“10 Lessons” from US-based VC First Round

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US-based venture capital (VC) firm First Round this year celebrates 10 years of investing. To mark the occasion, the firm has looked at all its investment-related data covering its 10 years – and over 300 investments-worth – of work, and has released a set of “10 lessons” it wants to share with the industry.

While First Round is US-based, we at Disrupt Africa think some of its lessons are universally applicable. Like that female founders outperform all-male startups…

It’s true. First Round found its data shows companies with a female founder performed 63 per cent better than investments with all-male founding teams. Yet more proof that female entrepreneurs have a very real role to play in the ecosystem worldwide.

Second, First Round says young entrepreneurs perform better – founding teams with an average age under 25 at the time of investment perform 30 per cent above average.

Where founders went to school, and their past employment also has an impact, First Round says. So get yourself off to a good school, and seek out Africa’s rising startup stars for your early employment years.

An interesting finding is that while investors pay more for repeat founders – their initial valuations are up to 50 per cent higher -, startups run by repeat founders don’t necessarily outperform those with first-timers at the helm.

On the other hand, those trying to go it alone – the solo-founders – do much worse. Teams with more than one founder outperformed solo founders by 163 per cent, and solo founders’ seed valuations were 25 per cent less than teams with more than one founder. Lesson: don’t think you know it all, combine your strengths with a core team, and you’ll really make waves.

While you need a team, it seems that the mantra of needing a tech co-founder isn’t always true. According to First Round’s findings, a technical co-founder is critical for enterprise companies – enterprise startups with at least one tech co-founder perform 23 per cent better overall. BUT, consumer companies with a tech founder actually underperform completely non-tech founding teams by 31 per cent. Surprised? We were.

And perhaps the take-homes we like best: “you can win outside the big tech hubs”, and “the next big thing can come from anywhere”.

Sure, First Round is talking about startups in the US, and US-based tech hubs. But we say Africa can prove this point too.

As to where the next big thing will come from, First Round’s point is that contrary to popular belief, the best investment are not actually found through referrals, they can pop up anywhere – through Twitter, at Demo Days, anywhere. In fact those startups First Round “discovered” – as opposed to had referred to them – performed 58.4 per cent better.

And those founders who approached First Round directly did 23 per cent better. So when the time is right, don’t sit around and wait for the investment to find you.

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Inspired and excited by the African tech entrepreneurial scene, Gabriella spends her time travelling around the continent to report on the most innovative tech startups, the most active investors, and the latest trends emerging in the ecosystem.

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