Why the focus on founders?
Early-stage investors around the globe apply various lenses when evaluating startups. These include the markets that the startup operates in, the products and services it builds and sells, the chosen business model, and the team behind it all.
At Antler, we believe that in the early stages, without meaningful quantitative data on the performance, startups need to be assessed largely on the strength of the founding team and their potential.
The typical startup's roadmap is full of twists and turns, and it's rare for the initial business model and product to remain unchanged. Netflix used to deliver DVDs to your mailbox - now they are the world's largest subscription streaming service. Twitch originally launched with Justin Kan, one of the co-founders, wearing a webcam attached to a baseball cap and streaming about his life 24/7 via a laptop-backpack system - now it's the world's largest video game streaming platform.
With this in mind, it's key that the startup is founded by a strong team with complementary skills and experiences to navigate this journey. The right team can identify how to adapt or pivot their business to new market developments and will continue to iterate until they succeed. It's for this reason that many early-stage investors, such as Antler undertake extensive founder and team due diligence prior to investment. We also observed that only 10% of unicorn companies were founded by solo founders - hence, team formation is at the core of a startup's success.
So, who are the most successful founders and what do they have in common?
In the startup world, crossing the notorious US$1 billion valuation mark as a privately-owned company and reaching unicorn status is often seen as the pinnacle of success in a founder's journey. And while there are many articles focusing on unicorns as organizations, little research has been done on understanding the characteristics of individual unicorn founders.
At Antler, we want to shed some light on this topic, starting with the growing DACH startup ecosystem.
We analysed the backgrounds of 117 founders from the 38 unicorns that were founded in the last 20 years in Germany, Switzerland, and Austria. While much has been said about Europe lagging behind the leading technology ecosystems, the DACH region has seen tremendous success over the last years - peaking in an amazing 14 new unicorns in 2021 alone!
The DACH startup ecosystem is accelerating rapidly - 14 out of 38 unicorns (37%) founded in the 21st century have just joined the US$1billion club this year.
Furthermore, in order to look at more leading indicators of where things are headed, we also analysed 60 founders from 21 soon-to-be unicorn companies that are on the fastest track to become the next unicorns, often referred to as Soonicorns. These startups were founded in the last five years and have raised more than US$100m and/or are valued above US$300m.
All data were obtained through Crunchbase, Pitchbook, CB Insights, LinkedIn, and other publicly available information. Feel free to contact berlin@antler.co if you have any questions, comments, or additions to the data obtained.
Key Findings
Based on our analysis of 177 founders and 59 companies, we confirmed the suspicion that the typical founder stereotype so far has been: "male, middle-aged, from German origin, and has an academic background from a top business university".
The representation of female founders is still extremely low. With only two out of 117 unicorn founders being female (less than 2%), there are immense diversity gaps in the ecosystem.
There is also a noticeable concentration of business profiles among founders, with half of the unicorn companies having a business/operational-only founding team. Only 30% of the founders had a technical background.
The average founder also had considerable experience before building their startup - on average, founders had seven years of professional experience before starting their unicorn journey.
We also counted internships into work experience as seven unicorns were founded straight out of university (GetYourGuide, Celonis, GoStudent, Personio, Lilium Aviation, Bitpanda, Sportradar). As a result, we found that 24% of unicorn founders had less than one year of work experience upon founding their business.
The majority of unicorn founders (52%) have previous startup experience, confirming the findings Antler's partner Alan Poensgen obtained in his article about Westwing. There he shared how working in a successful startup can have a positive flywheel effect on your own founder journey. Still, a relatively high share of unicorn founders come from traditional elitist networks, such as top management consulting (30%) and banking (12%).
The tide is changing
Looking at the soonicorns that have been founded in the last five years, we are optimistic about what is yet to come. The female founder percentage has jumped to 10% — a 5x increase, while this is still too low, we are hoping that this number will change more dramatically soon.
Technical founder profiles have increased from 30-40%, with now 60% of the founding teams having at least one technical co-founder, and the average work experience prior to founding has increased from seven years to 11 years.
We believe this is partly due to a shift to more technical verticals that the new generation of founders are working on disrupting. Typical e-commerce and internet-driven startup ideas are slowly being outnumbered by more technically demanding topics in areas such as SaaS, BioTech, and SpaceTech that are often based on B2B-centric business models.
Regarding previous work experiences, the range of founder profiles is getting more varied as the share of typical elitist profiles is declining. It's becoming increasingly more important to gain hands-on experience, with 60% of soonicorn founders having worked at a startup before.
Which institutions did the founders actually attend?
We found out that the vast majority of successful founders so far had access to privileged networks via elite universities and prestigious companies they worked at. And while many of these brand names may sound familiar to you, the extent of their prevalence might surprise you.
For example, 70 out of 117 unicorn founders went to the same 10 universities.
You are the average of the five people you spend the most time with.
— JIM ROHN
Up until now, it seems that attending a top university could drastically increase your likelihood of success. Apart from gaining an excellent education, you get access to a strong alumni network that can act as role models and support you in your entrepreneurial journey while being surrounded by like-minded peers who motivate you to set and achieve highly ambitious goals.
According to research by social psychologist Dr. David McClelland of Harvard, [the people you habitually associate with] determine as much as 95 percent of your success or failure in life.
— DARREN HARDY, THE COMPOUND EFFECT
Take the two leading German universities: WHU - Otto Beisheim School of Management and Technical University of Munich (TUM) together contributed to more than a quarter of the unicorn founders in the DACH region in the last 20 years. The small unicorn factory in Vallendar (WHU) has produced 1.4 unicorn founders per 1,000 alumni - a significant ratio.
Looking at the most frequent employers, there has been a considerable concentration of management consulting firms. One could draw parallels between the structured and efficient problem-solving abilities of a management consultant and the required skill-set as an entrepreneur who has to solve challenging problems with imperfect information on a daily basis.
Moreover, a prestigious employer brand name on your CV could act as a stamp of approval and provide significant signaling effects in terms of attracting future employees, investors, and customers to your startup. In recent years, the management consulting firm Boston Consulting Group (BCG), and the startup incubator Rocket Internet have trained the most unicorn founders in the region, followed by other household consulting names McKinsey & Company, Roland Berger, and the investment bank Goldman Sachs.
While the commonalities in backgrounds of unicorn founders in the last two decades are quite noticeable, there are ongoing efforts in the ecosystem to further democratize entrepreneurship for founders who don't come from these types of backgrounds, don't already have a network that can provide the initial capital as well as support them on their entrepreneurial journey, and are facing other types of discrimination.
One of these game changers is Antler - a place where every talent with the right drive, spike, and grit has the chance to build a defining company of tomorrow.
Another component to maximize your chances of success toward the one billion dollar mark is to have the right investor on board. It is typically difficult to grow your venture big and fast enough without raising external funding, such as venture capital. According to Ali Tamaseb who researched over 200 startups with billion-dollar valuations, 92% of these billion-dollar companies were VC-backed.
However, great investors will not only provide money but also open important doors for you, including introductions to other investors, potential customers, key team hires, and be your guiding partner along the way.
The relationship between founder and investor is often compared to a marriage. If the business is a success, it can become a +10 year mutual journey — so choose wisely! The early-stage investor ecosystem in the region has come a long way over the last decade. And while there is still a large gap in the leading international markets, in particular in growth-stage financing, many highly professional investors are active in the region.
Amongst the early backers of unicorn companies, HV Capital has the most significant track record, having backed nine unicorns in the region.
There has never been a better time to start your own company
It's empowering to see the opportunities available to aspiring founders across Europe. Starting your own company is becoming progressively democratised.
Different perspectives & experiences help drive innovation.
We know diversity drives better financial performance (McKinsey 2020), higher valuation step-ups between liquidity rounds (Oliver Wyman 2019), and faster exits (PitchBook 2019). Nonetheless, there is still a drastic need to reduce any selection bias and bridge socio-economic gaps in the ecosystem. Underrepresented founders are being excluded from the opportunities of equity investment at a very early stage of business development (Cornerstone 2020).
At Antler, a global early-stage VC, we have launched investment operations in our Berlin office in 2020 to help address these gaps across the region. The goal is to spark change in the ecosystem by providing aspiring founders from diverse backgrounds with access to the required network, complementary co-founders, coaching, and funding to succeed in their entrepreneurial journeys from Day 0.
With 44% of our portfolio companies having a female co-founder and 28 nationalities represented among the 60 founders in our first Berlin cohort, Antler is off to a great start in the DACH region and is working on contributing to further innovation, economic growth, and development within the ecosystem.
If you are thinking of building your own category-defining company, are looking for high-caliber co-founders along with a door-opening network and investment, apply to Antler!
Don't hesitate to reach out to the authors of this article if you have any comments or questions regarding the article: Alan, Christoph, Sarah, Moritz, Lucie, Tomasz, Yash, Nivritti, Nam Hai.
*This data was collected over a period of two months to July 31, 2021. Since then, Cluno, Arvelle Therapeutics, Breath Therapeutics have undergone successful exits.
