At Tensility, we’re constantly improving on our pattern recognition. Our ability to spot revolutionary technology innovations, market opportunities, and high-performing founding teams is shaped largely by the previous successes and failures that we’ve had with our portfolio companies. The long time horizon of the venture business makes it difficult to spot the correlations and causations in the data, which often is fuzzy and incomplete. Outcomes are influenced by so many factors that searching for statistically significant relationships is difficult.
Let’s talk about founders. Our experience over 20+ years of venture investing in technology startups has taught us what to look for in successful entrepreneurs:
The energy required of founders to both have all these skills as well as grind through building a company from scratch has historically implied at least one characteristic: youth. Anecdotal evidence appears to support this trend: Mark Zuckerberg founded Facebook when he was 19. Michael Dell started Dell Technologies at the age of 21. Paul Graham once said that “the cutoff in investors’ heads is 32… After 32, they start to be a little skeptical.”
Recent research from Ben Jones, professor of strategy at the Kellogg School of Management, however, offers surprising results:
The researchers were chiefly interested in high-growth new ventures—the kinds that can transform the economy—and understanding whether the Silicon Valley mythology was true. So they limited their dataset to include only technology companies, and further winnowed that down to the fastest-growing 0.1 percent—in other words, the one company out of every 1,000 that saw its sales or number of employees increase the most in its first five years.
45! What a disconnect from the prevailing narrative of young founders being successful. We see this narrative at play everywhere. The average age of YCombinator Winter 2018 Cohort was 29.9. The average age of TechCrunch awards recipients between 2008-2016 was 31. Etc.
Several factors may contribute to this phenomenon. Technology startups depend heavily on software developers- and the average age of software developers appears to be 28.7. The media also tends to overemphasize young entrepreneurs.
How does this new understanding of who are likely to be successful founders affect our investing?
We’ve never explicitly targeted younger founders. But, prevailing narratives can have subtle and unintentional effects on our investing decisions. Moving forward, we should all be aware of potential biases and make sure we don’t fall prey to them.
Businesses today face risk from a myriad of factors- from political upheaval that disrupts supply chains, to natural disasters which threaten people and facilities, and even to local crime which puts employees in danger. Companies can attempt to plan for these risks through enterprise risk management, but collecting actionable intelligence in time to mitigate risk continues to be a difficult task.
Stabilitas, based in Seattle, is the leading provider of Critical Event Intelligence that combs the world’s data to correlate critical events with key enterprise assets. The Stabilitas platform integrates the industry’s widest array of global data sources, including unstructured data like text-based news sources as well as structured data sources like earthquake feeds from the USGS. Stabilitas’ key innovation is using multiple machine-learning techniques to synthesize this data from disparate structured and unstructured sources into discrete critical events. Stabilitas works with customers to develop a full picture of the customer’s assets, however they may be distributed around the globe, and surfaces only that critical intelligence which is relevant to the customer, filtering out the noise and amplifying the intelligence signal. Unique in the industry, Stabilitas also offers API connectivity that allows seamless integration with a customer’s existing security operations system.
Tensility is pleased to announce an investment in Stabilitas, which will enable Stabilitas to scale their customer base and expand into new markets. We’re excited to work with the founders, Greg Adams and Chris Hurst. Greg and Chris are both experienced military veterans and graduates of Harvard Business School, and they each bring unique and relevant experience in enterprise risk to Stabilitas. As an Army Green Beret, Greg saw firsthand the value of actionable critical intelligence in keeping his troops safe. Chris managed enterprise risk both in the Army and as while working at CH2M Hill on government contracts.
Stabilitas currently partners with large enterprises like Amazon and Procter & Gamble to provide timely and actionable critical event intelligence. Stabilitas also has a valuable partnership with G4S, the world’s largest security company. We’re excited to see the Stabilitas team move forward in addressing the risks inherent in doing business in today’s unpredictable world, and are confident that critical event intelligence provided by Stabilitas will be a invaluable resource for for all enterprises.