Good connections key to startup success

January 15, 2020

The future potential of early stage startups can be assessed by their existing professional relationships, research led by a team at Queen Mary University of London suggests.

Using available online data from 41,380 companies collected over 25 years, the research team created a visual network to show connections between companies and their employees.

They found that young startups who quickly acquire a central position within the network are more likely to show signs of long-term economic success.

The team then used this approach to develop success prediction algorithms, which were shown to be two to three times more accurate when predicting future economic performance than current labour-intensive screening methods adopted by venture capital firms.

The findings are published today in Scientific Reports.

Startups were ranked based on their values of 'closeness centrality', which measures the average distance of one company from other firms within the network. Results indicate the predictive link between rankings and long term success, with 30% of the top 20 firms each month achieving a positive economic outcome within seven years.

The researchers were able to validate their approach by reviewing the rankings of well-known successful companies such as Facebook, Uber and Airbnb over time. They discovered that these companies swiftly moved to high ranking positions soon after they were founded.

Data on funding rounds, acquisitions and initial public offerings were all used as measures of startup success.

Dr Moreno Bonaventura, former PhD student at Queen Mary and Chief Scientist at Startup Network, said: "The people within a company, be it investors, employees or advisors, bring with them experience from other firms on effective strategies, know-how on cutting-edge technologies, and their own personal contacts. Global networks are the backbone through which knowledge is gained and shared, and this information can be used to build predictive intelligence on the future economic performance of young companies."

Dr Lucas Lacasa, Reader in Applied Mathematics and Engineering and Physical Sciences Research Council (EPSRC) Early Career Fellow at Queen Mary, said: "Traditionally historic reports on sales, growth or market size are used to predict future success but with startups this level of data usually isn't available. Instead measures such as the qualifications and attributes of founding entrepreneurs are used, which can be subjective as well as labour-intensive. We propose that this novel, data-driven approach could complement existing screening approaches used by investors and we anticipate that further refinements could improve the prediction accuracy even more."
-end-
The research was funded by the EPSRC and supported by data from the Startup Network, S.r.l.

Notes to editor:

* Research paper: 'Predicting success in the worldwide start-up network'. Moreno Bonaventura, Valerio Ciotti, Pietro Panzarasa, Silvia Liverani, Lucas Lacasa, Vito Latora. Scientific Reports.

* DOI:10.1038/s41598-019-57209-w

* Available here after embargo lifts: https://www.nature.com/articles/s41598-019-57209-w

* For a copy of the paper or further information, please contact:

Sophie McLachlan
Faculty Communications Manager (Science & Engineering)
Queen Mary University of London
sophie.mclachlan@qmul.ac.uk
Tel: 020 7882 3787

About Queen Mary

Queen Mary University of London is a research-intensive university that connects minds worldwide. A member of the prestigious Russell Group, we work across the humanities and social sciences, medicine and dentistry, and science and engineering, with inspirational teaching directly informed by our world-leading research. In the most recent Research Excellence Framework we were ranked 5th in the country for the proportion of research outputs that were world-leading or internationally excellent. We have over 25,000 students and offer more than 240 degree programmes. Our reputation for excellent teaching was rewarded with silver in the most recent Teaching Excellence Framework. Queen Mary has a proud and distinctive history built on four historic institutions stretching back to 1785 and beyond. Common to each of these institutions - the London Hospital Medical College, St Bartholomew's Medical College, Westfield College and Queen Mary College - was the vision to provide hope and opportunity for the less privileged or otherwise under-represented. Today, Queen Mary University of London remains true to that belief in opening the doors of opportunity for anyone with the potential to succeed and helping to build a future we can all be proud of.

Queen Mary University of London

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