The key attributes to starting a billion-dollar business are…

4 Sep 2022

There are many aphorisms about success out there, from the apt and witty to ones that make you gag involuntarily. But research on leading European founders may hold some real-life clues to what it really takes to succeed in business.

There is quite a bit of rubbish out there telling people what it takes to succeed in business: drive, motivation, a fabulous idea, a propensity for risk, a nurturing environment, the will to succeed etc, etc.

Sometimes, you involuntarily gag when you hear some of the quotable quotes about success: “The question isn’t who is going to let me, it’s who is going to stop me,” Ayn Rand wrote. Yes … and also yuck!

There is of course a certain amount of cynicism too: Mark Twain said: “All you need in life is ignorance and confidence and then success is sure.” And, according to Winnie the Pooh: “People say nothing is impossible, but I do nothing every day.”

The aphorism I agree with is this one: The elevator to success is broken. You will have to use the stairs … one step at a time.

Business success, particularly in tech, has become a bit of a European obsession. It must be galling for Europeans to see that most of the success stories in the past two decades have come out of the US — and from a very small part of the US: Silicon Valley.

Some will claim that as much business innovation takes place in Shenzhen in China, but you may be surprised to learn that most big Chinese tech companies were started, or financially supported, by people who spent most of their working lives in the Valley.

Anyway, things are changing. There are a growing number of European unicorns — companies with a technical value of more than $1-billion — and there was a huge jump last year.

The Crunchbase Unicorn Board listed 86 European companies, which was five times more European unicorns than the previous year, and three times the previous record, which was in 2019. You know Europe is doing better because the number of scams is also increasing: Hello Wirecard. Too soon?

Nevertheless, this needs to be taken with a pinch of salt because there are only seven European companies in the top 50, and many of the companies are food delivery companies, which were artificially boosted by the pandemic.

But still, it’s now a sizeable database. Vestact fund manager Michael Treherne pointed out in his company’s newsletter this week that there is now some research on this group. The research, by tech fundi Chris Rainville who works for European consultancy Mosaic, asked the question: “What do Europe’s leading founders have in common?” And the answers are fascinating.

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But first a quiz. Do you think the majority were university dropouts? Do you think they are mostly young? Do you imagine they wear hoodies? Do you think they had a technical background? And do you think they came from the most prestigious universities?

If you answered “yes” to any of those questions, you would be wrong. If there was one thing that did show up very emphatically among the CEOs of this group of 197 unicorns it was that this was not their first rodeo. A total of 65% were repeat founders (some may have worn hoodies their first time out, but that was strangely not covered in the research).

In addition, only 10% were university dropouts, and actually 55% had a master’s degree or a PhD. This does leave one open question because simple maths will tell you that 35% had very ordinary academic qualifications. And it didn’t make much difference if they went to the small set of top universities: the top five alma maters accounted for only about 15% of founders. Clearly a chip on your shoulder is a distinct advantage.

One thing that is perhaps less surprising is that the founders had, on average, pretty long work experience before they broke away to do their own thing. Around 35 had worked for 10 years and another 30% for five years before founding their companies. But, oddly, they generally had not worked for any of the big US tech companies. Only 5% had worked for a FAANG company (Facebook, Amazon, Apple, Netflix and Google) or Microsoft before founding their unicorn.

Rainville suggests this is possibly because of the relative youth of the European tech ecosystem. In North America, a much larger proportion of founders would have worked for other Silicon Valley companies, he points out.

This all makes so much sense to me. The romantic notion of the great startup being born in a university dorm room and then everybody drops out and becomes a billionaire is attractive — but rare.

As the saying goes, life is not a fairy tale. If you lose your slipper at midnight, you are probably drunk. DM/BM

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