A recent study focusing on the founders of “Unicorns” (companies valued at over a billion dollars) revealed that most of these companies have founders who are considered “underdogs,” often come from the top 10 universities, show a growing number of female founders, but do not show a clear monopoly in funding from VCs at the seed stage.
The study, known as the “Unicorn Founder DNA Report,” conducted by Defiance Capital, analyzed 845 unicorns and 2,018 unicorn founders in the US and UK between 2013 and 2023 to identify common traits among these founders.
The key findings of the study include:
• 70% of unicorns have founders who are considered “underdogs” (immigrants, women, people of color).
• The presence of female founders in unicorns has increased to 17% in 2023.
• 53% of unicorn founders hold degrees from the top 10 global universities.
• 49% of unicorn CEOs have STEM degrees, with 64% of female founding CEOs holding STEM degrees, and 70% of founder teams having STEM degrees.
• Apart from SV Angel (6.4%) and Y Combinator (10%), no other VC fund has invested in more than 2.8% of unicorns (Sequoia). This suggests that the market for investing in potential unicorns at the seed stage is highly fragmented, giving outlier VC funds equal chances as well-known funds to invest in unicorns at the earliest stages.
The study also highlighted that while unicorns are mostly founded by white individuals, every third unicorn has an Asian founder. Additionally, 38% of unicorns have at least one non-white founder, 82% have at least one white founder, and 62% have first or second-generation immigrant founders. Only 3% of unicorns have a black founder.
Furthermore, only 21% of immigrant and female founders received funding from top ten VCs. Teams with female founders tended to be two years younger than all-male teams when founding their unicorns (32 vs. 34).
Serial founders (50%) were more likely to succeed in building unicorns, but only 1 in five unicorns had solo founders.
Over the past decade, all top seed funds were generalist funds, indicating a highly fragmented market for seed funds. Only 28% of unicorn founders raised capital from a top VC seed fund with more than 1% market share.
Only 34% of unicorn founders had previously worked at elite employers before founding a unicorn, suggesting that a background at a firm like McKinsey is not a necessary requirement for success.
The study identified three key factors in the “DNA” of a unicorn founder:
1. No “plan B”
2. “A chip on the shoulder”
3. Unlimited self-belief
Many unicorn founders were found to have developed a growth mindset, with values, work ethic, and ambitions established during childhood. Several founders had personal stories of feeling unjustly treated or limited in their native environment.
The study also noted these traits in communities that had been historically marginalized, such as women founders, people of color, neurodivergent individuals, or founders with non-traditional backgrounds.
Additionally, a higher number of first and second-generation immigrant CEOs had STEM degrees compared to local CEOs, suggesting a migration of talent from emerging economies to developed ones. Notably, more second-generation immigrants attended elite universities than the rest of the sample.
Other intriguing findings from the study included the observation that solo founders tended to start their unicorns three years later than founder teams. On average, it took seven years for all types of founder teams to reach unicorn status, but second-generation immigrants achieved this milestone in only six years.
The traditional archetype of an all-white, male, Ivy League founder was shown to be a rare occurrence, making up only 11% of founders. Additionally, only one-third of founders native to the country where they founded their company graduated from a top ten university.
Furthermore, the top 20 US VC funds favored male and immigrant founders with STEM degrees from elite universities at the seed stage, indicating a potential oversight in investing in female founders, who are an emerging demographic in the unicorn space.
Christian Dorffer, the founder of Defiance Capital, emphasized the comprehensiveness of the study and its significance in understanding unicorn founders in the US and UK. He highlighted the need for a shift in the type of founders that Seed funds are backing, as only a small percentage fit the traditional profile like Mark Zuckerberg.
He pointed out the resilience, determination, and innovation displayed by unicorn founders, particularly immigrants and underrepresented groups, who have defied odds to achieve remarkable success. Dorffer emphasized the opportunity for new funds to focus on supporting these founders who face challenges in fundraising.
Regarding potential changes in strategy for VCs and family offices, Dorffer mentioned the importance of diversifying investments and considering emerging managers for potential alpha returns. He highlighted the inspirational stories of unicorn founders, particularly women and immigrants, who have overcome obstacles to build successful companies.
