[jonbischke]

Removing Uber seems to defeat the purpose of this a bit. After all, the goal of venture investing is pretty much "find the Ubers". Most of the "rules" don't actually apply to Uber. For example:

Rule 1 - Uber had no female founders.

2 - Travis and Garrett were "older" founders.

3 - Neither went to a "top school".

4 - Neither worked for one of the name brand companies listed.

5 - Both were repeat founders. If included, FRC's investments in repeat founders would likely perform much better than first-time founders.

8 - Uber is based in the Bay Area. If included, FRC's investments in "Big Tech Hubs" would likely perform much better than outside of tech hubs.

A couple of the other rules might also not apply to Uber (don't have enough data to assess).

On the whole this is a well-intentioned exercise but I wonder if the exclusion of Uber doesn't lead to wrong conclusions.

[hkmurakami]

First Round is a multi-stage firm, but they seem to focus on seed stage where valuations are still in the 7 figures to low 8 figures. At that stage it may be possible to return 3x your fund over 7 years without having super outliers.

The valuation at which you invest dictates the kind of exits you will need in order to satisfy your LPs.

[kzhaouva]

Rule 7 - I could be wrong, but is it possible that Travis is a software engineer? I thought he talked about that in this video: https://www.youtube.com/watch?v=VMvdvP02f-Y starting 3:30. He said "...I started in engineer..."

Again, I also think this is a really cool article

[sbuccini]

Yes, he studied computer engineering for a bit at UCLA.

[johnny99]

That a software engineer does not make.

[bglusman]

But isn't this the point of removing outliers, to avoid a single data point overly clouding the significance? To be fair, by similar logic they should arguably remove one or more of the least successful businesses, but all failures are generally 'equally unsuccessful' but no two successes are equivalent.

[nostrademons]

The whole point of startup investing is to search for outliers. The way returns are distributed in the tech industry, it's not unusual for 1-2 companies to be responsible for 90%+ of a fund's financial returns.

http://www.paulgraham.com/swan.html

Including Uber would probably have made most of the data meaningless - since their conclusions are valuation-weighted, their data would show that the ideal startup founder is...Garrett Camp. But then, that's how the startup investing business actually works - your data is useless unless you find the one outlier that everyone else missed.

Edit: It occurs to me that this effect could be overcome by taking the log of valuation (or whatever metric is of interest) and then running your statistics over that. That's standard procedure when trying to do statistics over a Zipfian or other power-law distribution; it lets the outliers count, but prevents them from distorting the averages too much.

[applecore]

The mean (or average) is a good choice for data with a normal distribution. However, if your data has extreme scores, such as the difference between an Uber and everyone else, you should look at the median or 90th percentile, because it's much more representative of your sample.

[nostrademons]

Median and 90th percentile are still pretty meaningless for the question that First Round is asking, notably "If I want to maximize my financial returns, what qualities should I look for in founders?" Miss that one company at the 99th percentile, and your return could be 10x lower.

[applecore]

It's still relevant to founder who want to know what it takes to be in the top decile of their cohort.

[mikkom]

That's why they should have used other metrics than average.

[logicallee]

if you remove a handful of outliers (jesus, buddha, mohammed, joseph smith, maybe two dozen in total) then nobody has ever formed a religion that got any significant number of followers.

In other words, if you remove the outliers you're now looking at something basically meaningless, like evaluating a McDonald's meal by drinking the soft drink only - everyohe else other than the outliers is the soft drink, and the outliers are the main meal.