STANFORD UNIVERSITY AND HIGH-TECH ENTREPRENEURSHIP: AN EMPIRICAL STUDY EPFL Babson College Entrepreneurship Research Conference 1
Motivation High-tech entrepreneurship and innovation are important topics Whereas Silicon Valley, the Boston Area and MIT have been extensively studied, Stanford University is not really well-known, with the exceptions of (many) famous success stories (Sun, Cisco, Yahoo, Google, etc) Basic motivation is a description of high-tech entrepreneurship and founders from Stanford university Another important motivation is that data on Stanford may induce new studies and results on the topic 2
Spin-off and start-up 3
The full set of data (2727 companies) 234 1991 study 406 149 4 19 2140 57 124 2368 Stanford spin-offs 204 4
Stanford spin-offs 204 companies 5
Stanford spin-offs - distribution 1% 5% Nb of companies 20% 35% Biotechnology Medtech Computers Electronics IT & SW 21% Energy Env 17% Unknown 1% 1% 1% VC-Backed 26% 19% 38% Biotechnology Medtech Computers Electronics IT & SW Energy Env Unknown 13% 2% 6
Stanford spin-offs VC funding 100 in total, 4 VC-backed start-ups per year since 1985 $120M / year of VC money, $30M per company since 1985 20 18 16 14 12 10 8 6 4 2 0 VC Backed No VC or unknown 7 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Stanford spin-offs - success $2.9B invested, $8.2B of M&A, $22.4B of public value exc. Cisco ($131B) and Google ($153B) 14'000 12'000 10'000 $M 8'000 6'000 4'000 Public VC 2'000 M&A 8
Stanford spin-offs - status 20 18 Status All start-ups VC- backed Public 8% 14% Pi Private 39% 37% 16 M&A 29% 36% 14 Ceased 16% 13% Unknown 8% 12 Total 204 100 10 8 6 4 2 0 Unknown Public Private M&A Ceased 9 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Stanford spin-offs time to liquidity 5.97 years to liquidity when VC-backed 6.55 years if no VC or unknown 6.16 years overall Nb. of companies VC backed No VC or unknown Unknown 2 Energy env. 3 IT & SW 16 5 Electronics 16 6 Computers 2 0 Medtech 2 4 Biotech 25 11 Total 61 31 Unknown Energy Env IT & SW Electronics Computers Medtech No VC or unknown All VC backed Biotechnology 0.0 2.0 4.0 6.0 8.0 10.0 12.0 10
A broader picture 2140 companies out of the Wellspring of Innovation 11
The full set of data 1991 study 406 234 149 4 19 2140 57 124 Stanford spin-offs 204 12
WellSpring Start-ups (2140) - distribution 0% Biotech 6% 2% 3% 1% 5% Medtech Computers 10% 5% 5% Semiconductor Electronics Telecom IT & SW 12% 9% Internet t Energy Env Manuf. Eng. Services 7% 14% Non tech services Finance 1% 1% 17% Consumer goods Others Unknown 13
WellSpring High-Tech Start-ups distribution 2% 1% 24% All companies 4% (1467) 10% Biotech 8% 2% Medtech 7% 8% 13% 21% 29% 21% Computers Semiconductor Electronics Telecom IT & SW Internet Energy 0% 1% Env 0% VC-backed Manuf. 6% (737) Eng. Services 9% 2% 9% 6% 17% Biotech Medtech Computers Semiconductor Electronics Telecom IT & SW Internet Energy Env Manuf. Eng. Services 14
Wellspring (2140) VC funding 754 VC backed companies 26 VC-backed start-ups per year over 1980-2004 (35% of all) $360M / year of VC money (81-94), $3.3B (95-00), $41M per company 300 250 200 150 VC backed Non VC backed 100 50 0 1980198119821983198419851986198719881989199019911992199319941995199619971998199920002001200220032004 15
WellSpring (2140) - success $27.5B invested, $185B of M&A $287B of public value including ebay ($29.3B) Yahoo ($23.6B), Baidu ($13B) but also 100'000 90'000 80'000 70'000 60'000 50'000 40'000 Charles Schwab (Finance) - $21.7B The Gap (Consumer Goods) - $14.5B 30'000 Public 20'000 10'000 VC M&A 16
WellSpring Start-ups (2140) status in 2008 300 Status All start-ups VC- backed 250 Public 113 5% 142 10% Private 699 33% 412 16% 200 M&A 719 34% 120 55% Ceased 456 21% 79 19% Unknown 153 7% 1 0% 150 Total 2140 754 35% 100 50 0 unknown Public Private M&A Ceased 17 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
WellSpring Start-ups (2140) status by field 21% of high-tech h h are private vs. 55% of services or non-tech 100% 90% 80% 70% 60% 50% Unknown 40% Public 30% Private 20% M&A 10% Ceased 0% 18
WellSpring time to liquidity Nb. of companies VC backed No VC or unknown Consumer Goods 8 45 Finance 0 52 Non Tech Services 2 67 Engineering services 5 37 5.3 years to liquidity when VC-backed Other tech 0 5 8.0 years if no VC or unknown Manufacturing 1 10 Energy env. 0 7 6.6 years overall Internet 177 102 IT & SW 125 93 Telecom 107 34 Electronics 35 43 Semiconductor 65 26 Computers 18 8 Medtech 51 27 Consumer goods Biotech 36 18 Finance Total 630 574 Non tech services Eng. Services Others Manuf. Energy Env Without VC Internet All IT & SW Telecom VC backed Electronics Semiconductor Computers Medtech Biotech 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 20.0 19
About the founders Reminder: These are Stanford alumni only; the companies may have had other founders, who are not studied here. 20
A few famous founders Sergey Brin and Larry Page Google Jerry Yang and David Filo Yahoo! Sandy Lerner Larry Bosack Cisco Dave Hewlett and Bill Packard HP Professors Theresa Meng and John Hennessy, Atheros Communications Marc Andreessen and Professor James Clark, Netscape 21
Founders: years from graduation* to foundation 100 90 80 70 60 Average: 50 2 years 40 30 20 10 0 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 10111213141516171819202122232425262736 Years Stanford spin-offs (license), 204 companies 62 unknown or no Stanford founder identified also 1 comp at 23, 27, and 36 years * Stanford professors or staff imply 0 as value. If a company has many founders, this is an average by company. 22
Founders: years from graduation* to foundation 250 200 Average: 150 93 9.3 years 100 50 0 17 15 13 11 9 7 5 3 1 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 Years 1992 study: 383 companies, 42 unknown Wellspring study: 2140 companies, 162 unknown. * Stanford professors or staff imply 0 as value. If a company has many founders, this is an average by company. 23
Founders: years from graduation* to foundation Total Consumer goods Finance Non tech services Eng. Services Manuf. Energy Env Internet IT & SW Telecom Electronics Semiconductor Computers Medtech Biotech 5.71 6.95 7.68 7.11 6.43 7.05 8.86 9.81 9.97 9.59 937 9.37 8.8 13.04 12.63 11.95 0 2 4 6 8 10 12 14 All 3 groups 266 unknown. * Stanford professors or staff imply 0 as value. If a company has many founders, this is an average by company. 24
Serial Founders 2 266 founders created only one company 445 founders having created more than one company (16%) including 44 professors (26%) Nb of companies founded Nb of founders Nb of professor founders 1 2266 123 2 317 24 3 82 11 4 27 3 5 10 4 6 6 8 2 1 16 1 1 Total 2711 167 % serial 16% 26% Question: a correlation between success and serial entrepreneur? 25
How do serial founders do vs. novice founders Data on non serial VC backed M&A Public Ceased 1739 Number Average Number Average Number Average 474 $36'081'000 253 $520'000'000 102 $4'929'000'000 370 Data on serial VC backed M&A Public Ceased 988 Number Average Number Average Number Average 386 $39'132'000 220 $624'000'000 55 $5'955'000'000 232 1st comp VC backed M&A Public Ceased 445 Number Average Number Average Number Average 147 $28'466'000 120 $900'000'000 30 $11'934'000'000 92 2nd comp VC backed M&A Public Ceased 445 Number Average Number Average Number Average 202 $42'042'000 93 $617'000'000 20 $3'371'000'000 107 3rd comp VC backed M&A Public Ceased 128 Number Average Number Average Number Average 57 $54'251'000 18 $277'000'000 6 $2'324'000'000 39 4th comp VC backed M&A Public Ceased 46 Number Average Number Average Number Average 23 $38'867'000 867 13 $165'000'000 3 $1'109'000'000 109 000 000 12 26
A summary 2 727 companies 1 050 were VC backed 150 were public in 2008 VC ($M) M&A ($M) Public ($M) Sales ($M) Jobs Stanford Start Ups 2'969 8'214 307'136 65'410 105'281 1991 Study (not 1'842 75'406 185'175 171'579 454'082 including licenses) WellSpring of Innovation (tech. only) 27'125 173'375 183'615 111'696 401'453 Total Tech 31'936 256'995 675'926 348'685 960'816 (non tech) 272 11'892 154'413 46'348 204'895 Total 32'208 268'887 830'339 395'033 1'165'711 Top 5 (tech) 1'719 75'800 445'000 115'661 603'528 Top 10 2'794 110'200 497'010 145'377 680'087 Top 20 4'532 148'800 564'040 173'645 762'618 Top 50 8'379 194'772 626'037 199'502 872'731 Top 5 5% 29% 66% 33% 63% Top 10 9% 43% 74% 42% 71% Top 20 14% 58% 83% 50% 79% Top 50 26% 76% 93% 57% 91% Sales, jobs and public value in the table come only from the 153 public companies 27