By Mar Hershenson (Pejman Mar Ventures), Isaac Madan (Stanford University), and Shaurya Saluja (Stanford University)
Harvard Business School and Stanford Graduate School of Business are often compared and are consistently ranked among the top 3 business schools in the country. In February, Dimitri Dadiomov of NextView Ventures published an analysis of startup activity by Harvard MBA founders over the past six graduating classes. After reading the article, we were interested to find out more about Stanford’s entrepreneurial output and how it compares to Harvard’s.
Additionally, in the Valley there is much controversy and discussion around what archetypal, successful founding teams look like, especially with respect to the role and background of an MBA co-founder. We decided to dive into the backgrounds and characteristics of the founders of the top 40 companies in our data set and compared them to the remainder of GSB startups to determine what features stood out.
We were able to identify 434 founders from GSB classes between 2008 and 2014, who’ve raised almost $2.5B in capital across 127 funded companies.
Entrepreneurial Activity
A few caveats to note upfront: (1) we use number of founders, number of funded companies, and amount of funding raised as proxies for entrepreneurial activity — these are not indicators of success; (2) our data is from publicly available sources like AngelList, Crunchbase and LinkedIn, so we may have missed some founders/companies that do not report financing; (3) and our data is based on a single snapshot in time.
The large funding spike in 2011 is largely due to SoFi, which has raised $766M to date. Latter companies in the classes of ’13 and ’14 are early in their lifecycles, mostly having raised seed and A rounds, so we’ll expect them to raise aggregate amounts on par with the classes of ‘08-’10 in the coming years.
Top exits
Three companies have already seen exits over $100M: Skybox Imaging was acquired by Google for $500M, RelateIQ by Salesforce for $390M, and Viki by Rakuten for $200M. One of the companies, Jumei, IPO’d (NYSE: JMEI) with a current market cap of $2B.
Sectors
GSB founders are solving problems across a broad range of industries, with primary emphasis on consumer, enterprise, and e-commerce, which in aggregate accounts for over three-quarters of all startups.
Locations
Over 70% of founders stay in Silicon Valley to build their companies, within commuting distance of Stanford. Less than 15% of companies will move overseas, likely to the home countries of the founders.
Undergraduate schools
GSB founders come from a diverse range of undergraduate schools. Notably, out of the GSB founders who had listed their educational history on LinkedIn, 15% of them had an earlier degree from Stanford or Harvard. Other highly-represented schools tend to be prestigious US universities like Dartmouth, Yale, and MIT.
Top investors
Among the investors in these GSB startups that had disclosed funding rounds, Darren Bechtel had the highest number of investments. Angels such as Eric Chen, Russell Siegelman and Brendan Wallace have 6 or more investments each.
Average and Median Round sizes
On average, companies with a GSB founder have significantly higher seed rounds and higher A rounds when compared to general companies.
A few caveats for this comparison: 1) years correspond to those in which funding rounds were completed, not the years founders graduated, 2) if seed rounds were stretched over a period of time, we combined them into one, taking the later date as date of close and 3) average and median deal sizes for general companies come from CBInsights.
Stanford vs. Harvard
We now proceed to compare the Cardinal with the Crimson, head-to-head. When comparing these data, it is important to note upfront that the HBS class size is typically over two times larger than that of the Stanford GSB (936 vs. 410 for the class of 2016).
Stanford vs. Harvard: Number of founders
In most years, Stanford outpaces Harvard in the number of self-identified founders. On average, there are 59 Stanford founders per year and 38 from Harvard. In most years, 12 to 18% of Stanford’s MBA class founds a company, while typically less than 6% of Harvard MBAs will found a company out of a given MBA class.
Stanford vs. Harvard: Number of companies
In most years, Stanford again outpaces Harvard in its number of funded companies. On average, each year there are 18 companies founded where at least one founder attended the GSB, while there are 13 companies where at least one founder attended HBS.
Stanford vs. Harvard: Amount funding raised
Stanford and Harvard are neck-and-neck when it comes to funding raised. On average, Stanford raises $353M per year, while Harvard raises $370M. The two most recent years have drastically less funding because these companies are quite nascent, indicating opportunities for upside and investment.
Stanford vs. Harvard: Summary
In short, Stanford is fertile territory for startups. The Stanford GSB is over two times smaller than Harvard HBS, yet produced 168 additional founders raising roughly the same amount of aggregate capital. Interestingly, Harvard has raised roughly the same amount of capital across a smaller set of companies. Part of this likely has to do with the spike of GSB companies in 2013, many of which are still early in their lifecycles.
Top 40 companies
Over the past 10 years, the perception of a strong founder and founding team has shifted. So, we also sought to understand, what does a good Stanford MBA founder and team look like? Are there any stand-out qualities?
To perform this analysis, we identified the top 40 companies in our data set. This meant companies started by Stanford MBAs graduating between 2008 and 2014 that had raised over $10M in funding and either are still operational today or saw a healthy exit. Of course, a company that has raised $10M today is still very early in its lifecycle and is by no means a guaranteed success, but we have used this cutoff as a proxy such that we can compare this set to GSB companies that, for the most part, have not raised any capital.
Two caveats to note:
1) We looked at founders’ LinkedIn profiles to better understand their backgrounds, hence our data set is only as comprehensive and accurate as the founders’ self-reported information on their profiles.
2) We have not shown comparisons between top 40 companies and companies outside the top 40, so our findings are just indications of common characteristics of strong founders and not necessarily stand-out qualities that uniquely separate strong founders from less successful ones.
Investors in top 40 companies
The following lists investors with 3 or more investments in the top 40 companies:
The most active investor in the top 40 companies was Felicis Ventures, with 5 companies. SV Angel, DCM and Sequoia each had 4 investments. Top angels include Ethan Kurzweil, Keith Rabois and Eric Chen, each with 3 investments and all of whom are Stanford alums. Notably, DCM and Kurzweil make strong picks since all of their investments recorded in our data set have been in the top 40 companies.
Top 40: Undergraduate majors
Of the founders in the top 40 whose undergraduate majors we were able to identify, computer science is the most frequent undergraduate major. In total, 47% of them had technical degrees. This suggests the value in having a technical background even as a business co-founder.
The following are the top 6 majors, each with 3 or more founders (there is a long tail of other majors which we have included in our computation of 47% technical background but don’t include in the graph):
Top 40: Highest degree received (other than MBA)
The significant majority of founders in the top 40 do not have an advanced degree beyond their MBAs.
Top 40: Number of years of work experience
Another controversial issue is how much work experience is ideal for founders before they go and start their companies. We looked at the number of years of work experience that founders had before coming to business school. Interestingly, founders in the top 40 tended to have an average of 6.4 years of work experience. In fact, 100% of top 40 founders had between 4 and 8 years of work experience. Founders outside the top 40 had a broad range of experience levels, from 0 to 10 years with an average of 5.7 years. Of course, this finding may simply be reflective of the fact that people who attend business school usually have some work experience under their belts, though it is interesting that there is a narrower band of experience levels across the top 40.
Top 40: Age of founders
The age distribution for founders of the top 40 companies shows most of the founders are currently between 31 and 35. The average age of the top founders is 33, supporting the previous findings of an average of 6.4 years of work experience. Of course, these findings of age and years of work experience are biased by the fact that most students going to business school typically already have at least a few years of prior work experience.
Top 40: Prior industry experience (sectors)
We were also interested in learning where the most successful GSB founders were gaining their experience before starting their companies. So, we looked at the industries that they were working in prior to business school. Most founders spend their time in consulting, finance, tech, and venture capital, even while the majority of these founders have technical degrees. These sectors represent the majority of prior industry experience of successful GSB founders.
Top 40: Prior industry experience (companies)
Within these industries, at what companies did these founders work? A majority of founders had experience at the “Big Three” management consulting firms, Bain & Company, The Boston Consulting Company (BCG) and McKinsey & Company. Only about 15% of the founders in our data set had experience at large tech companies such as Microsoft and Google.
Top 40: Total number of founders on founding team
Interestingly, the top 40 companies had a higher percentage of 3, 4, and 5 person founding teams than companies outside the top 40. Many earlier articles and notable investors have discussed the importance of multi-person co-founding teams. This finding is corroborated by our GSB data.
Top 40: Total number of GSB founders
The significant majority of startups (84%) in the top 40 had only one founder from the GSB on their founding team versus multiple GSB founders (only 16%). The ideal make-up of a founding team is a long-standing debate, but these data suggest that GSB startups do not need multiple GSB co-founders to be successful.
Conclusion
Stanford GSB students are 2x likelier than HBS students to found a company that raises $10M or more.
Learnings about the top 40 Stanford GSB companies:
● 47% of founders have technical degrees.
● 100% of founders have 4 to 8 years of work experience, with an average of 6.4 years.
● 56% of founders had prior work experience in consulting, finance, tech and venture capital.
● The “Big Three” consulting firms are the most common prior employers.
● The majority of teams have 2 or 3 founders.
Methodology & disclosures
● Our database of founders was constructed by finding people who self-identified themselves as founders, co-founders, and CEOs of companies that were founded during or after their time in the MBA program.
● All data are from public sources like AngelList, Crunchbase, and LinkedIn, so it is important to note that the data set is neither fully comprehensive nor 100% accurate.
● We use funding as a proxy for entrepreneurial activity, not as an indicator of success.
● A number of companies do not publicly disclose funding rounds or the amount raised, so the data set is not fully representative.
● Data are current as of February 20, 2015. Financings, liquidity events, etc. after this date are not included.
Acknowledgements
Thank you to our reviewers: Katia Ameri (Pejman Mar Ventures), Mike Greenfield (CEO of Bonafide), Eric Ouyang (Pejman Mar Ventures), and Nicole Quinn (Stanford GSB).
