% and solo founders' seed valuations were 25% less than our teams with more than one founder.

F I N D I N G # 6

+163%

Valuations

Performance

+25%


First Round enterprise companies with at

least one technical founder perform a full

230% better than their non-technical

colleagues. But consumer companies with

at least one technical co-founder

underperform completely non-technical

teams by 31%.

-31%

+230%Performance

Technical Co-Foundersare Critical in Enterprise Not So Much In Consumer

F I N D I N G # 7


You Can Succeed Outside Big Tech HubsFirst Round companies founded outside New York and the Bay Area are performing just as well as their peers based in those epicenters — in fact, they do 1.3% better.

F I N D I N G # 8

+1.3%Better between


The Next Big Thing Can Come from AnywhereCompanies that we discovered through

Twitter, Demo Day, etc. outperformed

referred companies by 58.4%. Founders that came directly to us with

their ideas did about 23% better.

F I N D I N G # 9

Josh, you have to see this

Hey, Look at my idea!

Brand new idea!

+23%

+58%


The Action is Moving from Sand Hill to San Francisco

Before 2009, we invested nearly equally between San Francisco and the rest of the Bay Area. During the last five years, 75% of our Northern California companies started their companies in the city.

F I N D I N G # 1 0

Sand Hill

San Francisco

It’s amazing what a decade’s worth of data can show. While these findings won’t

dictate how we choose to invest from now on, we’re intrigued by what they say about

the shifting direction of our industry.

A R TS C I E N C E


We’re already looking forwardto the 20 Year Project.


A Note on Our MethodologyPerformance multiples reflect the appreciation (or depreciation) between our original investment and (1) the value at exit (for companies that have exited) or (2) the fair market value we used in our audited December 31, 2014 financial statements.

While we’ve invested in 300+ companies to date, we did not include investments in (1) the 16 companies that we backed in the last six months (since their share value wasn’t included in our 2014 financials), (2) the 17 companies that we invested in 2014 that did not raise follow-on financing by the end of 2014 (since their share value would not have time to change either up or down) and (3) our investment in Uber (as it would

skew all the results, showing that companies with a name that starts with a vowel, for example, perform 100x better than all other investments).

To be clear, we’re not expecting this analysis to get us an invitation to join the American Statistical Association. And we’re not claiming that our data is representative of the industry… or even statistically significant. Rather, we believe that this data can provide some interesting directional insight. We found some of the learnings to be surprising — and I’m sure we’ll continue to be surprised many more times over the next 10 years.


F I R S T R O U N D . C O M

Find out how you can jointhe First Round Community:


http://www.firstround.com

Date post:	14-Aug-2015
Category:	Small Business & Entrepreneurship
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The 10 Year Project

Small Business & Entrepreneurship