3,593 MADE FOR SPEED
A new study on what successful
companies have in common
THINKING ABOUT NAMING your startup after your- self? You may want to reconsider. A recent MI T study found that companies named after the founder were less likely to grow. The study’s authors, Scott Stern, a professor at MIT’s Sloan School of Management, and Jorge Guzman, a doctoral candidate there, set out to dissect startup success. They analyzed more than 800,000 companies that
had launched in California from 2001 to 2006 and looked at
what distinguished the ones with growth (as a proxy, those
that had an IPO or were acquired within six years of founding)
from the rest. Some of the results were surprising. The trait
most correlated with rapid growth? Incorporating in Delaware.
Businesses that did so were 35 times more likely to succeed.
Of course, the state is known for its business-friendly laws,
but “it’s a statistical relationship, not a causal relationship,”
stresses Guzman. “Incorporating in Delaware doesn’t make you
more successful.” He speculates that the Delaware effect may
have more to do with funding. “A lot of VCs require it,” says
Guzman, “and 50 percent of publicly traded firms are incorporated in Delaware. Bigger firms tend to be in Delaware.” And,
it seems, so do firms that aspire to be big. —BOBBIE GOSSAGE
ILLUSTRATION BY SCRIP T & SEAL
associatedwithgrowth. Andcompanieswith patentsandDelaware roots?Theywere awhopping195
growth,butother factors,including securingpatents ortrademarks withinayearof ounding,were moreimportant.
THEBETTER TOGOOGLE YOUWITH
twowordsorshorter hadabetterchance ofsuccess.And forgetLLCs. Acorporation wasmorethan
TOOSMALL Businesses thathad
mostlylocal clientswere notaslikely togrow.
LIKELIHOOD ACOMPANY WILLGROW HENTHESE TRAITSARE PRESENT
PORTIONSOF COMPANIES WITH THESE TRAITS
INNOVATE 92 - INC. - MAY 2015