2%

3%

7%

26%

37%

39%

70%

87%

GROWTHCOMPANIES

NONGROWTHCOMPANIES

1%

5%

63%

14%

1%

1%

15%

10%

–76%

–62%

92%

536%

50%

2,502%

618%

NAMED AFTER

FOUNDER

LOCAL

BUSINESS

SHORT

NAME

PATENTS

INCORPORATED

IN DELAW

ARE

CORPORATION

HIGH-TECH

INDUSTRY

TRADEMARKS

3,593%

MADE FOR SPEEDA new study on what successful companies have in common

G R OW T H WAT C H

THINKING ABOUT NAMING your startup after your-self? You may want to reconsider. A recent MIT 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 start-

up 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 incorpo-rated in Delaware. Bigger firms tend to be in Delaware.” And, it seems, so do firms that aspire to be big. —BOBBIE GOSSAGE

ILLUSTRATION BY SCRIPT & SEAL

—

THE DELAWARE EFFECT

Incorporatin

g in Delaware

was most

close

ly

associa

ted with

growth.

And companies w

ith

patents and D

elaware

roots? They

were

a whopping 19

5

times m

ore likely

to su

cceed.

—MORE

THAN JUST

TECHNOLOGY

Being in a

high-tech

secto

r

(aerospace

, IT,

and biotech) w

as

corre

lated with

growth, b

ut oth

er

factors,

inclu

ding

secu

ring patents

or trademarks

within a ye

ar of

founding, were

more importa

nt.

—

THE BETTER

TO GOOGLE

YOU WITH

Companies with

names that w

ere

two w

ords or s

horter

had a better c

hance

of succe

ss. A

nd

forget LLC

s.

A corporatio

n

was more th

an

six tim

es as l

ikely

to ta

ke off.

—

THINKIN

G

TOO SMALL

Business

es

that h

ad

mostly l

ocal

clients

were

not as l

ikely

to grow.

LIKELIHOOD

A COMPANY

WILL GROW

WHEN THESE

TRAITS ARE

PRESENT

PORTIONS OF

COMPANIES

WITH

THESE

TRAITS

INC. - MAY 2015