Compare Yourself to 3,200 High-Growth Companies

Recently, the Startup Genome Project released a study (of 3200 startup companies in the technology field over six months) to understand why some are more successful than others. They provide key findings in their report (pdf) with one of the clearest results they found being that entrepreneurs who are open to outside input and learning are more successful.

They found that startups that have helpful mentors, track metrics effectively, and learn from startup thought leaders raise seven times more money and have 3.5 times better user growth. They also discovered that solo founders take three times longer to reach critical mass and teams with strong business skills are 6.2 times more likely to succeed than tech oriented teams.

Our biased reading of it suggests that hiring an external management consultant can help stack the odds in your favour. Why? In short, because good management consultants know things that you may not and bring a vast range of useful experience.

But what if you’re an experienced business manager with years of relevant experience of your own? So then what can a management consultant do for you?

A professional management consultant brings years of experience from a wide variety of markets and organization types. They may know a lot about the type of company you aspire to become. They have experience with more business models than you can imagine – some variant of which may be just what you need to support your growth.

Regardless of your skills and years in business, a good management consultant can give you advice and support that will dramatically increase your organization’s effectiveness and, profitability (if that’s your goal). And speaking of goals, management consultants typically give you the best return on investment when they advise on strategy development (mission, vision, goals) and on revenue growth (marketing).

For some other background on why hiring a management consultant is a good idea, you can watch this short video: Management Consulting.

As always, your comments and feedback are welcome; contact me by phone at (613) 592 0544 x300 or email apenny@kingsfordconsulting.ca.

A brief background: The goal of the report is to develop a framework for assessing startups more effectively by measuring the thresholds and milestones of development that Internet startups move through. Through survey, it was found that Internet startups move through similar thresholds and milestones of development.

Summary of findings:

1. Founders that learn are more successful: Startups that have helpful mentors, track metrics effectively, and learn from startup thought leaders raise 7 times more money and have 3.5 times better user growth.

2. Startups that pivot once or twice times raise 2.5 times more money, have 3.6 times better user growth, and are 52 per cent less likely to scale prematurely than startups that pivot more than 2 times or not at all.

3. Many investors invest 2-3 times more capital than necessary in startups that haven’t reached problem solution fit yet. They also over-invest in solo founders and founding teams without technical cofounders despite indicators that show that these teams have a much lower probability of success.

4. 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. (However, this does not mean that investors don’t have a significant effect on valuations and M&A)

5. Solo founders take 3.6 times longer to reach scale stage compared to a founding team of 2 and they are 2.3 times less likely to pivot.

6. Business-heavy founding teams are 6.2 times more likely to successfully scale with sales driven startups than with product centric startups.

7. Technical-heavy founding teams are 3.3 times more likely to successfully scale with product-centric startups with no network effects than with product-centric startups that have network effects.

8. Balanced teams with one technical founder and one business founder raise 30 per cent more money, have 2.9 times more user growth and are 19 per cent less likely to scale prematurely than technical or business-heavy founding teams.

9. Most successful founders are driven by impact rather than experience or money.

10. Founders overestimate the value of IP before product market fit by 255 per cent.

11. Startups need 2-3 times longer to validate their market than most founders expect. This underestimation creates the pressure to scale prematurely.

12. Startups that haven’t raised money over-estimate their market size by 100 times and often misinterpret their market as new.

13. 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.

14. B2C vs. B2B is not a meaningful segmentation of Internet startups anymore because the Internet has changed the rules of business. We found 4 different major groups of startups that all have very different behavior regarding customer acquisition, time, product, market and team.

Read the full report (pdf)