Predicting Who Will Start Companies Next

Bloomberg Beta, the venture investment arm of Bloomberg LP, is looking to invest even earlier than traditional venture capital firms. In fact, they want to invest “before the company is a company. Before the founder even knows they’re a founder,” Fortune reports.

The firm teamed up with Mattermark and the results “could have ramifications for the way investment decisions, typically driven by gut instinct and intuition, are made. Mattermark identified the most likely career paths of successful founders, creating a pool of 1.5 million people who were connected by one to two degrees of separation to tech startups, but were not founders yet. By analyzing the people that started companies over nine months, Mattermark mapped out the strongest predictors of starting a company: a person’s education, which previous companies they’ve worked for and how senior they were, their geography, and their age. The goal was to find things that didn’t fit the standard path to entrepreneurship.”

The Harvard Business Review has an interesting interview with Roy Behat, the head of Bloomberg Beta.

Said Behat: “We started to think, was there a way to get to know people even earlier? And we’d seen what companies were doing with predictive analytics to predict and select their customers using data. And so we just wondered: before a founder explicitly became a founder, could we predict that and develop a relationship with them? And so together with Mattermark, we built this model based on data from past and present venture-backed founders and we used it to try and predict, from a pool of 1.5 million people, the top 350 people in Silicon Valley and New York, which is where we’re focused, who had not yet started a venture-backed company but we believed would do so. And so that’s what we did and we reached out to them.”

Here’s what they’ve found:

  • 38% of venture-backed founders are over 40 years old
  • Only 15% of venture-backed founders have a Computer Science degree
  • Management consultants are more than 2x more likely to be venture-backed founders than engineers
  • 43% of venture backed founders worked at a venture-backed company immediately before founding
  • Two thirds of venture-backed founders were not in a senior leadership position prior to founding
  • Contrary to conventional wisdom, being “stuck” in the same company or position for a long time (even a decade) does not diminish your likelihood of becoming a founder

Interestingly, Bloomberg Beta shares its operating manual online.