Tune In, Turn On, Drop Out – The Startup Genome Project

In April 2010 I received an email that said, “I’m an incoming Stanford student in the fall and working on a project that a number of people suggested I get in touch with you about.”

Ok, I get a lot of these. Is this some grad student or post doc who wanted to do some independent study?

The email continued,  “The problem I’m working on is that many founders are either making uninformed decisions or inefficiently learning the new skills they need. The solution I’m exploring is a just in time learning methodology that accelerates founders’ learning curve by aggregating relevant content, peers and mentors.”

Hmm, now I’m getting intrigued. This sounded like one heck of an interesting guy and it’s a subject I care about. I wondered where he got his MBA from?

The email closed by saying, “The project is a hybrid between academic and entrepreneurial circles and I’d really love to begin a dialogue with people in the academic world also interested in solving this problem. Your name has come up a lot in that regard. Let me know if this interests you and if you have any time to speak.”

It was signed Max Marmer.

I set up a meeting and at Cafe Borrone some kid who looked 18-years old came up to me and introduced himself as Max. “How old are you? I asked. “18,” he replied.

Holy sx!t.

When I asked Max why he was interested in solving entrepreneurial education problems he replied, “I was always interested in big picture trends for where the world is headed. I spent time with organizations like the Institute for the Future and Singularity University. My conjecture became that the world’s biggest problem isn’t poverty or disease or any oft-stated major problem, but that we don’t have enough people engaged in trying to solve these problems. A big piece of the solution lies in the scalable impact of entrepreneurship and an increase of successful entrepreneurs. But potential impact consistently fails to be realized because of self-destruction.”

I don’t think I touched my sandwich. I tried to remember what I was doing at 18 and whatever it was I wasn’t this. Max continued, “That’s why I’m really interested in ways of optimizing the entrepreneurship ecosystem to allow more entrepreneurs to go from idea to reality. To do this requires: a methodology, tools and systematically reducing friction.”

I was feeling pretty old. Max set the record for smarts divided by age.

Tune In, Turn On, Drop Out
Max entered Stanford in the fall of 2010 as a freshman, took as many of the engineering entrepreneurship classes as he could and independent study with me. (He was part of the Sandbox network - a group of incredibly smart under 30 year olds.)

Max dropped out of Stanford after his first quarter.

But he left to work on what he told me he came to do - crack the innovation code of Silicon Valley and share it with the rest of the world. He set up Blackbox.vc, a seed accelerator for technology startups (and one of the tour stops for entrepreneurs from around the world.) They went to work gathering deep knowledege of what makes successful Internet startups.

Max and his partners interviewed and analyzed over 650 early-stage Internet startups. Today they released the first Startup Genome Report— a 67 page in-depth analysis on what makes early-stage Internet startups successful.

Startup Genome Report
Some of their key findings:

1. Founders that learn are more successful: Startups that have helpful mentors, track metrics effectively, and learn from startup thought leaders raise 7x more money and have 3.5x better user growth.

2. Startups that pivot once or twice times raise 2.5x more money, have 3.6x better user growth, and are 52% less likely to scale prematurely than startups that pivot more than 2 times or not at all.

3. Many investors invest 2-3x more capital than necessary in startups that haven’t reached problem solution fit yet. They also over-invest in solo founders and founding teams without technical cofounders despite indicators that show that these teams have a much lower probability of success.

4. Investors who provide hands-on help have little or no effect on the company’s operational performance. But the right mentors significantly influence a company’s performance and ability to raise money. (However, this does not mean that investors don’t have a significant effect on valuations and M&A)

5. Solo founders take 3.6x longer to reach scale stage compared to a founding team of 2 and they are 2.3x less likely to pivot.

6. Business-heavy founding teams are 6.2x more likely to successfully scale with sales driven startups than with product centric startups.

7. Technical-heavy founding teams are 3.3x more likely to successfully scale with product-centric startups with no network effects than with product-centric startups that have network effects.

8. Balanced teams with one technical founder and one business founder raise 30% more money, have 2.9x more user growth and are 19% less likely to scale prematurely than technical or business-heavy founding teams.

9. Most successful founders are driven by impact rather than experience or money.

10. Founders overestimate the value of IP before product market fit by 255%

11. Startups need 2-3 times longer to validate their market than most founders expect. This underestimation creates the pressure to scale prematurely.

12. Startups that haven’t raised money over-estimate their market size by 100x and often misinterpret their market as new.

13. Premature scaling is the most common reason for startups to perform worse. They tend to lose the battle early on by getting ahead of themselves.

14. B2C vs. B2B is not a meaningful segmentation of Internet startups anymore because the Internet has changed the rules of business. We found 4 different major groups of startups that all have very different behavior regarding customer acquisition, time, product, market and team.

———

I’m not sure I believe every one of the report conclusions – it just covers very early stage web startups, and the methodology is still shaky – but this is a landmark study. I think these guys have gone a long way to turn hypotheses about early-stage Internet startups into facts. And they’re just getting started.

Congratulations.  A+

Download the full Startup Genome report here.

——-

I can’t wait to see what Max does by the time he’s 21.
Listen to the post here: Download the Podcast here

23 Responses

  1. Holy shit. This caused me to sit bolt upright after 11pm on a Sunday night after a bottle of red. Awesome.

  2. [...] Here is Steve Blank touting a youngster’s project that impressed him: Max and his partners interviewed and analyzed over 650 early-stage Internet startups. Today they released the first Startup Genome Report— a 67 page in-depth analysis on what makes early-stage Internet startups successful. [...]

  3. I read this report at 5am this morning and surprisingly finished it all the way through. The research and findings are impressive and will be, without a doubt, a guide for every new entrepreneur out there that’s thinking of starting something. I for one, will try and avoid the common mistakes mentioned when forming my first startup this year.

  4. I currently work for a stealth-mode web startup in Toronto and considering how well things seem to be going so far, I’m interested in reading the report and seeing how we fit BlackBox’s successful startup profile.

    One criterion that I love, which was what attracted me to my current company, is “9. Most successful founders are driven by impact rather than experience or money.”

    That’s pretty much our CTO in a nutshell. I think in our first meeting he said something like, “I want us to be the Velvet Underground of truth!” (by which I think he meant be the group that other groups source and grow from, the way the Velvet Underground was the band that every future good rock band was influenced by.)

    Wasn’t sure at that point if he was loony or a genius, but if anything I knew he was interesting, so I came on board. :)

    Actually I think that point might have more to do with the fact that people who are driven by making an impact in turn attract others who want to make an impact, which in itself is a great way to hire ambitious staff.

  5. Congrats Max and Bjoern. I met Max a little over a year ago after I got a similar email saying he was trying to crack the DNA code of what makes a successful startup, and then use that to build a “Post Startup Accelerator Program” around the findings.

    It sounded like a daunting, audacious, slightly over-ambitious Everest-level goal at the time; thrilling to see the guys have made it to base camp!

    Max– let me know when you’re ready to start cracking the biz dev code. Nathan

  6. I have long suspected a lot of this and it’s fantastic to now have some evidence I can use with policy makers and startup entrepreneurs. Brilliant! Thank you Max… and thank you Steve.

  7. They are seriously smart kids.

    I’m interested in being a solopreneur so somewhat different (would definitely like to see this included in their next version).

    I think they may find that cerebral analysis and explanation doesn’t bring change in behaviour – they’ll find they are just more competing advice leading to paralysis. To bring change they’ll need to give more hands-on guidance – say by having a college course on it or something.

  8. Also to change the world in desirable directions means choosing the kinds of start-ups whose performance they want to improve.

    Yet another widget doesn’t really make for a much better world. But it is a superb beginning.

  9. Very interesting. “Startups need 2-3 times longer to validate their market than most founders expect.” – that I can definitely agree with. When I moved out to Seattle to try my first idea, I definitely ended up spending 3x as long as expected before I realized the market wasn’t as interested as I thought it would be.

    Thanks for sharing!

  10. One question: How is the project going to stay up-to-date with current changes in the population they sampled?

    Thank you for the heads-up.

    S.

  11. [...] shares his backstory: “Tune In, Turn On, Drop Out – The Startup Genome Project” [web] TechCrunch lists 14 of the most interesting trends identified in the report [...]

  12. [...] highlights are listed in Steve’s article; the full report, though, is very much worth a read. Use this form to get access. A couple of my [...]

  13. “The world’s biggest problem is we don’t have enough people engaged in trying to solve this problems (disease, poverty, etc.)”, and the way to solve it is making more entrepreneurs succeed, I love this guy!

    More successful entrepreneurs == better distributed wealth? I Believe so
    More successful entrepreneurs == more automation of lower value work? Just think autonomow
    More successful entrepreneurs == cheaper ways for a better life? I believe so

    Awesome and inspiring… Good luck with this Everest, “sí se puede”

  14. I love that this work is being done. Thank you, Max, from a guy that has been searching for the roadmap for a while.
    As far as the “aggregating relevant content, peers and mentors.” goes you might want to have a look at the StarveUps model. It may be the only truly scalable approach to the peers/mentors piece of the puzzle.
    StarveUps: http://starveups.com/
    Interview with StarveUps founder: http://www.iijiij.com/2011/05/10/an-accelerator-that-outperforms-y-combinator-and-techstars-08868

    And thanks, Steve. Really enjoyed your talk at Startup Lessons Learned last week.

  15. [...] Tune In, Turn On, Drop Out – The Startup Genome Project In April 2010 I received an email that said, “I’m an incoming Stanford student in the fall and working on a project [...] [...]

  16. [...] The Startup Genome Project’s empirical research on startups — Steve Blank [...]

  17. [...] Blank wrote an interesting post today on the Startup Genome Project. The report is based on a survey of 663 startups. All of them are web-based businesses, and they [...]

  18. [...] Blackbox has just launched their first Startup Genome Report. It’s been getting quite a buzz in the community, including VentureBeat and Steve Blank’s website. [...]

  19. [...] 20 program because he was 3 months over age. There’s a great article about him by Steve Blank here. Together BlackBox has regular events and meets ups like Co-founder dinners. It’s amazing to [...]

  20. [...] Steve Blank publicized the findings of the startup genome project, I have seen references to the study in multiple [...]

  21. [...] months ago I wrote about my ex-student Max Marmer and the Startup Genome Project. They’ve been attempting to quantify the art. They believe that they can crack the code of [...]

  22. [...] Steve Blank says, the methodology may be a bit shaky but this is a landmark study [...]

  23. [...] We have years of experience programming. We have degrees in technical fields. According to the Start-up Genome Project, start-ups are more likely to succeed if they have two founders (check). We have one founder who is [...]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

Join 149,124 other followers