In his working paper that was presented at the World Bank in September, author Geoffrey Barrows examines more than 20,000 startups from Ecole Polytecnique in Paris. Why? To answer the question: do efforts to provide funding and resources to budding startups through government, foundation, and organization-led startup programs actually make a difference in the future success of those startups? His team has subsequently correlated the 20,000 startups with future outcome metrics such as success, funding, and employees, and tied them back to their original evaluations. The result? A clear correlation. Startups that were evaluated to be top-tier fare substantially better than their counterparts down the road.
A second question was whether grants actually help the startups do better, or if the top startups simply have more success regardless of funding or resources provided to them through the competitive programs. Barrows and his team’s research showed that competitive startup grants do indeed work. In fact, the study found that a typical grant/prize generates approximately 10 times as much in funding later in that startup’s life, compared to similar startups not selected for those grants.
However, if the program organizers or final selection committees deviate from global best practice and partly choose their own winners based on intuition, the study finds a significantly lower impact of the grants or resources distributed. To maximize grant impact, Barrows and his team finds that the organizers should use a structured and unbiased evaluation process, and stick to the unedited results.
Read the working paper here.
Credit: Faye Gillespie