The Moneyball Series: What Really Drives Startup Success Episode 1: Does Attending a Top University Matter?

To kick off this installment, we’ll examine one of the most common factors VCs use to predict a startup’s success, especially in early-stage investing: founder pedigree. Specifically, we’ll analyze whether attending a top-tier university should carry as much weight as it does in VC investment decisions.

Before we dive in, I’ll admit that I have a dog in this fight. I’m rooting for the answer to be a resounding “no” because I myself did not attend a top university. I would love for the data to show that attending a storied institution is not a prerequisite for success and that unicorn founders can come from universities of all ranks.

That said, I must also acknowledge that, as a VC, I'm easily impressed by the caliber of schools founders have attended and have moved deals forward based on this factor. So, all this to say—I’m ready to be proven right or wrong.

What is Founder Pedigree?

The term “founder pedigree” is, of course, intentionally vague. VCs don’t explicitly define what it means to have the right pedigree, yet it remains a key metric in “go” or “no-go” investment decisions. While its interpretation may vary from firm to firm, the overarching pattern is the same: founder pedigree is typically a combination of whether the founding team attended the right universities, worked at the right companies, and has the right experiences. And this makes sense. In early-stage investing, ideas are abundant, and even products, often too underdeveloped to evaluate, are unreliable indicators of long-term success. With hundreds, if not thousands, of deals crossing VCs’ desks each year, investors need a quick way to filter the good from the bad.

In doing so, some promising opportunities will inevitably be overlooked, but the numbers are on VCs’ side. In a recent study conducted by Ilya Strebulaev, nearly 67% of unicorn founders graduated from prestigious U.S. universities. This figure does not include founders who attended top universities but dropped out (Bill Gates, Mark Zuckerberg, anyone?) or those who studied at elite institutions abroad, such as the IITs in India, Tsinghua University in China, or Tel Aviv University in Israel, which together have produced 94 founders of U.S. unicorns. Including these figures would only strengthen the argument and reinforce VCs’ bias toward prestigious institutions.

So, are investors right? Is attendance at a top university the key to startup success? As you can imagine, the answer isn't clear. While the data certainly suggests that where founders went to college matters, here are other considerations that may paint a more nuanced picture:

• Did unicorn founders attend top universities because they are smart, or because they are rich?

There is a collective understanding that Harvard and Stanford graduates are smart. After all, they must be in order to be accepted to a place that has a 3-4% acceptance rate. VCs take this common refrain to heart. We wholeheartedly believe that elite university graduates are in fact, elite, and have the knowledge and intelligence to be the founding team that will make our bets pay off.

But if we look closely at the data, we find that a considerable portion of Ivy League students are from well to do families; at Brown University, 19% of students hail from families in the top 1% of income earners (annual incomes exceeding $630,000), and 70% come from the top 20% (families earning approximately $110,000 or more annually). Similarly, at Harvard University, 15% of students are from the top 1%, with 67% from the top 20%. In contrast, representation from the bottom 20% of the income distribution (families earning $20,000 or less annually) is much lower, with figures like 4.1% at Brown and 4.5% at Harvard. While these figures aren't specifically about founders (information about individual wealth and family background is tough to find, although some of the most famous unicorn founders are certainly from rich families. Bill Gates, Mark Zuckerberg, anyone?), we can extrapolate the data to say that by attending top universities, unicorn founders should follow a similar demographic pattern.

Being financially well-off, of course, does not preclude Ivy League grads from also being smart. Both can be true at the same time. But it does generally mean that those grads have had access to good schools with college-ready programs throughout their lives and families who have the financial means to invest in their education, factors that can only aid their admittance to the best colleges.

Another benefit that wealth affords is a safety net, which is often crucial when launching risky ventures. Since many unicorn founders come from wealthy families, they have the luxury of taking the risks necessary to start a business, knowing their families may be able to support them if their venture fails. This isn’t a knock on their abilities—it simply adds context to why we may be seeing the same profiles in the venture-backed world and helps us understand whether we’re betting on the smart kid or simply backing the rich kid. And if the latter is true – if VCs are finding benefit in investing in the wealthy – then perhaps we can look to other channels outside of prestigious universities to find the 1%.

• Do VCs invest in founders that attended top tier universities because they attended these institutions themselves?

VCs, like all humans, are affected by affinity bias. We naturally prefer to work with and invest in people who are similar to us, whether in experience, education, or social background. It’s no surprise, then, that the founders we invest in often look and think much like we do. Many VCs have degrees from top universities and majored in engineering, business, finance, or economics—just like many unicorn founders.

The upside of these degrees is that they provide valuable skills for building businesses, especially venture-backed ones. The downside, however, is that if founders come from the same universities, study the same fields, and receive advice from mentors with similar backgrounds, how can the businesses they create truly cater to a diverse population? How many ideas from unconventional founders do we pass on, founders whose unique life experiences, while different from our own, mirror those of underrepresented groups, groups that could represent billion-dollar markets? I know DEI isn’t currently in vogue, but if VCs only invest in Stanford-educated founders who think and act like us, how can we expect to get fresh ideas or execution strategies that can only come from lived experiences?

VCs may be creating a self-fulfilling prophecy by consistently betting on graduates from well-known institutions. Unicorn founders may not come from these schools because they hold the secret to success, but rather because VCs keep making the same bets. If we repeatedly invest in founders from the same backgrounds, it’s no surprise that the successes we see come from those very groups—reinforcing the cycle.

• In sectors outside of tech, did successful founders also attend prestigious universities?

The world of VC investing is an insular one. In 2024, 51% of U.S. VC dollars went to Bay Area companies. 42% of investments were poured into AI companies. SaaS continues to dominate as the business model of choice, and the top VC firms received the lion's share of LP capital. What this suggests is that as far as our investment strategy goes, we're not as adventurous as we think we are. So in an effort to look outside of ourselves, let's take a look at the profile of a typical main street business owner.

A typical business owner in the U.S. is a White (82% of business owners are White. Hey, some things hold true no matter where you are) male (61%), over the age of 50. He is not likely to hold a college degree (only 39% of business owners have a bachelor's degree or higher, let alone a degree from a prestigious institution) and tends to own the business on his own (70% of businesses are single owner). And yet the 10-year survival rate of the average American business is nearly 35%. Compare that to only 25% of VC-backed businesses being deemed a success (returning VC investment + profit). Sure, operating a mom and pop shop isn't comparable to running a billion dollar company, but these successes shouldn't be overlooked either. Owning and operating a company for over ten years without venture capital fueling its growth (and padding its losses) is no small feat. One of the key components of starting a successful business is access to capital, an unfair advantage VC-backed companies have over others. And let's not even talk about the number of unicorns that are actually worth their insane valuations. In a study by Bain & Company, only 0.7% of unicorns generate $1B in cash and revenue, suggesting that these venture backed companies might not be able to survive on their own for 10+ years without the constant injection of VC capital.

So What Does This All Mean?

Well that entirely depends on how you want to interpret the data. Yes, it's true that many graduates of top universities come from wealth. Does this give them an unfair advantage over someone who attended a low-ranking state school because they had to worry about other things besides education? Absolutely. But should VCs care? Maybe not. VC firms aren’t charities, and betting on the future is no easy task, so any harbinger of success can and should be used. Should we continue to work with people who look and sound like us? Again, the answer is unclear. Building a billion dollar business is hard enough, and so anything that makes our lives a little easier, even if it means working with our doppelgängers because we like them, shouldn't be an indictment on our morality.

But perhaps there are other reasons why VCs should look outside of Princeton Review rankings to find the next diamond in the rough. Reasons like competition. If all VCs use the same rubric to find our next star founder, competition for those founders will be fierce. And when competition for founders and their startups is fierce, valuations start to balloon to unrealistic figures– figures that aren't sustainable without the constant injection of VC capital. This series is, after all, called The Moneyball Series. Like the book and the movie, the question isn't whether or not the baseball players getting top dollar are good, it's whether they are worth the amount they're getting. By diving into the data, teams can see that maybe they're not, and that they can get very decent and comparable players for a fraction of the cost.

That's the lesson here. It's not that founders who attended top universities aren't smart or good or capable. It's that founders who didn't attend top universities are too often overlooked. Using main street business owners as examples, we see that success can and does spawn from unlikely places. By looking in these unexpected places, we may find individuals with unique lives and lived experiences who can generate ideas we might never have considered—ideas that could very well become the next billion-dollar business.