Decoding the DNA of Europe’s most successful technology entrepreneurs
Earlier this month, we had our annual Founders’ Summit at Atomico — an opportunity for us to share news about how we’re doing with our friends and associates, and to talk to them about the direction we think Atomico — and the wider market — is heading in.
As part of this, we shared the findings of some research we carried out into the European founder experience — research which has some fascinating lessons for other founders and investors, and which showcases some telling insights into the continent’s tech ecosystem.
We thought it might be useful to share some of this research with you, so the following’s a lightly-edited version of the speech I gave at the Summit — do let us know what you think!
We’re proud of our position as a global thought leader is a clear priority for us. We are committed to taking an innovative and data driven approach to investment to make our flywheel spin stronger and become more powerful
Internally, our proprietary research is a key component, complementing the depth of experience of our team and the insights that we generate through technology.
Externally, our research has brought greater transparency to European tech, successfully dispelling myths that have been commonly used to drive a false narrative around the progress being made all across Europe.
Silicon Valley was widely regarded as having a geographic monopoly on innovation, but companies such as Lilium or Graphcore prove that Europe is more than capable of world-class innovation.
This success of Europe on the global technology stage has undoubtedly played a role in establishing entrepreneurship as a career path of choice for a growing number of our region’s brightest & best minds.
However, many are still hindered from the outset by false beliefs of what it will take to succeed:
- that just having a good idea is enough
- that hard work alone will overcome any challenge
- or that funding is somehow equal to success
And you don’t have to take our word for it that these things simply aren’t true…
These are exactly what Europe’s most successful founders told us remain some of the biggest myths around entrepreneurship today.
Naturally, this leads us to ask… what does it take to succeed? And, more importantly, can data allow us decode the DNA of successful entrepreneurs? This is our kind of challenge. So we decided to take it on… and led a project to study and learn from Europe’s finest.
We identified over 150 founders that represent Europe’s elite, the driving force behind the 50 or so most successful technology companies of all time to come from the region — every one of them a billion-dollar business, and collectively worth over $160 billion.
We asked intimate questions; rather than just analysing their CVs, we wanted to get inside their heads and ask them intimate questions about their path to success…
- What motivated them?
- How did they make decisions?
- How did they approach building and leading teams?
- What did they learn along the way & how would they do it differently given a chance to start over?
In order for our survey to work, for us to glean real insight, we needed them to be as open & honest as possible, so we collected their responses anonymously — these are our findings…
Before we dig in, a few interesting and important points about this cohort…
- Contrary to popular belief, the young university drop-out turned billion-dollar founder does not reflect a path well trodden by Europe’s top entrepreneurs, although it does happen
- 85% are university educated
- They most frequently start in the their thirties with an average age of 31 at the outset
While some are serial entrepreneurs, many are not. In fact, two-thirds of Europe’s most successful founders were starting out for the first time. However, few embark on this journey on their own. In fact, just 7 of these companies were started by a lone founder.
The overwhelming majority start out in teams, most commonly with 2 or 3 founders. They are individuals that come together through past relationships forged by common experiences in industry or friendship. These relationships that have withstood the test of time become important foundations to help teams to navigate the inevitable ups and downs they’ll experience as founders.
It’s far more relevant to look at the composition of these teams. While 64% of the founders may be first-timers, 63% of the companies had at least one serial entrepreneur in the founding team.
It’s unfortunately not a surprise that these teams are overwhelmingly male dominated. Just 4% of the founders are women and only 13% of the founding teams had at least one woman, reflecting the massive gender imbalance in tech as a whole
Importantly, just over a quarter of the founders start their companies outside their homeland. At the company level, the impact of migratory tech talent is even more stark: 50% of all of the billion-dollar companies have at least one migrant in their founding team.
This is just another reminder of the critical importance of the mobility of tech talent here in Europe, as well as of the huge opportunity that exists if we can succeed in attracting the untapped pool of incredible female talent into tech and entrepreneurship.
But what about their motivations? For most — 74% — it is about solving a problem, either one they’ve identified from professional experience, or a problem they’ve encountered personally
This may seem obvious to all of us, but we pass on hundreds of companies each year precisely because they lack this basic purpose.
Post-mortem analysis of startup failures show that a lack of market need is the single largest reason that companies die.
For the majority, fixing this problem is driven by a deep-rooted passion. This is ingrained from the outset for most, but in others takes hold as they build; 70% of the founders stated they had or had developed this depth of attachment to the problem they set out to solve.
It’s unsurprising then that we heard from many of these entrepreneurs that their advice to the next generation is ‘to fall in love with the problem you’re solving’. Passion for the problem invariably leads to an obsession with their product and, in particular, how their customers experience it.
This obsession with product is important. While bad execution can still kill a great product, even the best operators in the world cannot save a product that’s fundamentally broken. As David Ogilvy says: “great marketing only makes a bad product fail faster”.
For these founders, customer and product orientation becomes a superpower, ensuring they stay attuned to the needs of their customers and possess unique insights to remain one step ahead of their competitors at all times.
Deep product and customer insight is, of course, critical for decision-making. But what else did we learn about how the best founders make decisions?
Every entrepreneur faces a stream of critical decisions that may come to define the trajectory of their business. Making key early hires, expanding into new markets, or killing products before they even launch.
Conventional wisdom often dictates that decisions such as these should always be based on data. We learned, however, that what defines the decision-making approach of these founders is knowing when they should trust their instincts to strike the right balance between this and being guided by data. For every founder that said they were data-driven in all aspects of their decision-making, there were two that said they were driven more by instinct than data
This is, of course, a reflection of operating reality. There will always be times when data is misleading, ambiguous or lacking entirely, and it’s at these junctures that the best founders have the confidence to drive from instinct.
Despite having the courage of their convictions, they are not blinded by them. Do not confuse their single-mindedness in solving their problem with obstinacy; these founders are open to having their assumptions challenged, and when presented with new data, they are pragmatic, and feel comfortable in changing their minds.
This pragmatism is perhaps best seen in their willingness to make short-term sacrifices for longer-term success. 82% of founders stated their comfort in being prepared to ‘break things’ — to tear up established processes when necessary. It’s for good reason then, that many founders called out the myth that where you start is where you’ll finish.
As Siraj will tell you, the business that eventually drove the billion-dollar exit to Monsanto, is not the same business they initially set out to build; similarly, the founders of King, the games company, can attest that the business that IPO’d for $7B & was then acquired for $6B was very different to how it started for them. This willingness to course correct — to move in a new direction — is a hallmark of the best.
There is, however, a difference in terms of responding to ‘internal’ signals compared to responding to advice from ‘outsiders’. While 8/10 founders strongly agree they felt comfortable in responding to new data from inside of their company, this narrows to just 4 in 10 when asked if they acted effectively on advice received from experienced individuals on the outside.
When looking in the rear view mirror, it’s interesting that they believe they could have done a better job in this regard. As former entrepreneurs ourselves, we know it’s critical that they not just build a personal board of top advisors, but that they learn to trust and act upon their advice to avoid repeating past mistakes.
This is all the more important given just 20% of founders claimed they had a good sense of where they had deficiencies in their management and leadership skills and set out to proactively address them
As you’d expect, most were able to recognise certain deficiencies, but in the interests of maintaining ‘speed’ chose not to focus on them, hoping instead they’d work them out as they went along.
Of course, this too is where Atomico adds value to our portfolio company founders. To both help to encourage transparency and discussion around potential weaknesses, but — more importantly — to help them to address them, whether that’s helping to hire key recruits or leveraging our network to match them with the right mentors.
Identifying weakness is not just about self-assessment, but also about reviewing the rest of the team. Inevitably, there will always be hiring mistakes, but it’s how these are dealt with that really matters
What is evident from these founders was a willingness to quickly address underperformance. 70% of founders showed a low tolerance level for underperformers, moving decisively to address issues from B or C players.
This is inherent for some, but for others, it only develops following several occasions where underperformance had been allowed to become a bigger issue for the organisation.
Aside from the obvious impairment of the company’s ability to execute, getting the team right has other meaningful implications. Building the right culture is critical to an organisation. Culture is what inspires commitment from the team. Culture is what makes people break through walls to fulfil the mission.
Many think it is the result of a carefully crafted management activity, but this isn’t at all how these founders see it. Rather, they view culture as a reflection of the team of people they have brought together.
With this in mind, it’s not surprising that when we asked these founders what they’d do differently given the chance to start over, the answer was overwhelming. They’d spend more energy focused on talent and recruitment.
This not only came out top — it outscored all other responses by a factor of 5.
We also asked the founders to identify two things their boards did to specifically contribute to their success.While this uncovered a long list, the three standout responses were:
1) Helping to set the ambition levels and goals for the business;
2) Enforcing organisational rigour to enable the company to execute against those objectives; and
3) Helping them to build out their executive teams
We see this as a strong validation of the value of Atomico’s ‘Five Levers’ process and our ‘Growth Acceleration’ strategy.
We undertook this project not only to inform our own strategy, but also because we believe that a new generation of founders could benefit from our findings.
When asked directly what advice they’d impart to the next generation of founders, the most cited responses were:
What defines the best entrepreneurs is not related to something as simple as demographics. There’s no single path to success. Rather, it is a set of attributes that define how they start, build and lead their companies that really separates the great from the good.
They are attributes we actively seek out & assess in our due diligence using a proprietary framework that we designed to do just that. This allows us take a systematic and consistent approach to evaluate the capabilities of the teams we’re investing in. Ultimately, driving better investment decisions.
If the founding team is critical to the success of any investment we make, how we evaluate those people should be no different to how we assess a company’s market opportunity, technology or traction