New study of unicorn entrepreneurs finds many are 'underdogs' and female entrepreneurs are on the rise | Tech Crunch

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A new study that zeroes-in on founders of so-called “unicorns” (companies valued at more than a billion dollars) finds that many have “underdog” founders, who are often recruited from top 10 universities, a growing makeup of female entrepreneurs, but seed funding for VCs. There is no clear monopoly in the phase.

Defiance Capital's study of 845 unicorns and 2,018 unicorn founders (the “Unicorn Founder DNA Report”) set out to examine the “DNA” of unicorn founders from 2013 to 2023, focused on the US and UK (no EU/European). Define the common characteristics of this type of entrepreneur.

The study found:

• 70% of unicorns have “underdog founders” (immigrants, women, people of color).

• Unicorns used to have only male founders, but this is changing with 17% female founders in 2023.

• 53% have degrees from top 10 global universities.

• 49% of Unicorn CEOs have STEM degrees (64% of female entrepreneurial CEOs have STEM degrees) and 70% of entrepreneurial teams have STEM degrees.

• Outside of SV Angel (6.4%) and YC (10%), no other VC fund acquired more unicorns than 2.8% (Sequoia). This suggests that the market for investing in a potential unicorn is completely fragmented at seed, meaning that outlier VC funds are just as likely to invest in a unicorn in its early stages as a well-known fund.

The study further found that unicorns are dominated by white founders, but every third unicorn has an Asian founder. In fact, 38% of unicorns have at least one non-white founder: 82% have at least one white founder, and 62% have 1st or 2nd generation immigrant founders. Only 3% of unicorns have a black founder.

And only 21% of immigrant and female entrepreneurs were raised from the top ten VCs. Teams with female founders were two years younger than all-male teams when they founded their unicorns (32 vs 34).

Serial entrepreneurs (50%) are more likely to succeed in building unicorns, while solo founders account for only 1 in five unicorns.

Over the past decade, all the top seed funds have been general funds, and the market for seed funds has become very fragmented. Only 28% have raised capital from a top VC seed fund (with more than 1% market share).

Only 34% of unicorn founders worked at a high-level employer before founding a unicorn, suggesting that a McKinsey or similar background is not necessary for success.

The study also found three major factors in the unicorn founder's “DNA.”

1. There is no “Plan B”.

2. “a chip on the shoulder”

3. Unlimited confidence

The study found that many unicorn entrepreneurs had to develop a growth mindset with values, work ethic and ambitions established in childhood.

Many have a personal story of being treated unfairly or feeling limited in their local environment.

The study observed these characteristics in communities that had been abandoned for generations, e.g. Women entrepreneurs, people of color, neurodivergent or entrepreneurs with diverse backgrounds.

Many are “ambitious rebels,” motivated by a great cause they care about most, strong family role models, a quality peer network, and no fear of failure.

1st and 2nd generation immigrant CEOs hold significantly higher numbers of STEM degrees than native CEOs, suggesting a brain drain from developing or small economies to developed ones. Significantly, more 2nd generation immigrants attended an elite university than the rest of the sample.

Other interesting data points emerged from the study. Solo entrepreneurs tended to launch their unicorns three years later than founding teams, and all types of founding teams took an average of 7 years to reach unicorn status, while 2nd generation immigrants took only 6 years.

And of course, at 11% the all-white, male, local, Ivy League archetype founder is rare, and only one-third of founders from the country where the company was founded graduated from a top ten university.

Additionally, the top 20 US VC funds favor male, immigrant founders with STEM degrees from elite universities at SEED, but seem to be missing a trick by largely ignoring female entrepreneurs among the growing population in the unicorn space.

Commenting, Christian Dorfer, founder of Defiance Capital, told me: “I believe this is the most comprehensive study ever done on the backgrounds of unicorn entrepreneurs in the US and UK. We cover all new unicorns from 2013-2023, covering over 2,000 founders and over 800 unicorns.

“VCs famously say 'it's all about the people,' but with only 10% of unicorn founders fitting Mark Zuckerberg's profile, thousands of seed funds are backing many of the wrong types of entrepreneurs. An interesting finding in our study is that even top funds like Sequoia have less than 3% Only unicorns get — and only 30 funds have 1% or more unicorn market share,” he said.

“The hunger, confidence, ingenuity and resilience we found among unicorn entrepreneurs also makes a lot of sense when you see that 62% are immigrant entrepreneurs (from countries where unicorns aren't typically built) and 17% are new unicorns. The year includes female entrepreneurs.

He continued: “Immigrants and other underrepresented entrepreneurs are clearly able to produce these amazing results, but I want to prove that to LPs. Many immigrant entrepreneurs are coming from developing countries such as India and Africa, but also from Eastern Europe. They don't have many options at home. They should leave and pursue opportunities elsewhere. “

“There are only 30 funds that hold more than 1% of all these unicorns, which means it's completely fragmented,” he says.

“If you combine this fragmentation with the fact that immigrants and women have a harder time raising funds, there's a huge opportunity for new funds to come in and look specifically for these entrepreneurs.”

I asked him how might a VC or family office change their strategy after seeing this research?

“Sequoia is a top fund at only 2.8% of unicorns which means they are missing out a lot. Yes, for LPs, top funds are a relatively safe investment. But family offices are now looking at emerging managers and especially early stage funds as potential alpha. So if you're looking to maximize returns as a family office , you have to be emerging managers, in some new funds, to get an outlier company that becomes a unicorn,” he said.

Dorfer, who plans to create a podcast with many of the unicorn entrepreneurs surveyed, said: “The stories that are coming out show a crazy decision. As a female founder, you have to work twice as hard to raise money and take twice as many meetings. The founders of Andela and the three African entrepreneurs who built Unicorns… have very inspiring stories.



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