I’ve just come across the Startup Genome Report, in which 650 consumer web companies were sampled, screened and analyzed by a few entrepreneurs and with help from professors at Stanford. The goal: to extract the defining characteristics of successful companies.
Using data to draw conclusions of what is more art and experimentation than science and best practice (entrepreneurship) is a challenge. And while some of the conclusions are hard to interpret or put to use, overall, the report does a phenomenal job sketching the paths of success and failure. Reading the entire paper is time well spent.
The most important conclusion: startups need 2 to 3x more time to validate a market than founders expect. Premature scaling is the most common reason for startups to underperform. In other words, raising too much money and growing a company too fast before market fit is a big problem.
The authors divide company lifecycle into four stages: discovery, validation, efficiency and scale. How much, on average, does a company raise before hitting scale? About $1.5M.
After the company achieves product market fit, fundraising accelerates dramatically growing from about $1M to $4M.
The report also makes conclusions about VCs. The VCs who evaluate startups on pace of learning and iterations instead of milestones tend to be more successful.
All in all, the Startup Genome Report is rich with insight and well worth the read.
Update: LinkedIn posted a graphic on the genomes of founders today, a nice complement to the genomes of startups.