Solo founders beware: New report shows the ultimate team composition for startups looking for funding

Many solo entrepreneurs dream of creating the next big tech startup on their own. But having a well-rounded team seems to be the key when it comes to convincing investors to back your company. Especially in Europe, where investors are drawn to founders who have consulting and financing experience rather than just tech expertise.

Those are some of the key findings in the report “A Decade of European Startup Founders” from NGP Capital, which investigated which factors led to fundraising success for European startups over the last decade.

The report looked at more than 17,000 European tech startups founded since 2014, and then zeroed in on the top 10 percent that raised at least $20.5 million – or €19.5 million – from investors.

The findings show a clear pattern that can serve as a how-go guide for composing the perfect team of entrepreneurs.

"The report reveals the factors that have driven fundraising success across various European hubs over the past decade," says Bo Ilsoe, located in Switzerland as Managing Partner at NGP Capital.

Solo founders have big disadvantage

The first lesson is: Don’t go it alone.

Solo founders have a massive disadvantage when it comes to finding investors, raising 42 percent less than the baseline for the top teams in the report – or €11.3 million million on average.

Solo founders have a massive disadvantage when it comes to finding investors

The sweet spot for your team size is four people. Among the top teams the report looked at, those with four co-founders raised an average of €67 million. Those with five or more co-founders also did well, averaging €42.75 million in funding.

The number dropped to €33.3 million for companies with three founders and €21.8 for those with two founders.

Diverse skills and backgrounds

So what should your four-person team look like? Ideally, it will have at least one woman and one international member.

The report shows clearly that diversity is important – both when it comes to skills and gender.

Teams with a mixed skillset, such as finance or consultancy backgrounds, raised 43 percent more on average than those with more narrow expertise.

Mixed-gender teams also did better than those with all-male makeups. Companies with at least one female co-founder outperformed their all-male counterparts by 25 percent when it comes to fundraising.

Despite that, a vast majority of the companies that the report looked at – 80 percent – featured only male founders.

Having an international flair also makes you more attractive to investors.

Teams with at least one co-founder from a different country raised considerably more money – up to 54 percent more on average.

Teams with a mixed skillset raised 43 percent more

Education pays – but don’t stop at a Bachelor’s degree

Having the right letters after your name is, perhaps unsurprisingly, a key factor in attracting investors.

Founders with a PhD degree dominate the funding charts and bring in 66 percent more money than their peers. But don’t despair if you “only” have a Masters degree. Founders with MBAs also scored highly, raising 44 percent more than the baseline. A Bachelor’s degree doesn’t seem to be highly valued by investors, though. Founders with a Bachelor’s actually came in 26 percent below the baseline.

So what to do if you don’t have a doctorate? Add one to your team, ideally from one of the top UK universities.

The top four European universities for creating startups and raising investment are all in the UK: Cambridge, Imperial College London, Oxford, UCL and LSE.

Cambridge topped the charts, with its alumni having raised €10.6 for 411 startups since 2014.

Experience matters

While American angel investors focus heavily on tech experts, their European counterparts value consulting experience more heavily.

Former consultants from big-name firms were especially successful when it comes to fund-raising. Startups with at least one co-founder with past experience at McKinsey raised 264 percent more than the baseline on average.

Any previous experience in launching startups – even unsuccessful ones – is also valued.

Serial founders pulled in 45 percent more on average than first-timers.

So there you have it: The ultimate four-member team composition for your venture consists of one PhD from Cambridge, one former consultant from McKinsey, at least one woman and one international.

Don’t fit any of those categories? Don’t worry: Teams with five members do OK, too.