4 Ways Digital Commerce Founders Differ From the Valley Stereotype

When picturing the typical tech startup founder, what comes to mind? A group of young white men with a computer science background in Silicon Valley? Probably. And for many tech startups, that description is quite accurate. A recent study published in the Harvard Business Review finds that only 9% of VC-backed tech startups in the US have female founders. The share of VC-backed tech startups without technical founders is also extremely low. But is this pattern the same for all types of VC-backed companies?

By analyzing 30+ digital/social commerce startups across the US and Europe, ranging from those with billion-dollar valuations (such as Warby Parker) to more recently established companies, it is evident that the answer is no. The digital/social commerce space seems to have a founder logic of its own — and a very interesting one at that.

The sample in the study is based on the following selection:

• Founded in 2010 or later in the US or Europe
• Started out as direct-to-consumer (D2C) only or significant portion of D2C sales
• Raised a minimum of $1m in venture funding
• Fast-growing/high ambition

By analyzing parameters including founder background(s), amount raised, HQ location and founding year, four key insights are found which shows how these companies differ from the typical Valley-type tech startup:

• Non-technical founders: Most common educational background is an MBA from an Ivy League school or Stanford. However, this is far from required as educational backgrounds span from History majors to Biology and International Relations.
• Large proportion of sole founders: About one-third of the companies in the sample had sole founders. One-third had two founders and the remaining third had more than two founders. That as many as one-third have sole founders is interesting as most VCs stresses the importance of a strong founding team, which typically implies at least two founders.
• Outside the Bay Area: 40% of the companies in the sample are located in New York City, compared to 20% in the SF Bay Area. The rest are located across the US and Europe.
• Diverse founder backgrounds: Forget the stereotypical white, male, computer science major from Stanford who moved on to Google and then ventured out. These founders hail from a variety of backgrounds which means greater diversity in terms of background, ethnicity and gender than traditional tech startups. However, the founders are typically all female or all male, it is very seldom a mix (just 10% have both a male and female founder). A third of the companies has a female founder, compared to 9% of typical VC-backed tech startups.

The average company was founded 2013 in New York City and has raised $12m to date. It has 2.27 founders, with at least one MBA graduate— typically from Columbia or Wharton. The other founder(s) is either an engineer or designer. At least one founder has previous founder experience and one has previous experience in venture capital, management consulting or investment banking.

While this analysis is not based on an exhaustive study of venture-backed digital/social commerce startups, the findings still point to some interesting observations. An obvious conclusion is that founding teams in this space are way more diverse in terms of backgrounds and composition than the stereotypical tech startup. This is good for the ecosystem and it is a healthy sign that the companies have been able to raise venture funding. For many VCs it means that they have to get out of their comfort zone and challenge themselves and their partnerships as to what a high-potential founding team looks like. That being said, it is likely that the next wave of founders in this space will look to tech more broadly beyond digital marketing and integrate competencies like machine learning and automation. What the next wave could look like will be the topic of a blog post of its own — stay tuned!

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