What Successful Startups Have in Common
The big years for easy startup money are over: Startup funding was down by 62% in 2022 and shows only slow signs of recovery in 2023 so far. As capital is becoming more expensive and uncertainty is increasing in the economy, venture capital has become understandably careful about what to invest in, even with the ongoing surge in AI startups.
Below are the trajectories of headcount growth for AI health tech startups with the highest and the lowest headcount growth within 6 years after being founded. The crux? They look similar for the first three years before starting to diverge!
As an investor, you want to know sooner than that whether there is a high growth opportunity with the startup. What are some other metrics to look out for?
First are attrition rates in the early years of the startup. While a healthy turnover rate can be beneficial for established companies, high attrition rates in early startups can be a red flag and a sign of disagreement among the founding team, lack of a shared vision, or simply poor management. Fast-growing startups have lower attrition rates than slow-growing startups in the first three years.
What about the founders, does prior entrepreneurial experience matter? We find that fast-growing startups are slightly more likely to be founded by serial entrepreneurs than first-time founders. This isn’t too surprising – having experience with founding your own company can help avoid common pitfalls of first-time founders.
While prior entrepreneurial experience only has a mild impact, the background of the founding team makes a big difference. Fast-growing startups have much higher average prestige scores than slow-growing startups. Our prestige score takes into account which schools someone attended, as well as the companies they previously worked at. The higher the prestige score, the more someone has been exposed to people from prestigious institutions.
So which companies are fulfilling these criteria? We were particularly interested in the growing field of Health Tech and AI-focused health startups. Quantivly, Shyld AI, Alli Connect, and Dyania Health all have low attrition rates, are founded by serial entrepreneurs, and have high-prestige founding teams. They are also examples of companies revolutionizing healthcare provision using technology. Reach out to us if you would like help identifying other promising startups in other areas!
If you have any ideas of other metrics to track or would like to hear more, please feel free to?reach out.?
Happy Tuesday!
Lisa K. Simon & Beyza Arslan , Economists at?Revelio Labs
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Revelio Labs?provides workforce intelligence. We absorb and standardize hundreds of millions of public employment records to create the world's first universal HR database, allowing us to see current workforce composition and trends of any company. Our customers include investors, corporate strategists, HR teams, and governments. Check out our archive of newsletters?here.