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The 10 Year Project

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  1. 1. What we’ve learned from 10 years and over 300 investments. 10years.firstround.com© 2015 First Round Capital
  2. 2. We believe that seed investing is much more an art than a science — and there’s no such thing as a formula for success. But as First Round celebrates our 10-year anniversary this year, we thought it could be interesting to publicly share some insights. We have a unique data set of detailed information on our community of over 300 companies — and nearly 600 founders. We wanted to look at the founder characteristics that accompanied successes and not quite successes. Of course there were counterexamples and outliers, 
 but some definite themes emerged. Here are 10 of them. 10years.firstround.com© 2015 First Round Capital
  3. 3. 10years.firstround.com Women 
 are Winning Companies with a female founder performed 63% better than our investments with all-male founding teams. F I N D I N G # 1 +63%
  4. 4. 10years.firstround.com Startup Fortune Favors the Young The average age of a First Round founder is 32. But teams with an average founder age of under 25 (when we invested) perform nearly 
 30% above our average. +30%AVG. F I N D I N G # 2
  5. 5. 10years.firstround.com Where You Went 
 to School Matters First Round companies with at least one founder who attended an Ivy League school, Stanford, MIT or Caltech performed 220% better than other teams. F I N D I N G # 3 HARVARD COLUMBIA PENN CORNELL +220%
  6. 6. 10years.firstround.com The Halo
 Effect of Former Employers is Real Founding teams with experience at Amazon, Apple, Facebook, Google, Microsoft or Twitter built companies that performed 160% better than others in the First Round community. F I N D I N G # 4 +160% Performance Valuations +50%
  7. 7. 10years.firstround.com Investors Pay More for Repeat Founders Our investments in repeat founders didn't perform significantly better than our investments in first-timers — because their initial valuations tended to be 50% higher. F I N D I N G # 5 Valuations +50%
  8. 8. 10years.firstround.com Solo Founders 
 do Much Worse
 than Teams Teams with more than one founder outperformed solo founders by a whopping 163% and solo founders' seed valuations were 25% less than our teams with more than one founder. F I N D I N G # 6 +163% Valuations Performance +25%
  9. 9. 10years.firstround.com First Round enterprise companies with at least one technical founder perform a full 230% better than their non-technical colleagues. But consumer companies with at least one technical co-founder underperform completely non-technical teams by 31%. -31% +230% Performance Technical Co- Founders
 are Critical in Enterprise Not So Much In Consumer F I N D I N G # 7
  10. 10. 10years.firstround.com You Can
 Succeed Outside Big Tech Hubs First Round companies founded outside New York and the Bay Area are performing just as well as their peers based in those epicenters — in fact, they do 1.3% better. F I N D I N G # 8 +1.3% Better between
  11. 11. 10years.firstround.com The Next
 Big Thing Can Come from Anywhere Companies that we discovered through Twitter, Demo Day, etc. outperformed referred companies by 58.4%. 
 
 Founders that came directly to us with their ideas did about 23% better. F I N D I N G # 9 Josh, you have to see this Hey, Look at my idea! Brand new idea! +23% +58%
  12. 12. 10years.firstround.com The Action is Moving from Sand Hill to San Francisco Before 2009, we invested nearly equally between San Francisco and the rest of the Bay Area. During the last five years, 75% of our Northern California companies started their companies in the city. F I N D I N G # 1 0 Sand Hill San Francisco
  13. 13. It’s amazing what a decade’s worth of data can show. While these findings won’t dictate how we choose to invest from now on, we’re intrigued by what they say about the shifting direction of our industry. A R TS C I E N C E 10years.firstround.com© 2015 First Round Capital
  14. 14. We’re already looking forward
 to the 20 Year Project. 10years.firstround.com© 2015 First Round Capital
  15. 15. A Note on Our Methodology Performance multiples reflect the appreciation (or depreciation) between our original investment and (1) the value at exit (for companies that have exited) or (2) the fair market value we used in our audited December 31, 2014 financial statements. While we’ve invested in 300+ companies to date, we did not include investments in (1) the 16 companies that we backed in the last six months (since their share value wasn’t included in our 2014 financials), (2) the 17 companies that we invested in 2014 that did not raise follow-on financing by the end of 2014 (since their share value would not have time to change either up or down) and (3) our investment in Uber (as it would skew all the results, showing that companies with a name that starts with a vowel, for example, perform 100x better than all other investments). To be clear, we’re not expecting this analysis to get us an invitation to join the American Statistical Association. And we’re not claiming that our data is representative of the industry… or even statistically significant. Rather, we believe that this data can provide some interesting directional insight. We found some of the learnings to be surprising — and I’m sure we’ll continue to be surprised many more times over the next 10 years. 10years.firstround.com© 2015 First Round Capital
  16. 16. F I R ST R O U N D.CO M Find out how you can join
 the First Round Community: 10years.firstround.com© 2015 First Round Capital
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