A Million Funding Rounds Say You’re Wrong | Max Wolff, Systematic Ventures

What we talked about.

In this episode of the Sunny Ray Show, host Sunny Ray talks with Max Wolff of Systematic Ventures about what data from more than a million funding rounds reveals about how startups actually get funded. Wolff, a macroeconomist with a statistics background, describes venture as a social network posing as an industry that has outgrown its social base. He traces his path from predicting the housing collapse, to covering early tech names for institutional investors, to co-founding a secondary market shop and working on ETF-based fintech with his co-founder Magnus. He explains why Systematic Ventures tracks about 200,000 investors and updates its numbers weekly, and why it forecasts the arc a company is on rather than its end point. He challenges popular beliefs, noting that solo founders and college dropouts tend to fare worse, while teams of two to four and at least one female founder tend to do better. He closes with practical advice on co-founders, ego, storytelling, and realistic timelines and costs.

A million funding rounds show that solo founders and dropouts underperform, and that who backs you matters as much as what you build.

The questions, and the answers.

What is Systematic Ventures building, and what problem are you trying to solve?

Everyone in venture thinks they know how it works, and each has a different theory. My co-founder and I know both finance and tech, so we apply data science to venture. It is a social network pretending to be an industry, and we want to study the rounds to see where conventional wisdom holds and where it breaks.

What part of the job turned out to be a story people tell rather than a skill?

A lot of the idea that big companies are big because they are so good at what they do. Many look good because they are large enough to have some successes and to hide catastrophic falls with a PR budget. Also, who invests in you is often at least as important as what you build.

Why did you think venture decisions could be modeled when early stage firms fail so often?

About nine out of ten companies with initial friends and family funding never get to grow up. Some have fatal flaws, but many die because building a company and raising money are different skills. Being a strong fundraiser can matter more than being a strong builder, which I saw as an opening.

Which popular beliefs about founders does the data contradict?

The lone founder is a myth. Statistically, solo founders fail at much higher rates, and more founders is better until about four. Dropping out of school is not good, finishing college is not good either, and having at least one female founder is quite good. Non-US nationals with citizenship pressures slightly outperform.

Can the data predict which companies will succeed?

No. You cannot forecast what a company does, but you can forecast what arc it is on, meaning the direction and magnitude of its path. We look at over a million rounds and about 200,000 investors, update weekly, and treat statistics as a seat at the table, not the decider.

What unusual factors do you track beyond the usual ones?

We look at school, time spent there, and founder count, but also how many competitors got funded in your year. Unicorns often emerge in cohort years with little funding. We also track how good each investor is at helping companies raise their next round, including angels.

If you were starting a startup to maximize your odds, what would it look like?

I would assemble several committed co-founders, check egos, and let people stay in their lane while cross-training so the company survives an absence. I would raise quickly, tell a story investors can actually hear, and avoid underestimating time and cost, since you cannot get everything fast and cheap.