Linking prefunding factors and high-technology venture success: An exploratory study

Authors: ['Juan B. Roure', 'Modesto A. Maidique']

Year: 1986

Methodology

Sample: 8
Design: longitudinal
Data: Venture capital due diligence files, Investment proposals, Closing documents, Interviews with two major West Coast VC firms

Prior joint work experience among founders [anecdotal] — Qualitative difference (Successful founders had more experience working together)

Team size and completeness [anecdotal] — Successful firms formed larger, more functionally complete teams

Functional experience depth [anecdotal] — Extensive experience in the specific function performed in the new venture

Experience in rapid-growth firms [anecdotal] — Prior experience in high-growth companies within the same industry

Buyer concentration [anecdotal] — Targeting product-market segments with high buyer concentration

Technological advantage/Product edge [anecdotal] — Ability to attain and sustain a competitive edge through technology

Speed to market [anecdotal] — Early market entry resulting in reduced competition

Market growth rate [anecdotal] — Not a differentiator (both success and failure groups targeted high growth)

Anticipated gross margins [anecdotal] — Not a differentiator (both groups anticipated high margins)

Founder equity share [anecdotal] — No correlation found between equity distribution and success

VC Board representation [anecdotal] — Not a differentiator (both groups had experienced VCs on boards)

Successful ventures are characterized by 'complete' founding teams who have worked together previously and have deep functional expertise in their specific roles.
Success is linked to targeting concentrated buyer segments where a technological advantage can be sustained, rather than just targeting high-growth markets generally.
Early market entry through disciplined product development management was a primary differentiator for the successful cohort.

Extremely small sample size (n=8) limits statistical significance.
Exploratory nature of the study means findings are suggestive rather than definitive.
Focus is restricted to high-technology startups, which may not generalize to other sectors.
Survival bias may be present in the selection of the 'successful' cohort (public companies with $65M-$500M sales).

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