LATAM Unicorns part 2: Breakdown of the founders
This is the second part of a study about LATAM unicorns. Part 1 focused on data about the companies and fundraising, and this second part will focus on the people behind the unicorns. The founders define a big part of a startups' success, and there are many myths around what makes a good founder, so I was curious to see what the data said for LATAM companies.
I want to clarify that I believe there is no “right” way to build a company, and there is no “one type” of founder that will guarantee success. I recommend using caution when interpreting the results and not jumping to conclusions, as many factors not considered in this study contribute to a startup’s success or failure. Finally, it is essential to mention that past performance is not necessarily an indication of future performance, and what made a founder good in the past may not make him good in the future.
For the people interested in learning about the selection criteria, I recommend going to part 1 where I explain this in detail. In summary, the results shown represent data from 28 LATAM unicorn companies and 76 founders. Details about the specific methodology (*) are outlaid in the fourth section. I do want to caution that a big part of the information came from Linkedin and Crunchbase which might contain some errors (if you find one send me a message on Linkedin happy to correct them and recalculate results).
A big part of the inspiration to do this research came from reading the work of Stanford professor Ilya Strebulaev and VC and book author Ali Tamaseb. I highly recommend following their work for people who want to dig deeper on the topic and get more data around US founders and unicorn companies.
Some graphs show a company logo or founder at the top; they represent an example of a case in a given group (randomly chosen). There can be certain cases that a founder could be part of two groups but in the graph displayed in just one of them (e.g., a founder can have more than one major).
First, looking at the number of co-founders, 89% of the companies had two or more co-founders. Building a company is challenging and requires a broad set of skills rarely present in just one person. Additionally, the founder’s journey is difficult and full of bumps, and having more people to share the experience makes it a bit easier (two books highly reflect the founder’s rollercoaster of emotions that I highly recommend reading: Shoe Dog and Viva). Having said this, it is also possible to build a successful company by being a solo founder, as is proven by cases like Ualá, Creditas, and Olist.
When seeing the results for the US, it is interesting that the number of solo founders is almost double with 20% of the total unicorns. I have a theory that as the number of success cases in LATAM increases, there will be a greater percentage of solo founders, many of them being early employees of the first unicorns of the region. Being an early employee of a high-growth startup accelerates the learning curve, increases the person´s network, and gives them a broad set of skills, that prepare them to create a company.
In terms of gender, from the 76 founders in the sample, just 3 were women. This result reflects how bad gender inequality is and an invitation to create awareness around this issue. Claire Diaz-Ortiz wrote an article on concrete actions to begin closing the gap. The three rockstars in the sample are Cristina Junqueira (Nubank), Mariana Paixao (Loft), Loreanne Garcia (Kavak). Curiously, they are founders of two of the highest valued unicorns in the region, with valuations over USD$8Bn. This issue is not just present in LATAM; the results are similar in the US, where only 6% of unicorn founders are women.
Some people believe that to build a successful company, at least one founder must have a technical background (*). Looking at the results for the region, nine companies reach unicorn status without having someone technical on the founding team.
Having a technical co-founder can be advantageous, especially in the early stages, as it allows the startup to iterate and develop the product faster. In cases where having a technical co-founder is not possible, I think this can be compensated with the founder’s ability to recruit a top tech team and communicate correctly with them, as proven by cases like Kavak or Creditas. Given the increasing amount of hiring of tech talent by foreign companies in the region, this will become a difficult task in the following years, especially because international companies tend to offer salaries 2 to 7 times greater than regional companies.
In terms of age when founding the company, given some success cases like Mark Zuckerberg (created Facebook when he was 19), many people assume founders tend to be young people in their early 20s. Of the 65 founders with data available (*), 45% were over 31 years old. Still, there are indeed cases of young founders, as was the case of Victor Lazarte that founded Wildlife when he was around 24 years old. At the same time, there are cases of highly experienced founders, such as Diego Dzodan of Facily, which was around 48 when he founded the company.
Comparing the results, the median age of LATAM founders was 30 years old, compared to 34 in the US. Empirically I can say that a good portion of the LATAM founders I have spoken to in the past two years tend to be in their early thirties.
This was the part with less public data available so I want to recommend people to go to the methodology section for more details.
Of the 72 founders with data available, 36 had only a bachelor’s degree (if a founder had a bachelor's and a master’s she/he was placed in the master’s group). It is interesting to note that the two founders with doctoral degrees were from Notco (plant-based alternative foods), which aligns with their product that requires a high level of technical knowledge.
In the US the percentage of founders with a postgraduate degree is 61%, with 23% having a doctoral degree. This is significantly higher than in LATAM, especially at the doctoral level, where the gap is almost 7x. I have to say that a low percentage of solutions that I see in my work as a VC in LATAM fall in the deep tech or highly technical categories, which might have a relation to the academic degrees of the founders.
Many people in the ecosystem say that the best founders come from top-ranked international universities. At least at the bachelor’s level, just 14% of the founders went to a top-ranked university (*). The leading university in the ranking is Universidade de São Paulo, where founders of companies like Wildlife Studios, CloudWalk, Loggi, Merama, Gympass, 99, Mercado Bitcoin, and Nubank studied.
In total, the founders went to 47 different universities. Brazil leads the way in the location of the universities with 45%, followed by the US with 19% and Argentina with 9%. Interestingly, Mexican universities represent just 3% despite being the second unicorn-producing country in the region.
Of the 36 founders who took postgraduate studies, 53% went to a top-ranked university (4x more than at the undergraduate level), with Harvard and Stanford representing 31% of the 42 degrees (6 founders had 2 postgraduate degrees).
The founders attended a total of 22 universities. In terms of the location, the US takes the lead with 43%, followed by Brazil with 21% and France with 14%. Interestingly, just 29% of the people who decided to do a postgraduate did it in a Latin American university.
Looking at what they studied, 119 college and graduate majors were earned by 72 founders. Business leads with 40% of the total majors. Interestingly, just 15% had a computer science degree, which is significantly lower than in the US, where this study showed it as the leading major with 29% of the total and Business was the third with 26% of the total. This can also have a potential relationship with the technical degree of LATAM solutions mentioned before.
There are interesting cases like Renato Andrade from Merama, who has a bachelor’s in law and another in business, and his working experience has been mainly on the business side.
Regarding the prior working experience, the median time was eight years, where 75% of the founders had 5> years of work experience. Still, there are cases like Victor Lazarte from Wildlife studios or Santiago Sosa from Nuvemshop, that had less than two years of professional work experience when they became founders. At the same time, you have people like Sergio Fogel from Dlocal with over 20 years of prior work experience.
Having been an inexperienced founder myself, I can say that having prior experience can save you from making a lot of mistakes, that can be costly in terms of capital and time.
Looking at the companies the founders worked for, 71 founders worked for 49 different companies. Looking at the top 12, the leading ones are consulting companies (McKinsey, Bain, and BCG), representing 18% over the total founders or 9% over the total companies. The second category is financial companies (JP Morgan, Santander, Deutsche Bank, Morgan Stanley), representing 14% of the founders and 7% of total companies.
Comparing the results to the US, according to the Book Super Founders, the top four companies were from the technology sector (Google, Oracle, IBM, and Yahoo). In that same study, McKinsey appears seven on the list.
Having work experience is important, but sometimes having previous experience as a founder can bring greater benefits. Of 73 founders, 20 had previously built a successful company. The list of some former successful founders include:
- Sujay Tyle (Merama): USD$700M exit with Frontier Car group.
- Simon Borrero (Rappi): Imaginamos currently employs 103 people and Grability currently employs 35 people.
- Florian Hangenbuch and Mate Pencz (Loft): Printi raised USD$100M+ and was acquired by Cimpress (NASDAQ: CMPR).
- Chris Torto (Ascenty): Vivax became the second-largest cable TV carrier in Brazil, had an IPO on the Bovespa stock exchange, later acquired by Net Serviços.
There are cases where two of the founders had previously built together a successful company like Simon Borrero and Sebastian Mejia from Rappi, or Daniel Udurraga and Oskar Hjertonsson from Cornershop.
Finally, I wanted to look at the blended results at the company level. Of the 28 unicorns, 75% had at least one founder that worked for a branded company, 54% had at least a founder that went to a top-ranked university, and 43% had at least one former successful founder on the team. Three unicorns did not have any founders with any of these backgrounds; one example is Hotmart, in which both of the founders had a background in computer science.
I believe that a significant value of working for a branded company or going to a top-ranked university is the networks it opens. These networks tend to be really important when a company hires and raises capital. Having said this, I do believe it is possible to build these without having these backgrounds; it just might require more creativity and effort from the founders to create them.
III. Final remarks
My goal with this research was to give the data for people to draw their conclusions. One thing that the data did show was that there are different paths to build a successful company and there is no magic formula for success.
It was a pleasure studying the LATAM unicorns, and I want to express my admiration to all the founders; we often see their success, but we don’t see the hard work and sacrifices they all had to make.
I find it interesting for a follow-on study to understand the power of networks, the relationship it has with the variables in this research, and what role they played in the success of LATAM unicorns. Maybe with those results, some causations can start to be made.
I hope that people will see this study in a few years and be impressed by how unrepresentative the sample is since I expect there will be many more LATAM unicorn companies in the region in the upcoming years.
Personal Linkedin: https://www.linkedin.com/in/danielporrasr/
IV. Methodology details (*)
Number of co-founders: included founders listed on Crunchbase or had co-founder status on Linkedin.
Top-ranked university: Ivi league university or top 20 according to QS global university rankings.
Technical founder: included founders with a major’s in Computer Science, Computer Engineering, Electrical or Electronic Engineering, Computer Software Engineering, Computer Systems Engineering, Mechatronics & Robotics Engineering. Or founders that, before founding the startup, worked as developers.
Age at founding: For the founders that did not have public data available, I assumed they were 18 when they started their undergraduate degrees. Using methodology with the founders that did have data available, the margin of error was usually between 0 to 2 years.
Prior years of experience: extracted from self-reported data on LinkedIn. There can be a margin of error of 2 to 12 months, as LinkedIn does not display the exact date on a given month that the persona began and ended a job position. Included internships. If a person worked for two companies at the same time, counted them as a unique value.
Top companies list: just took into account the ones that the founder worked at least one year, did not include companies created by the founders.
Branded company: Morgan Stanley, Sequoia, General Atlantic, BCG, McKinsey, Santander, Bain, Groupon, Coca Cola, Oracle, Linio, IBM, Airbnb, JP Morgan, Goldman Sachs, Apple, Bridgewater Associates, Dell, Paypal, The Carlyle Group, EY, Deutsche Bank, Citi, Google, Facebook, and Uber
Former successful founder: built a company with over 20 employees or raised more than USD$1M in funding, or had an exit to a brand name company or exit with value over USD$1M.