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People who are interested in stories surrounding billion-dollar companies will find this book interesting. However, if you are looking for stats around what makes a billion-dollar founder, the notes that I share below are all that you need to read. It’s an entertaining book, but the insights that come out of it could fit in a blog post.
- Data dispels most of the common startup myths that are shared by the media. These myths include the average billion-dollar founders’ age, education, and processes.
- Billion-dollar founders are not attached to one idea and commonly pivot many times before the market pulls the correct idea forward.
- Founders with a track record of building companies that reach $10M+ in revenue are more likely to create billion-dollar startups after their initial success.
Forget Founder Myths
Forget the common myths about founders. Data tells us that the stories the media share about founders aren’t true. Below, you will learn what the data really says about billion-dollar founders.
What Differentiates a Billion-Dollar Founder?
Billion-dollar founders are:
- Any age.
- From any background; although, it’s recognized that some backgrounds can assist in the success of founders.
- Founders that choose any number of co-founders, some even choosing to not have a co-founder at all.
- More educated than their counterparts and attend better schools. They are more likely to have a PhD than be a dropout.
- Not necessarily domain experts in what they are creating.
- Founders that pivot frequently and aren’t emotionally attached to ideas. They are willing to listen to the market.
- Increasingly creating companies outside of Silicon Valley (50% of them), and this trend is expected to grow.
- Most likely super founders, meaning they have built a company to $10M+ in revenue previously or had a company acquired for $10M+.
- Technical and non-technical founders, with technical founders having a slight advantage over non-technical founders.
Billion-dollar founders start at any age, so age is a non-factor. For some, being young helps to ask the right questions (naivete) and to get media coverage. But the standard college dropout story is not a common theme among billion-dollar founders.
Half of the billion-dollar founders from Ali’s dataset were older than 34 years old when they started with varying backgrounds.
There is no right or wrong place for a founder to work previous to founding a billion-dollar company. The founders who built these companies had an average of 11 years of work experience before they founded them. Many worked at large companies, such as Google, Facebook, or McKinsey, or they had only built startups.
Many of the founders did not have domain expertise. As an example, none of the founders of Flatiron Health knew about cancer, which is what the entire company was built around. Hard science and soft science startups are generally the exception where you do need expertise.
Some founders were missionaires and solved their own problems, while others followed ideation processes and were opportunity-driven.
Billion-Dollar Founders Attract Strong Teams
The data tells us that the number of co-founders that a startup has—including solo founders—doesn’t affect its success.
What stands out about billion-dollar founders is that they attract the best core team from the beginning. Strong founding teams were common between all of the billion-dollar companies that Ali studied.
Billion-Dollar Founders Learn Quickly
The speed of learning is vital for these companies and founders. They are resourceful and ask the right questions to the right people. These founders aren’t afraid to jump from idea to idea. They pivot frequently. Great founders aren’t emotionally attached to their ideas, and they are willing to let the market pull the product out of them.
Ideate, build, sell, repeat.
Billion-Dollar Companies Offer Differentiated Products
Startups with differentiated products were more likely to become unicorns, like Nest. Pain killer solutions are more likely to be billion-dollar startups, but vitamin pill solutions with strong brands or that are habit-forming worked too.
Companies that save customers time or money are more likely to be successful over those that give convenience or entertainment.
Billion-Dollar Startups Build in Large Markets
Billion-dollar companies were disproportionally built in markets that were already large. Startups creating new markets were less likely to succeed. Not only that, but the startups that created markets didn’t end up becoming larger companies than those that built in pre-existing markets. It’s about being the closest to the turning point and not the first to market. Many recycled ideas made it to the billion-dollar stage, such as Instacart.
Competition is a good sign. Many billion-dollar startups competed with incumbents or fragmented markets. Those are easier to beat than highly-funded startups with the same idea. Zoom beat out Cisco and Skype by paying attention to quality of product and customers. Defensability came through engineering—expertise and network effects. Startups with network effects were more likely to succeed.
The Impact of Venture Capital in Billion-Dollar Companies
Raising venture capital money is relatively new, but it has an outsized impact for startups that want to make it to a billion-dollar status. Only about 10% of billion-dollar companies were bootstrapped—Github, Atlassian, UI Path, and Qualtrics are all examples.
Venture capital has unintuitive math, which is why venture capitalists prefer riskier startups with more potential. Usually, the fund size of the VC dictates the exit outcomes that the VCs will be happy with.
When pitching venture capitalists, the backgrounds of team members mean more than the deck and how you present. Less is more in your pitch deck. Rather than convince VCs to pay attention to you, you should focus on putting your company in the best position; then they’ll automatically pay attention to you.
The Path to Becoming a Billion-Dollar Startup
Founders that want to build a billion-dollar startup need to begin with creating value. The best preparation is to start a company. The next best preparation is to start something: a club or side hustle. Many founders had startup experience—successful or not—before they created the billion-dollar one. And founders with previous $10M exits were more likely to create billion-dollar companies.
Anyone with any background can become a super founder. But it’s more likely to happen on your second, third, or tenth company. VCs should connect with people and back them in back-to-back scenarios for this reason.
Super founder: one who has founded at least one company with $10+ million of revenue or a $10 million acquisition.
Note: The $10 million isn’t an absolute. The main idea is that super founders can scale companies to a certain scale or outcome more than once.
The super founders today create the billion-dollar startups of tomorrow.
Want to Read More?
#SuperFounders is a great read. Captures stories in the valley that are really relevant, today.— Bill Tai (🍌,🍌) 💙🇺🇦💛 (@KiteVC) May 19, 2021
Years ago I read "Fire in the Valley" chronicling the start of #SiliconValley
Decades from now, entrepreneurs will read https://t.co/L3XkIi1eKa and will be equally intrigued! https://t.co/4oZ6Cjypr7
Just one chapter in but this is the type of data-driven book I’ve been looking for for years. @alitamaseb has nailed the approach and I’m learning so much. Can’t wait to get through the rest. #superfounders https://t.co/r14yW8kdf9— Saba (@sabakarimm) May 2, 2021