Methodology of the Startup Genome

This is a free monthly benchmark for startup founders. After filling out a questionnaire we will compare you against other startups that are similar to you in order to help you evaluate your recent performance.

The Startup Genome Compass uses a hybrid Stage and Type model that describes how firms progress through their business development lifecycle.

Traditional theory of startup performance hinges on external characteristics of a firm to attribute success factors. Properties such as the amount of money raised, education of entrepreneurs and history of entrepreneurs are typically used to try and explain startup success and failure. The results, however, indicate that a firm’s fate is not only determined by external factors. Two different startups with the same starting scenario will achieve very different results depending on how they perform over time.

The Startup Genome Project aims to enhance traditional theory by delving deeper into firm behavior. Our focus is on actions taken by firms to explain their success or failure. Startup Genome Reports

Startup Genome Report 01: A New Framework For Understanding Why Startups Succeed Startup Genome Report: Premature Scaling

Startup Types

Types of startups are differentiated based on the complexity of their interaction with their users and payers. A startup that has a completely automated interaction with their users and payers behaves differently from a startup that requires an in-person sales force and a lot hand holding. Different types of startups vary widely on customer interaction metrics such as average selling price, customer acquisition cost, user growth rate and average revenue per user. Whereas, startups of the same type show similarity between each other on these metrics.

As the First Startup Genome Report shows, we have identified 4 different types of startups:

Type 1 - The Automator
Type 1N - The Social Transformer
Type 2 - The Integrator
Type 3 - The Challenger

Developmental Stages

We define startups as temporary organizations designed to scale into large companies. Over the course of their evolution firms move through 6 distinct stages in the Startup Lifecycle, which you can read more about here.

At each stage firms face different challenges and focus on different aspects of their business. Early stage startups are designed to search for product/market fit under conditions of extreme uncertainty. Late stage startups are designed to search for a repeatable and scalable business model and then scale into large companies designed to execute under conditions of high certainty.

The Stages of the Startup Lifecycle:

Stage 1 - Discovery
Stage 2 - Validation
Stage 3 - Efficiency
Stage 4 - Scale
Stage 5 - Sustain
Stage 6 - Conservation

The Startup Genome Compass

The Compass, performs two operations in one. It is able to tell a firm to which type it is and which stage it is in. We call this the Classification operation. Using this information, a set of benchmarks is generated for a firm using the cumulative knowledge of all firms who filled out the Startup Genome survey. We call this the benchmarking operation. Collecting the information is done using an online survey that was developed specifically for this purpose. Further details describing the development of the compass can be found in our methodology blog posts: Startup Genome Report, Machine Learning based Classification

Compass Classification

The compass classifies firms into their types and stages using a machine learning algorithm. To train our algorithm to recognize these types and stages, we used a sample of roughly 500 firms in our dataset. We then validated our classification approach on the entire dataset.

Compass Benchmarks

Having amassed information from more than 10,000 firms, the Compass is able to display comparison information between each startup and other firms of the same type and stage. We measure more than 20 different attributes of startups, and display them in relation to the relevant population. We use color coding and informative visualization to alert firms about their differences from others. These measures can be used to identify potential areas entrepreneurs and investors to focus.