Once People Know Your Name

From an interview with Belldegrun in Super Founders (PublicAffairs, 2021), venture capitalist Ali Tamaseb’s data study of billion-dollar startups. Belldegrun was a UCLA cancer doctor and professor who started four drug companies while still in academia, and Tamaseb introduces him as “one of the most educated founders.” The line comes as Belldegrun describes what a founder has to get from outside the company: the best board of directors, and enough money.

Right after the line, he compares two of his own companies. Cougar Biotechnology, his second, developed a drug for prostate cancer, his own medical specialty. Even so, he says, “we went for one year begging for money.” At Allogene, his fourth, the team raised almost $800 million in less than nine months after founding it. In between, Johnson & Johnson had bought Cougar in 2009 for nearly a billion dollars, and Gilead Sciences had bought Kite Pharma, his third company, for $11.9 billion. Knowing prostate cancer did not shorten the hunt for money at Cougar; two companies that paid off made it fast at Allogene.

What Allogene’s backers extended was trust, based on what he had done before. Paul Gompers of Harvard Business School and three co-authors found the same pattern across venture-backed startups, in a 2010 study in the Journal of Financial Economics. A founder whose last company had gone public (sold its shares on the stock market) had a 30% chance of doing it again, against 21% for first-time founders and 22% for founders who had failed before. Skill is the obvious explanation, and they find evidence for it, but they argue part of the reason is other people’s belief in the founder: suppliers and customers are more willing to commit resources to a company they expect to succeed because of the founder’s track record, and that commitment helps it succeed. In their words, “success breeds success.” If they are right, the trust a record earns does more than speed up fundraising: it brings in the partners that make the next success more likely.

Henrique Dubugras of Brex, interviewed in the same book, describes the stage before anyone knows your name: knowing your subject is what gets you taken seriously.