Should VCs bet on PhD founders?
We were recently reviewing the fine work that DCVC’s Ali Tameseb did in his blog post: Land of the Super Founders: a Data Driven Approach to Uncover the Secrets of Billion Dollar Start-ups. Ali did a great job of parsing the 195 unicorns (at that time) across many, many dimensions (educational and work background of founders, previous start-up experience, intensity of competition, etc).
One question he didn’t really address is whether PhDs are a good bet or not.
On the one hand, many of the characteristics of a PhD (intense focus, high academic achievement, mastery of an area) seem useful to start-up success; on the other hand, PhDs sometimes have a reputation of being overly methodical, and have the mixed blessing of many good, comfortable career choices.
The reality for us is that our portfolio is heavily skewed towards PhD-founders. We have written about this approach in an earlier post (“The wave we’re riding: Chinese PhDs in the US”). However, we have never attempted to empirically answer the question - how good are PhD founders? Are they more successful than non-PhDs? And if so, in what verticals?
To answer this question, we take a look at the 347 unicorns headquartered in the US that have ever reached a $1 billion valuation in the past 10 years and their founding team. Most of the data comes from Pitchbook, and some are manually gathered by going through founders’ LinkedIn profiles.
It is important to keep in mind that there are a lot of limitations of this analysis due to data availability, accuracy, and misjudgment. Some data may not be up-to-date. More importantly, we don’t have the data of the whole universe, i.e. how many startups are founded by PhDs in total, and hence we could be wrong about our conclusions. Also, there are hundreds of factors that would affect a company’s development, and having PhDs in the founding team is only one factor.
Key takeaway: PhDs appear to have very similar performance (slightly on the positive side, but not significant) to non-PhDs in overall unicorn formation; however, in certain fields, PhDs are strongly over-represented
- Overall, PhDs have slightly better performance than non-PhDs, but that is far from significant.
Among the 347 unicorns that we looked at, 62 of them have at least one PhD co-founder, which is about 18% of the group. Some key metrics don’t suggest a strong advantage to PhD founders (although again, the numbers are slightly in favor of PhD founded companies). For example, the average valuation vs. capital raised multiple (one way of looking at business-building efficiency) is 4.87 for PhD founders and 4.06 for non-PhD founders. And it takes on average 6.34 years for a PhD-founded unicorn to reach a $1 billion valuation while non-PhDs on average need 6.94 years.
2. PhD founders are more common in certain industries
The 347 unicorns sit in different industries. Information Technology accounts for more than half of the unicorns (52.4%), followed by Consumer Products and Services (19.0%), which is followed by Business Products and Services (10.1%), and Healthcare (9.8%).
Information Technology is a broad category for most tech companies, with a wide range of verticals including artificial intelligence, machine learning, big data, mobility tech, cloud tech & devops, cybersecurity, AR/VR, B2B payment, hr tech, internet of things, etc. Hence, we will do a breakdown of verticals in the following section.
The percentage of PhD founders also varies with industries. Nearly half of the unicorns in Healthcare have at least one PhD founder (44.1%). Business Products and Services has the second-highest percentage of PhD founders (20.0%). As for Information Technology, even though they have the largest number of unicorns, they actually have a lower-than-average percentage of PhD founders (16.5%).
3. PhD founders are more successful than non-PhDs in certain fields
However, there are some fields where we see a much higher percentage of PhD founders and significantly better performance of the startups. Some notable fields are as follows. The same caveat from above applies: we do not know the universe of start-ups in these sub-areas (ie., we have no idea how many AI/ ML start-ups there have been in total during the years that these unicorns were born). The below analysis is on relative representation of PhDs in certain categories.
We are interested in several items:
- In what areas are PhDs heavily represented
- Is there a difference in performance? In this case, we looked at two statistics: the ratio of valuation to capital raised (ie. did they become valuable efficiently) and their speed to reaching the $1B mark
Artificial intelligence/ Machine learning: 51 unicorns with 16 having PhD co-founders (31.4%).
Examples in this sector include
- SambaNova Systems: an advanced systems platform and hardware designed to power machine learning and data analytics. PhD co-founder includes Dr. Oyekunle Olukotun
Big data: 49 unicorns with 13 having PhD co-founders (26.5%).
Examples in this sector include
- Palantir Technologies*: data fusion platform designed to integrate, visualize, secure, and analyze information. PhD co-founder includes Dr. Alexander Karp
- Snowflake: SaaS-based cloud data warehousing platform designed to safely and efficiently store, transform, and analyze business data. PhD co-founders include Dr. Marcin Zukowski and Dr. Thierry Cruanes
- Databricks*: unified data analytics platform designed to make big analytics data simple. PhD co-founders include Dr. Ali Ghodsi, Dr. Andy Konwinski, Dr. Arsalan Tavakoli-Shiraji, Dr. Ion Stoica, Dr. Matei Zaharia, Patrick Wendell*, and Dr. Reynold Xin
*It is worth noting that Palantir’s “PhD co-founder”, Dr. Alex Karp, has his PhD in German Philosophy; it is also worth noting that Databricks has no fewer than 5 PhDs among their co-founders, and one of their founders, Patrick Wendell, dropped out of a PhD from UC Berkeley to co-found Databricks.
Mobility tech: 38 unicorns with 12 having PhD co-founders (31.6%). This sector features very deep benches of PhD co-founders (multiple companies having more than 1 PhD founder).
Examples in this sector include
- Aurora: machine learning software and hardware to power self-driving cars. PhD co-founders include Dr. Chris Urmson, Dr. Drew Bagnell, and Dr. Sterling Anderson
- Pony.ai: artificial intelligence and algorithms to develop an autonomous driving technology. Ph co-founders include Dr. James Peng and Dr. Tiancheng Lou
- Plus.ai: self-driving technology to offer large scale autonomous commercial fleets. PhD co-founders include Dr. David Liu and Dr. Shawn Kerrigan
- Sila Nanotechnologies: revolutionary car batteries to improve energy storage options. PhD co-founder includes Dr. Gleb Yushin
Manufacturing*: 23 unicorns with 8 having PhD co-founders (34.8%).
Examples in this sector include
- Carbon: digital manufacturing platform designed to help in making advanced thinking a practical reality. PhD co-founders include Dr. Alex Ermoshkin and Dr. Joseph DeSimone
- Desktop Metal: three-dimensional metal printers designed to make printing accessible to all engineers, designers, and manufacturers. PhD co-founders include Dr. A. John Hart, Dr. Christopher Schuh, and Dr. Emanuel Sachs
*It is worth noting that there may be some mistag of “manufacturing” on the Pitchbook data. Some of the companies tagged “manufacturing” are not direct manufacturers. Rather, their products, including both hardware and software, can be widely used and applied in manufacturing to improve efficiency.
Internet of things: 8 unicorns with 4 having PhD co-founders (50.0%).
Examples in this sector include
- Samsara: internet of things-based sensors and cameras designed to increase the efficiency, safety, and sustainability of the operations that power the economy. PhD co-founder includes Dr. Sanjit Biswas
- Cisco Jasper: cloud-based platform for Internet of Things (IoT) services. PhD co-founder includes Dr. Amit Gupta
Some thoughts and conclusions
Tsingyuan almost always bets on early-stage, highly-technical companies, and technical founders and teams. About 75% of our portfolio companies have PhDs in the founding team. And we believe that this is a great source of super talented entrepreneurs. Among these unicorns led by PhDs, we are very glad to be the early investors to Ginkgo Bioworks, Quanergy, and Plus.AI.
We believe that it’s possible that “deep tech” will go through cycles that will sometimes favor PhD-founded companies, and will sometimes disfavor. In earlier days of the internet, there were many companies building basic infrastructure (chips, routers, etc) that were chock-a-block with PhDs. Then, there has been a long period of application, e-commerce, etc., development that favored business-focused founders. It’s possible that we are now entering an explosion of favorable trends (AI everywhere, genetic engineering, shift to electronic vehicles, and self-driving) that are all giant sectors that have characteristics that may favor PhD visionaries.
In this category, we have a host of companies in those categories that we think are well on their way:
- Turing Video: AI/ Computer Vision for physical security and operations. Co-founded by Dr. Song Cao, Dr. Xing Zhong, and Yi Li.
- Memverge: virtualization for memory/ storage convergence. Co-founded by Dr. Charles Fan, Dr. Yue Li, and Dr. Shuki Bruck
- Stellar Cyber: AI-enabled network intrusion detection. Co-founded by Dr. Changming Liu and Aimei Wei
- Otter.ai: AI/ NLP enabled meeting transcription. Co-founded by Dr. Sam Liang and Dr. Yun Fu.
- Subtle Medical: AI/ computer vision-enabled MRIs and PET Scans. Co-founded by Dr. Enhao Gong and Dr. Greg Zaharchuk
- Weride: fully autonomous vehicles designed to deliver Mobility as a Service. Co-founded by Dr. Xu Han, Dr. Yan Li, and Qing Lu
- Ambilight: low cost light-filtering optical film for mass adoption. Co-founded by Dr. Jianguo Mei and Dr. Chao Wang
- Mission bio: end-to-end solution for single-cell genetic testing. Co-founded by Charlie Silver and Dr. Adam Sciambi
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Tsingyuan Ventures is a $100M seed-stage technology firm. We back technical founders across software, life sciences, and frontier technologies. Learn more about our origin story and our approach here.
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