Ethan Mollick - The Unicorns Shadow

L et me tell you a story about a startup.

The undergraduate founder coded at night in his dorm room at Stanford, creating a new kind of social network. Though he was awkward and had few friends, he knew he needed a cofounder. His sister wanted to partner with him, but he knew better than to work with her. Instead he found a charismatic guy at a party who was enrolled in the same classes as him and, even better, was an ETSP in the Myers-Briggs testthe entrepreneur personality type! They decided to become partners on the spot, and, realizing that planning meant nothing in the fast-changing world of startups, they got to work immediately. Even though they were new at this, and the idea was outside the mainstream, they found a perceptive angel investor who had identified many hits and decided to back them. The founder and his partner soon found themselves running a giant global company, one that would change how we all communicate.

Seems pretty vivid, right? You can fill in the details: the garage (or maybe run-down frat house) filled with workaholic young programmers in the early days of the company, the founder wearing an ill-fitting suit to the investor meeting while his partner does the talking, and even the giant all-night parties as the company takes off. This is such a vivid picture because it matches a sort of universal startup monomythone that looms over aspiring entrepreneurs. Folklorist Joseph Campbell used the term monomyth to refer to the fact that the myths of different cultures share common elements that you can see in any story of heroes, from Hercules to Luke Skywalker. The startup monomyth works the same wayelements of the story above contain echoes of famous startups like Facebook, Google, Microsoft, Twitter, and Apple, and some infamous ones, like Theranos.

These are the legendary unicorns, with valuations of over $1 billion, that inform so much of the popular imagination about startups. And because these unicorns are the public-facing rock stars of the entrepreneurial world, they have an outsized influence over the imagination of founders and the public at large. They cast a shadow in their own shape over everything else. People want to be like these companies. They find themselves emulating these organizations.

But they dont have toand they probably shouldnt. I wrote this book to tell you why and to reveal how the stories we carry around about startups hold back founders, investors, and entrepreneurship in general.

I can do this because the study of entrepreneurship has been in the midst of an empirical revolution. New data, better research methods, and a host of smart scholars have been overturning the conventional wisdom behind what successful founders look like, how they succeed, and how the startup ecosystem works. In this book, we will look at the latest evidence on how to build successful startups and the way in which startups can use a scientific approach to gather their own data to increase their chances of success. At the Wharton School, the business school of the University of Pennsylvania, we call this method Evidence-Based Entrepreneurship.

Its tempting to say that Evidence-Based Entrepreneurship has been the sole key to the tremendous success of Penn grads in the world of startups. In 2018, for example, University of Pennsylvania graduates raised more venture capital money than was raised in all of France and Germany put together. But this fact alone should give you pause. My students are terrific, but are they really worthy of more investment than everyone in two of the worlds largest and most innovative economies? This disproportionate investment illustrates that the myths of entrepreneurship have greatly distorted the way that opportunities and talents are supported to the benefit of my students, but to the detriment of many others, a topic we will come back to later in this book.

Well also explore where the best startup ideas come from, the best ways to go about funding your enterprise, and how to effectively pitch your idea to investors. I have lived and worked in the world of startups throughout my entire career. I have cofounded successful internet companies and nonprofit organizations and have sat on the advisory boards of even more. Startups are also the subject of my academic research and the classes that I teach. But the evidence I will present to you in this book goes beyond my work to include fascinating research done by my colleagues at Wharton and other institutions around the world. And I provide additional information on the books website, including useful tools, files, and links, which you can access at www.unicorns-shadow.com.

Just as I will encourage you to be skeptical of the received wisdom around startup success, I also would encourage you to be skeptical of the evidence that I present and the ways in which I interpret that evidence. This book combines research from nearly 150 academic papers and manuscripts, and each paper has its own strengths and limitations. If there is a particular fact or piece of information that you want to challenge or understand further, I would urge you to look at the cited paper. I would only ask that you recognize that any errors or misinterpretations are my own, rather than the colleagues and peers that I cite. Even with these caveats, I think there is value in looking at the collected evidence around what makes founders successful. If nothing else, it provides a useful counterpoint to the ubiquitous stories of the unicorns. We are still in the early days of understanding startups, and we continue to learn and build out the real, messy, complicated, and sometimes counterintuitive story behind the myths.