News & Analysis

VC fund conducts unusual experiment to identify future startup founders

- October 23, 2014 3 MIN READ

Bloomberg BETA, a recently-launched $75 million venture capital fund backed by US media group Bloomberg, conducted a study in a rather unusual manner to determine what kind of people are likely to become successful startup entrepreneurs. And as it turns out, you don’t have to be young like Facebook’s founder and our generation’s poster child of success Mark Zuckerberg to do it.

Where before, people often dismissed young people as too naive to survive the demands present in the startup world, the success of many young entrepreneurs is demonstrating that they are in fact equipped with many qualities required to run a successful startup – namely, energy, charisma, capacity to absorb new knowledge and the ability to bring fresh ideas into the world.

According to Paul Graham, Co-Founder of Y-Combinator, young founders have plenty of strengths like stamina, poverty, rootlessness and ignorance. These may seem like disadvantages, but they’re apparently not – after all, startup life is very much about persisting with a consistent level of focus and energy even when there’s little certainty and money. Perhaps, you almost need to be ignorant to do it in the first place – because starting up is like walking into a tornado. If you knew the amount of work is takes to succeed, would you really want to do it?

It’s no wonder that young folks who quit university to pursue their startup dreams are considered rebels – the admirable kind. Given how many young faces we’re seeing in the media as well as the increasing number of initiatives emerging in the entrepreneur landscape that encourage young people to start businesses, it’s not hard to come to the conclusion that the best age to become a startup founder is your 20s.

Well, Bloomberg BETA’s study revealed otherwise. The VC fund hired analytics firm Mattermark to analyse a wide array of data and find people who had a greater chance of launching and building a successful startup. Interestingly, this is before those people knew it themselves. Danielle Morrill, Mattermark’s co-founder, told the BBC that they took a sample set of founders and examined where they worked, what kind of job they had, their age and other factors prior to starting up. “It is the largest study that has ever been done on patterns of business founders,” she told the BBC.

This is where things get interesting. Mattermark went ahead and mined publicly available data on social media sites like Twitter, Facebook and LinkedIn to find information on 1.5 million professionals who were in some way connected to technology startups. They whittled the list down to 350 people who most resembled the profile of the business founders in their initial study.

There are three key characteristics of successful founders, according to the study: 1) most successful startup founders were in their late 30s, while almost one in four were over 40. 2) those who had stayed in a job for a long time were more likely to go off on their own to launch a startup; and 3) two-thirds of business founders had not held a senior level position before starting their own company.

The 350 potential entrepreneurs were then sent cold emails explaining why Bloomberg BETA was contacting them and inviting them to a “meet-up” dinner. According to the BBC, the email started off as, “You’ve been chosen… as one of the most likely people in the technology industry to create a company”. Understandably, many of the recipients thought the email was some kind of scam. Yet for others, the email not only provoked an interest but also self-examination. And that was the purpose.

Many of the potential entrepreneurs actually showed up at the dinner, along with venture capitalists. The potential founders networked, and some are genuinely entertaining the idea of pursuing their own startups. According to the BBC, this will be an ongoing project, where future founders come together every few months and meet others who could contribute to their ventures.

Roy Bahat of Bloomberg BETA, told the BBC that the whole purpose of the project is to encourage founders with particular characteristics to take the leap and start their own businesses. Though it’s not clearly articulated, I suspect that VCs are looking for ‘the next big thing’ to invest in.

“Our role was to get to know them and, if they wanted to, we would be useful to them and help them,” Bahat told the BCC. “We recognised we were looking for a needle in a haystack, but the difference with taking this approach is that all the hay is made of gold.”

This is perhaps one of the most interesting paths a VC fund has taken to source potential investments.