Venture Capital Report Examines Who Gets Funded
CEO: that to be a founder of an Internet start-up, you have to be a nerdy, genius type in your early 20s. Think Sergey Brin of Google, or Facebook's Mark Zuckerberg.
Well, the company CB Insights collects data about private companies, and has just released a report on the founders of Internet start-ups. They tracked 185 Internet companies between January and June of 2010 to see what kind of leadership is attractive to venture capitalists looking to invest.
Anand Sanwal is the CEO and co-founder of CB Insights. He joins me now. Welcome to the program.
ANAND SANWAL: Thanks, Melissa.
: And your report basically debunks this whole notion of start-up founders being braniac 20-somethings living in Silicon Valley, right? You say wunderkinds, not the norm.
SANWAL: You know, amongst several findings, this was one that I think was surprising. Pop culture would have you believe that the Mark Zuckerbergs of the world are commonplace. The average age of the founding teams was in the 35-to-44 age range - which, you know, seems to indicate that VCs are funding folks with, you know, some amount of experience and maturity in the business world.
: VCs being venture capitalists.
SANWAL: Venture capitalists, exactly.
: Overwhelmingly, this group of Internet founders was male, we should say.
SANWAL: Yeah. It was 92 percent male founders.
: Okay. And if you're looking at education, the educational background of these folks, what did you find?
SANWAL: We, to some degree, as expected, saw - the states that these folks were educated in tended to be, you know, the Northeast and the West Coast. I think, surprisingly, at the advanced-degree analysis we did, Stanford was actually edged out by Harvard grads. And I think given Stanford's proximity to the whole Silicon Valley, we were surprised to see that it was kind of outdone by Harvard.
: If you look at the kind of training the Internet start-up founders have educationally, what did you find?
SANWAL: When we looked at MBAs versus master's degrees in other disciplines, primarily master's of science, a majority of the teams had only MBAs on them, or the highest degree on the team was an MBA. On top of that, the MBAs at the national level actually received the largest funding rounds.
: You also look at the racial makeup of Internet start-ups, and you find that while whites make up 77 percent of the U.S. population, they are 87 percent of the Internet founders. If you look at blacks, 11 percent of the overall population, just 1 percent; and for Asians, 4 percent of the U.S. population, but 12 percent of the Internet start-up founders. What do those numbers tell you?
SANWAL: Our view, again, this is just - shed light on what the mix is. And we're seeing lots of conversation about why this may be the case. I can say sort of anecdotally, based on informal surveys we do of venture capitalists, what they tell us is there's not many black entrepreneurs, for instance, that they see in the process of getting pitched. You know, I think that was one interesting highlight.
I thought the other thing that came away from the report was the fact that all Asian teams actually raised the largest venture capital relative to other teams.
: Why did you decide to do this research? What were you trying to find out?
SANWAL: When we talked to venture firms and asked them how they make their decision, you know, the idea - I think - is obviously important, but there's a lot of people who have the same idea. The VC folks are always telling us that it's the people. And so that's what this was trying to bring to the table, was just the data-driven perspective into the people behind the companies that we read so much about.
: Anand Sanwal, thanks for talking with us.
SANWAL: Thanks, Melissa.
: Anand Sanwal is the CEO of CB Insights. His company collects data about private businesses. It just released a report that looks at the founders of Internet start-ups backed by venture capital.
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