Unveiling Unicorn Pathways: How to Become a Unicorn w/ Leah Barto, Endeavor Global

Sarah Chen-Spellings (Intro):

We've all heard the legendary origin stories where founders drop out of college and bootstrapped tech revolutions from their garages. But how common really is this and what are the real stories? Well, on this week's Billion Dollar Bite, I chatted with Leah Barto, Senior Director of Research at Endeavor Global, that dove deep into this through their recent research piece, what they call the Unicorn Founders Pathways.

We talk about some unexpected findings between the pathways of 100 of the top unicorn founders in the United States, comparing that with 100 more in key emerging markets, including Latin America, the Middle East, Africa and Southeast Asia. Whether you're looking to spot that next unicorn or be one, this episode is for you.

Leah Barto:

So in Endeavor, we are a community of high impact entrepreneurs. And what we mean by that, our founders are scaling up rapidly, but they're also paying it forward.

They're mentoring, they're angel investors, they're also supporting their own employees in becoming founders themselves to create entire ecosystems. So that's really the whole mission of Endeavor. And my role is to lead the research team and we're uncovering patterns that we see in markets all around the world.

We now operate in 42 markets and we're really discovering how founders are scaling up and then how their ecosystems are building around them, and also how they're leading the charge in creating the next generation of founders.

Sarah Chen-Spellings:

Yeah, absolutely love that. And so one seminal piece that just came out that I was playing around with in the words of Leah Barto herself, data journalism is the future.

And of course, what's presented is really an interactive piece on where unicorns come from. Can you tell us a little bit about the genesis of that thinking of why do this piece of research and what the key takeaways are?

Leah Barto:

At Endeavor Insight, we've been studying how networks grow for over a decade. And we've seen this pattern over and over again, that when founders of successful companies are mentoring and inspiring their own employees to start their own companies, that has a real strong ripple effect.

We call that the multiplier effect, in how we see generationally over time, this pattern over and over again. So we wanted to examine a little bit further in how founders build their networks over time.

We wanted to bottle those findings in a new type of investigation and really look at top tier founders from around the world. And not just the success stories that we hear of unicorns in the United States, but also look at patterns in emerging markets.

So we formulated this study to really compare the trajectories of US founders of unicorn companies to those in emerging markets. And we had some exciting results and pretty surprising findings even to us.

Sarah Chen-Spellings:

So before we dive into the data here and some of the unexpected findings, tell us a little bit about the methodology. When you say you were comparing sort of US unicorns to emerging markets, like what's the sample size?

Were these all Endeavor entrepreneurs only? Or how did you think about, going about it?

Leah Barto:

We take a neutral standpoint. So we're not just investigating our own Endeavor entrepreneurs. We really want to uncover the dynamics that anyone can learn from and what's really happening in these markets.

So our sample is made up of 200 founders and how we did that was we looked at 100 founders in the United States based on privately held unicorn companies. And then we did the same for the top highest valued companies in emerging markets.

We left off a few major tech hubs because we really wanted to uncover the patterns of those that are operating in less connected markets.

Sarah Chen-Spellings:

Last year was a big market correction after the 2020 and 2021 high, when you talk about valuations here, what year are we talking about with the sample size?

Leah Barto:

Right. We did take a snapshot of those valuations. So it was December, right before last year. So December 2022.

Sarah Chen-Spellings:

Okay, December 2022. Great. So from the 200 founders, 100 in the US, 100 in emerging markets spread across, what were the most unexpected takeaways?

Leah Barto:

We really expected to see traditional resumes; when you think of a successful person in your life or in your experience, you think that they had sort of a paved path to success in terms of attending top tier schools, maybe getting their first job at a major corporation or consulting firm.

We were really surprised that fewer than a third of the founders of all 200 had attended an elite university. And what we mean by that is top world rankings. So all the Ivies, but, and then some, so most founders were attending other types of universities.

Same pattern held true for employers. We looked at big three consulting or MAMAA, big five tech firms and bulge bracket banks. Overall, fewer than 20 percent or around 20 percent of the founders had employment at that sort of top tier corporation.

Sarah Chen-Spellings:

One of the things that spoke out to me was the fact that many of them were also repeat founders. Is that right?

Leah Barto:

Yeah. So what didn't matter were things like top tier universities and employment, but what we found that was really common was previous entrepreneurial experience.

So half of the founders in the sample had previously worked for an entrepreneurial company. And when we looked at the types of companies that they worked for, it was ones that had exited that had scaled really rapidly.

So they were gaining that firsthand experience as employees before founding their own very successful company. And then half again were serial founders. So they had previously founded another type of company. Some successes, some losses there in terms of the types of companies that they had previously founded, but overall 80 percent of our sample had some type of previous entrepreneurial experience.

Sarah Chen-Spellings:

I've been juggling between the data sets here. But were you the one that also uncovered the median age being a lot older than what we thought?

We think of sort of like the hoodie wearing Mark Zuckerberg, that's in his twenties. But is this true for emerging markets, what sort of age range are we looking at and expecting success?

Leah Barto:

Yeah, we did look at that within our sample of 200, the average years of work experience. So after college, if they attended college was around 10 years.

So it does debunk that sort of stereotype and even the college dropout stereotype. It was pretty rare that any had not completed, college to go straight onto a unicorn company.

Sarah Chen-Spellings:

Yeah, love that. One of the things that you did highlight was the fact of them being global citizens, right, which speaks very true to the ethos of Endeavor, that talent is universal, but opportunity is not.

So can you tell us a little bit more about, what you mean by this sort of global citizen trend that you were seeing among emerging market unicorns?

Leah Barto:

So we looked at our sample of top tier, top ranked, unicorns by valuation. So in the US, 55 percent were immigrants or second generation immigrants.  And even in emerging markets around a third had some sort of experience moving to a different country than where they founded their unicorn. Overall, 60 percent of the founders had studied or worked abroad at some point.

So we looked at immigration patterns as well as kind of career experiences in terms of building their international perspective.

Sarah Chen-Spellings:

What would you say the actionable takeaways would be for a funder who's looking to source that next unicorn?

Leah Barto:

I think my biggest advice is that there's no single gilded road to success, and I know investors are in a position of wanting to make the best bets they can. And so a lot of them are looking for that special recipe or a single ingredient that might mean, the best bet possible.

But I really see in our data that if you are narrowing it down too much, you might be missing out on founders that have completely different backgrounds or that are taking the road less traveled. The one thing we did see was that experience matters. So the longevity of their experience, so that average 10 year period, and as well as that previous experience at entrepreneurial companies or with previous company can really make a difference.

Sarah Chen-Spellings:

You picked on something that I’d love for us to dive a little bit deep into, this whole notion of investors being based on pattern recognition.

People that are from a similar background are more likely to be successful. This whole connotation that there is a certain profile that you're looking out for. Tell us a little bit about what you think about this and how your research has informed how you're thinking about the future of the unicorn founder.

Leah Barto:

In our work at Endeavor, we've seen that innovation can come from anywhere, I think we saw some patterns in this research that founders in emerging markets.

There are some differences. So they tended to have prior roles in marketing, finance, consulting, and in the US, in contrast, we saw more founders likely to be product, engineers, and this reflected in the types of companies they ended up founding, which types of unicorn companies they were operating.

So in the US, founders at that top valuation were more likely to be following VC fads in terms of crypto, blockchain, things that the market really wanted to see more of. And in Emerging markets, they were much more likely to be running companies like e commerce, logistics, fintech that were in our experience, addressing real world needs, either from their own lived experience, but also that really in tune to consumer behavior or kind of UX driven, fulfilling a need that has real impact.

Sarah Chen-Spellings:

Yeah, totally makes sense. And it's something that actually your MD Allen Taylor actually spoke to me about, an episode before yours. The fact that when you think about emerging markets, you think about the waves of innovation, right? And in many cases, it is real real world problems where infrastructure doesn't exist.

And so that's also an opportunity to leapfrog and to create, for gaps that truly exist in the market versus competing with legacy systems or whatever that's saturating the market at that point. Of course, you know, the work at Beyond the Billion, which we do with Endeavor, which is all about advancing women entrepreneurs fueling women led innovation.

A sore spot, I guess, you know, when I looked at the data and saw that women were very underrepresented in this data set. Could you speak a little bit to that? And some of your thoughts on female founders and their journeys.

Leah Barto:

So given our kind of neutral stance in this sample, we just looked at top valued companies and took all of the founders of those companies. And all in all, there were only 10 women among the group of 200. So that really is a significant under representation.

It might not be surprising to you or maybe some of the viewers and listeners, but I think it is a real call to action for all of us. And what we want to be looking at with this research next is how do we highlight the journeys of female founders?

In contrast to men, how are they building their networks and their career trajectories? And not just to highlight the gaps. There's so much of the dialogue out there right now around VC, funding gaps and other gaps, but we have this hunch that there's some real success stories of women taking the road less traveled, or just navigating some of these same challenges in different ways, and still reaching tremendous levels of success.

Sarah Chen-Spellings:

I know this is not exactly something that you've researched completely yet and is hopefully in the pipeline. But I love to get your thoughts as a professional researcher and having had the experience of looking at Endeavor's body of work over the 25 years in some way.

What are your thoughts here on the perennial question of why women founders are not where they should be, and that, from the sample size, yes, being neutral and all of that, that's only 10 out of 200. Why are they so underrepresented?

Leah Barto:

There's a lot of great research right now, and in recent years that looks into some of those more systematic constraints, like gender roles and biases.

In our work, we really look at how founders are building their networks and how they scale. And so with that lens, I think there's a few things going on that we've seen come through in our previous research is that, women who are accelerating their careers really fast within corporations or within scale ups are very well positioned.

We've seen time and time again where they have a CEO who encourages them to tackle a challenge that no one has tackled before and then start their own business. And that CEO was their first investor. So that could be a signal to other employers that if we want to really address the gender gap in entrepreneurship, it starts much earlier with how we're sponsoring them in their career growth at that earlier stage. Similar stories we've seen in terms of how building networks at business schools or other sorts of opportunities where entrepreneurs first meet their co-founders. That's an opportunity to be sure that women engineers are a part of those programs to match them with business school students at that stage. All of the other mechanisms that are already in place in how we foster young talent and innovation and just being sure that women are included in that.

Sarah Chen-Spellings:

This is a great segue, to bring in one of the trailblazers and happens to be an Endeavor unicorn. We featured her as well, Hande on her journey. What was her path like when you were looking into it? How did she get to be this person coming out of Turkey, right?

Leah Barto:

So Hande Cilingir is the co-founder of Insider, a multibillion-dollar company now in Turkey. She is one of our Endeavor entrepreneurs. And she's spoken before about how her entrepreneurial roots really stem from her childhood and seeing her father, and really instilling a sense of hard work in her and supporting her in going to school and college.

So she did study and work abroad. So that was a pattern that was true for a lot of founders in the sample. She studied economics and management at the London School of Economics, and that's where she met one of her co-founders.

So that's very common in terms of the pathways we see in founders. And she was not afraid of taking risks. She took the leap and moved to China for her master's degree, and worked corporates for a little bit in marketing and business development roles.

And when she returned to Turkey, she launched her company with a group of co-founders, which is another area that we have studied with other research in the past of how complementary skill sets on co-founding teams can be really important.

As we saw with the patterns and differences between emerging markets and US founders, we saw in Hande's story as well, in terms of taking her experience in marketing rather than product engineering and launching that into a company that has had tremendous impact.

I think she can be held up as a role model and example of what some of these pathways are that we've seen in emerging markets.

There's a utility mindset that she has instilled in building her AI marketing platform. Not only that is that she, as part of Endeavors ethos has also made sure that she is an inspiration to others, dozens of her employees have now gone on to become founders themselves.

Sarah Chen-Spellings:

All right. Well, we've covered a lot of ground. Was there anything else, from the research that you wanted to cover that we didn't?

Leah Barto:

I don't think so. but I would encourage people to check it out for themselves. it's available on Endeavors website.

Sarah Chen-Spellings:

Yeah. And I guess for the founders that are tuning in that are in the rough. Having seen what you've seen, Leah, what would your advice be to someone who's wanting to be that future endeavor entrepreneur?

Leah Barto:

I would say, it goes both ways, this virtuous cycle of seeking out those opportunities and training grounds where you can gain entrepreneurial experience firsthand, especially as part of a scaling company prior to launching your own very successful company, but also paying it forward in terms of creating an environment for your employees or fellow entrepreneurs to learn from you.

Learn from your mistakes and really provide that guidance and inspiration for the next generation.

Sarah Chen-Spellings:

Yeah. Love it. Great. Well, Leah Barto, thank you so much for your time. And we are excited to see where your future pathway takes you and the research this uncovers.

Leah Barto:

Thanks so much, Sarah.