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    Determinants of Early-Stage Startup Performance: Survey Results
    Working Paper Summaries

    Determinants of Early-Stage Startup Performance: Survey Results

    by Thomas R. Eisenmann
    In this study of 470 founders/CEOs and their management practices, startups that employ lean startup techniques had better valuation outcomes. So did ventures that balanced hiring for skill versus attitude and, more broadly, made early efforts to professionalize human resource management.
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    Author Abstract

    To explore determinants of new venture performance, the CEOs of 470 early-stage startups were surveyed regarding a broad range of factors related to their venture’s customer value proposition, product management, marketing, technology and operations, financial management, funding choices, team management, and founder attributes. Multivariate regression analysis shows that startups that employed lean startup management practices—in particular, an optimal rate of pivoting—had stronger seed equity valuation growth, as did new ventures that struck the right balance in recruiting for skill versus attitude and that professionalized human resource policies earlier. High levels of confidence in financial metrics—including estimates of unit economics, the ratio of customer lifetime value to customer acquisition cost, and total addressable market size—were also associated with strong growth in seed equity value. Valuation outcomes were not related to several founder/CEO attributes, including age, educational background, personality traits, and motivations for becoming an entrepreneur. Likewise, choosing angels versus venture capital firms as lead seed round investors did not predict subsequent growth in equity valuation, nor did decisions about partnerships to provide technology, operational capacity, or marketing support.

    Paper Information

    • Full Working Paper Text
    • Working Paper Publication Date: October 2020
    • HBS Working Paper Number: HBS Working Paper 21-057
    • Faculty Unit(s): Entrepreneurial Management
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    Thomas R. Eisenmann
    Thomas R. Eisenmann
    Howard H. Stevenson Professor of Business Administration
    Peter O. Crisp Faculty Chair, Harvard Innovation Labs
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