The boffins at Startup Genome surveyed over 650 startups in a one year period and released a preliminary report last week that placed Singapore (7th) and Bangalore (9th) in the top 10 startup havens worldwide. Mumbai placed 20th in the list that saw Silicon Valley, London, New York, Toronto and Tel Aviv garner the top five slots of the most nurturing area/cities for startup companies.
The goal of the Startup Genome project is to increase the success rate of startups and accelerate pace of innovation around the world by turning entrepreneurship into a science. With the ﬁrst Startup Genome report we aim to lay the foundation for a new paradigm of assessing startups and understanding the drivers of entrepreneurial performance.
Startup mecca Silicon Valley is no stranger to such lists, but some see London as a surprise entry since they consider it an emerging startup builder. Whatever the case may be, Singapore, Bangalore and Mumbai’s inclusion in the top 25 is a testament to the active VCs, mentors, incubators and startup entrepreneurs in Asia.
The Startup Genome founders (Bjoern Herrmann, Max Marmer and Ertan Dogrultan) wanted to know what made startups fly or flop and drew out a survey (Startup Compass) to find out. The partial report from the survey did not elaborate on statistical findings for the Asian cities, but pointed out some crucial information for startup entrepreneurs and investors alike:
- Startup founders who listen and learn from their mentors — and effectively track their metrics, will make 7 times more money and expand the companies 3.5 times more than average.
- Startups that are willing to pivot and reconfigure their products or services once or twice will make more than twice the amount of money, almost four times the user growth and more than likely scale the company at the right time — compared to startups that keep changing direction or are too stubborn to adapt.
- Many investors pump in over twice the necessary capital in startups that haven’t reached problem solution ﬁt yet. They also over-invest in solo founders and founding teams without technical co-founders despite indicators showing these teams have a much lower probability of success.
- Investors who provide hands-on help have little or no effect on the company’s operational performance. But the right mentors signiﬁcantly inﬂuence a company’s performance and ability to raise money. Investors can still have a signiﬁcant effect on valuations and M&A though.
- Solo founders take more than three times longer to reach scale stage and are twice as less likely to pivot.
- Business-heavy founding teams are six times more likely to successfully scale with sales-driven startups than with product-centric startups.
- Technical-heavy founding teams are three times more likely to successfully scale with product-centric startups with no network effects than with product-centric startups that have network effects.
- Balanced teams with one technical founder and one business founder raise 30% more money, have three times more user growth and are 19% less likely to scale prematurely than technical or business-heavy founding teams.
- Most successful founders are driven by impact rather than experience or money.
- Founders overestimate the value of IP before product market ﬁt by 255%.
- Startups need around three times longer to validate their market than most founders expect. This underestimation creates the pressure to scale prematurely.
- Startups that haven’t raised money over-estimate their market size by 100x and often misinterpret their market as new.
- Premature scaling is the most common reason for startups to perform worse. They tend to lose the battle early on by getting ahead of themselves.
- B2C vs. B2B is not a meaningful segmentation of Internet startups anymore because the Internet has changed the rules of business. There are four different major groups of startups that all have very different behavior regarding customer acquisition, time, product, market and team.
The valuable insights gleaned from this research will invariably make startup entrepreneurship less painful but no less stressful; lowered learning curve plus a little lowered expectations; increased knowledge which may lead to increased profitability.
Just like the human genome project, the Startup Genome project may soon identify what makes a perfect startup business and provide a cure for sick and ailing startup ventures.