Who Are You? Charting the Demographics of Venture-Backed Internet Startups
Our friends at CB Insights, a New York information services firm that tracks investments in private companies, have been busy gathering new insights about the demographics of venture-backed Internet companies.
They’ve put together a report based on data about the founders of 165 early stage Internet companies that raised their first round of institutional venture capital funding (seed and Series A rounds) during the first six months of 2010. Today CB Insights is releasing Part 1, which focuses on the race, age, and experience of these startup founders, and plans to release Part 2, which focuses on the founders’ gender and education, later this week.
Much of the data the group came up with is unsurprising. The study found, for example, that an overwhelming number of Internet startup founders (87 percent) are white, which exceeds the 77 percent of the U.S. population that is white.
(The methodology here is worth a parenthetical note. In explaining how CB Insights determined the founders’ race and ethnicity, the firm says it was “driven algorithmically by data CB Insights has created on last names, which leverages U.S. Census Data in addition to several other sources. In cases where ethnicity or race was not conclusively provided by our algorithm, we employed human tagging [Human editors tagging photos for race]. In cases where we discuss ethnicity, these statistics reflect the founders’ ethnicities and not the country they were born in.”)
CB Insights says the rationale for conducting the study in the first place arises from the importance of “human capital” in the venture capital community.
“When we ask venture capitalists what gets them excited about the young, emerging, and often unproven companies in which they invest, we never hear about deals and dollars,” the report says. “Rather the first answer is frequently ‘the team’ or ‘the founders.’ This demonstrates just how crucial human capital is in VC investment decision-making.”
So who are the venture-backed Internet startup founders of 2010? Here’s some breakout highlights:
—Most of them are white (87 percent). Only 1 percent are black, in comparison to the 11 percent share of African-Americans in the total U.S. population, and 12 percent are Asian—about triple the 4 percent that Asians represent in the general population.
Among the Asian founders, CB Insights reports that 54 percent are South Asian (India, Pakistan, Bangladesh, Nepal, Butan, Maldives, and Sri Lanka) and 46 percent are East/Southeast Asian (Myanmar, Cambodia, Laos, Thailand, Vietnam, Malaysia, Indonesia, Brunei, Philippines, China, Japan, North Korea, South Korea, Taiwan, Mongolia, Macau, and Hong Kong.)
—CB Insights also provided data for the three states that rank highest in venture-backed startups. In California, 18 percent of the startup founders included in the study are Asian and 82 percent are white. In Massachusetts, 87 percent of the founders are white and 13 percent Asian. In New York, 89 percent of the founders are white, while 11 percent are Asian. CB Insights also provides data for startup teams.
—With regard to age, CB Insights concludes that wunderkinds are not the norm, and the average founding team is 35 to 44 years old. While almost half of the founding teams fall within the 33 to 44 range, CB Insights says companies with an average age in the range of 26 to 34 have the highest median funding—$2.5 million versus $2.4 million for founding teams in the 45-54 age range.
—Data generated for the report also substantiates the mantra that venture capital investors back founders with experience, with 39 percent of the founders surveyed showing previous experience as CEOs or founders. More founders does not necessarily result in larger funding rounds, the report says.