With so many startups vying for investment, it can feel like something of a lottery as to which founding teams secure funding.
It’s a little bit about the product and strategy, it’s a lot about networking and who you know, but, beyond that, are there particular traits that make a founding team more likely to succeed at fundraising?
Apparently, yes, according to new research from NGP Capital, a VC firm that has backed the likes of Babbel, GetYourGuide and Deliveroo.
In a new report, called A Decade of European Startup Founders, the group analysed the characteristics of the founders of 17,836 tech startups founded in Europe since 2014 to what traits the most successful had in common.
The report measured success as how much the founding teams have raised against a baseline of $20.5m (£16.2m).
So, what are these magical traits that determine whether investors will cough up? Some aren’t especially surprising.
Founders with advanced degrees tend to have better success, with PhD holders raising an average of $34.1m and MBA holders averaging $30m, significantly higher than the amount raised by bachelor’s degree holders ($15.2m) and those without formal degrees $13.9m.
Where you went to university also seems to make a big difference, with alumni from Britain’s top universities founding far more companies than the rest of Europe’s graduates.
When it comes to raising cash, University of Cambridge grads did the best with $11.2bn. France’s INSEAD was second with $7.6bn and the University of Oxford, London School of Economics and the Technical University of Münich rounded out the rest of the top five.
Another common trait of successful founders that may not shock is experience. Serial founding teams – defined as having at least one founder with previous experience launching a startup – raise around 45% more than first-time founding teams.
Previous experience founding a company wasn’t the only experience that was found to be helpful either, as founders with a background in consulting dominated Europe’s startup scene.
Former employees at McKinsey, Boston Consulting and Bain & Company went on to raise more funding than alums of any other business. A finance background also comes in handy, with former staff and Deutsche Bank, Fortis Bank France, Morgan Stanley and HSBC performing strongly.
Of the top ten companies that spawned the most startup founders in Europe, just one of them was a tech company, Apple.
Another common trait of Europe’s top founders is an international background. The report found that teams with at least one founder from a country outside the firm’s headquarters raised 33% above the baseline, while all local teams raised 13% below it.
This is especially true in the UK, which has the highest percentage of teams with international founders at 39%, well above Germany’s 28%, the Nordics’ 21% and France’s 16%.
Interestingly, the optimal number of founders in a team was found to be four. According to the report, the amount of funding received increased with the number of co-founders, peaking at four and then dropping off slightly beyond.
Startups with four co-founders raised an average of $70.5m, teams of three got $35.1m, dual founders raised $22.9m and solo founders raised just $11.9m.
“While Silicon Valley often prioritizes tech-heavy founders, Europe’s ecosystem champions academic pedigree, and diverse skills in its founding teams,” said NGP Capital managing partner Bo Ilsoe.
“In Europe, the strength of your CV, your founding team and your academic background matter, and while this unique blend offers a fertile ground for innovation and a wealth of opportunity for startups, the challenge for Europe’s tech ecosystem lies not only in building more successful startups but also in nurturing the next generation of tech companies and founders.”