Explainer: why some founders raise more money than others
Investor bias, Stears

In 2012 Paul Graham, the founder of the prestigious startup accelerator and venture capital firm Y Combinator equated being a startup founder to being an “economic research scientist”. In his words, “you don't know for sure which problems are soluble; but you're committing to try to discover something no one knew before”. Think of the previously crazy-sounding ideas that are now businesses, like sleeping in a stranger’s house while on vacation instead of a hotel (Airbnb) or building a massive taxi company without owning any taxis or hiring any drivers as employees (Uber). 

When a founder discovers this solution, they call it a startup. 

 


Key takeaways: 
  • Startups are designed to build products for a large market that are high-impact and hyper-growth. To get off the ground or grow as fast as they should, they turn to funding from investors.

  • Due to the high failure rates of startups, investors are always on the lookout for founders they believe are better suited to solving a particular problem with education background and previous work experience being the key influencers.

  • With 58% of the funding raised by African startups coming from the USA and UK, these biases work in favour of the foreign-educated CEOs who raised 73% of funding in 2021 compared to 37% raised by the locally-educated CEOs.

 

Startups are designed for high growth and disproportionately high impact. They are designed

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Jonathan Ntege Lubwama

Jonathan Ntege Lubwama

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