New research of unicorn founders finds most are ‘underdogs,’ and feminine founders are rising

A brand new research that zeros-in on the founders of so-called “Unicorns” (corporations value over a billion {dollars}) has discovered most have “underdog” founders, are sometimes drawn from the highest 10 universities, a rising feminine founder make-up, however no apparent monopoly at Seed stage of funding for VCs.

The research (“Unicorn Founder DNA Report) by Defiance Capital of 845 unicorns and 2,018 unicorn founders set out to look at the “DNA” of unicorn founders, concentrating on the US and UK (no EU/European) from 2013 to 2023, to outline the widespread traits of those sorts of founders.

The research discovered:

• 70% of unicorns have “underdog founders” (immigrants, ladies, folks of color).

• Unicorns used to have solely male founders, however that is altering with 17% having a feminine founder in 2023.

• 53% have levels from the highest 10 international universities.

• 49% of unicorn CEOs had STEM levels (64% of feminine founding CEOs had STEM levels) and 70% of founder groups have STEM levels.

• Outdoors of SV Angel (6.4%) and YC (10%), no different VC fund obtained into greater than 2.8% (Sequoia) of unicorns. This implies the market to spend money on a possible unicorn is totally fragmented at Seed, that means outlier VC funds have as a lot probability as a widely known fund to spend money on a unicorn on the earliest levels.

The research additional discovered that unicorns had been dominated by white founders, however that each third unicorn had an Asian founder. Certainly, 38% of unicorns had no less than one founder who was not white: 82% had no less than one white founder, 62% had 1st or 2nd era immigrant founders. Solely 3% of unicorns had a black founder.

And solely 21% of immigrant and feminine founders raised from prime ten VCs. Groups with feminine founders had been two years youthful than all-male groups when founding their unicorns (32 vs 34).

Serial founders (50%) had been extra prone to succeed constructing unicorns, however just one in 5 unicorns had solo founders.

Over the past decade, all prime Seed funds had been generalist funds, and the marketplace for Seed funds is very fragmented. Solely 28% had raised capital from a prime VC seed fund (with greater than 1% market share).

Solely 34% of unicorn founders had labored at an elite employer previous to founding a unicorn, suggesting a McKinsey or comparable background isn’t a prerequisite to success.

The research additionally discovered three dominant elements within the “DNA” of a unicorn founder.

1. No “plan B”

2. “A chip on the shoulder”

3. Limitless self perception

The research discovered that many unicorn founders had been pressured to develop a development mindset, with values, work ethic, and ambitions all established throughout childhood.

Most had a private story of feeling unfairly handled or feeling restricted of their native atmosphere.

The research noticed these traits in communities left behind for generations, e.g. ladies founders, folks of color, neurodivergent, or founders with atypical backgrounds.

Many have a tendency additionally to be “ambitious rebels”, usually motivated by a higher trigger they care deeply about, have sturdy household position fashions, a high quality peer community and no concern of failure.

A far higher variety of 1st and 2nd era immigrant CEOs had STEM levels than native CEOs, suggesting a mind drain from rising or smaller economies to developed ones. Considerably, extra 2nd era immigrants attended an elite college than the remainder of the pattern.

Different attention-grabbing information factors got here out of the research. Solo founders tended to begin their unicorns three years later than founder groups, and it took 7 years on common to achieve unicorn standing for all sorts of founder groups, however 2nd era immigrants took solely 6 years.

And actually, the all-white, male, native, Ivy league archetype of founder was really an rare prevalence, at 11%, and just one third of founders native to a rustic the place they based the corporate graduated from a prime ten college.

As well as, the highest 20 US VC funds tended to favor male, immigrant founders with STEM levels from elite universities at Seed, however look like lacking a trick by largely ignoring feminine founders, a rising demographic within the unicorn house.

Commenting, Defiance Capital founder Christian Dorffer, instructed me: “I believe this is the most comprehensive study ever done on the backgrounds of unicorn founders in the US and UK. We cover all new unicorns from 2013-2023, covering over 2,000 founders and over 800 unicorns.”

“VCs famously say that ‘it’s all about the people’, but with only 10% of unicorn founders fitting the Mark Zuckerberg profile, most of the thousands of Seed funds are backing the wrong type of founders. One interesting finding in our study is that even the best funds, like Sequoia, only get into less than 3% of unicorns – and only 30 funds have a unicorn market share of 1% or more,” he stated.

“The hunger, self-belief, ingenuity and resilience we found in the unicorn founders also make a lot of sense when you see that 62% had immigrant founders (typically from countries where it’s impossible to build unicorns) and 17% of new unicorns last year had female founders.”

He continued: “Immigrants and other underrepresented founders are clearly able to produce these amazing results but I wanted to prove it to LPs. A lot of the immigrant founders are coming from the developing world, like India and Africa, even Eastern Europe. They don’t really have that many options at home. They have to leave and pursue opportunities elsewhere.”

“There’s only 30 funds that have more than 1% share of all these unicorns, which means that it’s totally fragmented,” he added.

“If you combine this fragmentation with the fact that immigrants and women found it harder to fundraise, there’s a huge opportunity for new funds to come in and specifically set out to look for these founders.”

I requested him how a VC or a household workplace would possibly change their technique because of seeing this analysis?

“Sequoia being the top fund in only 2.8% of unicorns means that they miss a lot. Yes, for LPs, top funds are a relatively safe investment. But family offices are now looking at emerging managers and especially early stage funds as the potential Alpha. So if you’re looking to maximise returns as a family office, you need to be in a few new funds, emerging managers in order to get that outlier company that turns into a unicorn,” he stated.

Dorffer, who intends now to supply a podcast with lots of the unicorn founders surveyed, stated: “The stories that are coming out show crazy determination. As a female founder, you have to work twice as hard and take twice as many meetings to raise the money. The founders of Andela and three African founders that built unicorns… have stories that are just so inspirational.”