Debunking the Entrepreneurship Myth

Recently, it has become more widely acknowledged that long-term economic recovery and growth in this country isn't going to come in the form of bailouts or stimulus packages, but instead in our ability to innovate and create new high-growth businesses. As Tom Friedman wrote in a recent column, "We might be able to stimulate our way back to stability, but we can only invent our way back to prosperity." (New York Times, June 28, 2009)

So if we're looking to support that economic savior, The Entrepreneur, what are we looking for? One common legend implies that most tech entrepreneurs are young, college drop-outs. So my colleagues Vivek Wadhwa from Duke University and Raj Aggarwal from University of Akron and I decided to investigate the folklore, and ended up debunking some of the more pervasive myths surrounding entrepreneurship.

In our newly released study supported by the Ewing Marion Kauffman Foundation, titled, "The Anatomy of an Entrepreneur," we offer insights into high-growth founders' motivations and their socio-economic, educational, and familial backgrounds.

Turns out, most high growth entrepreneurs do not fit the stereotype of young kids working out of their dorm rooms, but instead tend to be middle-aged and married, have significant industry experience, and are at a later stage in their lives trying to build wealth or to advance an idea that they think has potential. In fact, nearly 60 percent of entrepreneurs have at least one child, turning the stereotype of the workaholic entrepreneur with no family on its ear.

A full 80% of entrepreneurs said that inability to find traditional employment was not at all a factor in their deciding to start a business. So what that means, as the country looks to develop policies supporting entrepreneurship, we need to start looking at the situation from the perspective of those currently working and supporting families and weighing the risks and benefits of striking out on their own. This has implications in issues such as healthcare, availability of small business loans, and small business tax policy.

We also learned that, although only about half of entrepreneurs had an interest in entrepreneurship while they were in college, those that did are more likely to become serial entrepreneurs.

This means that universities aren't off the hook, either. The findings reinforce USC's philosophy that although the most successful startups aren't necessarily created while students are still in school, the learning experiences that students have in college might determine whether they become lifelong entrepreneurs.

This is one way universities can make great impact. The full report can be found here.

Follow Krisztina Holly on Twitter: www.twitter.com/krisztinaholly

Comments

[ActonMBA]

Great use of the research out there to paint a picture of the "real" entrepreneur vs the "stereotype." Your call to action at the end is true -- educational institutions shouldn't be let off the hook. At the Acton School of Business, we focus entirely on entrepreneurship and agree with what you say about the learning experiences people have in school. That's why we give our students so many hands-on opportunities (selling door to door, sim games, etc). For more on the Acton MBA: www.actonmba.org/blog

[StevenSchlagel]

Great article and very true. I've supported small business owners and entrepreneurs for over 30 years and most tend to be middle-aged married guys who are moving from a technical or blue-collar background into business ownership OR have seen a problem that needs solving. If the economy does anything, it forces people to at least consider entrepreneurship as a possible solution but that by no means ensures a reasonable attempt or success.

[rayhart]

It's nice to see that someone is actually doing research on this topic. None of this is new to many of us in the "MicroBusiness" community. We've been talking about these problems for a long time.

Deep in the article and not emphasized enough are a few real solutions to real problems entrepreneurs, self employed and MicroBusinesses face, the actual cost of running a business.

Small Businesses generally pay more for everything needed to run a business. A great example is the common land line. It can cost as low as $20 a month for residential but if you need one in a business location, the phone company raises it to $50 per month for the same features until you get to 50 or so lines.

So yes, these items need to be addressed; tax policy, the 'art' of running a business, but forget loans and health care. Get the credit card companies to stop charging ridiculous rates (we use them more than the gov't), get local utility companies involved, and help the Dems pass a private health care plan.

[frantaylor]

It's been shown over and over again that the skillset necessary to keep a company running is completely different from the skillset necessary to start a company.

The smart entrepreneurs are the ones who hand the reins to seasoned, experienced management once their companies get off the ground and start to make money.

I have watched all too many startups go sky high and then crash and burn because the founders had no idea how to spend all the money that they suddenly found themselves with.

[iskra]

My experience is in line with your findings. As a serial entrepreneur I've spent a lot of time in start-ups and am currently on my seventh.

I think that what you need to separate out is successful ones vs. unsuccessful. By that I mean that while there's a ton of wide-eyed kids coming out of and dropping out of schools to start their own business and make a million, the majority of them fail pretty rapidly. Most won't get past their second year. If you looked only at businesses that have survived past their 3rd year, I would not be surprised to find an older, experienced, educated crowd.

As someone pointed out earlier, learning to run a business is a skill in and of itself and it's harder than it looks. A great idea isn't enough.

Bottom line is that innovation is truly one part inspiration and 99 parts perspiration. Innovation implies knowledge and that's either utilizing knowledge of others or having it yourself. Universities are definitely part of this equation and the research they foster provides a great deal of the knowledge that gets applied by entrepreneurs.

[PocketWatch]

This may be somewhat unscientific, but someone once told me the following:

Of 100 business that are started, 90% fail within 5 years.

Of those that succeed past 5 years, 90% do not survive the original owner (whether through sale of the business or death, retirement, etc.).

That really means that only 1% of all businesses that are started are "successful" in terms we usually understand. The rest are temporary entities that come and go almost at random.

[goldcoastsailor]

The Ewing Marion Kauffman Foundation studies motives of entrepreneurs. The USC Instutute for Innovation debunks myths. What a huge pile of steaming manure, that we learned to shovel so well in college. Myth debunkers are a quaint form of professorial snoot enablers. Entrepreneurs do one thing well, and that is to see the reality of a situation through the shitstorm of self delusion that is academia and government, and find a way to meet or create that unmet need.

[dobberdoss]

Your right! how do i know? I'm one of them.

[kendraro]

Maybe what the universities should be doing is trying to partner up with the towns to educate them about how to become more supportive to entrepreneurs - here in Durham, NC - home of Duke - townies have been watching the downtown area struggle to bloom for the past 20 years, often with the town seeming to try to thwart the brave souls that have started businesses with things like lengthy roadwork/sidewalk renovations that keep access blocked for months. I see properties all over the place that would be great for this business or that business - but the last time Durham had money to give loans to small business people, our esteemed leaders put a crook in charge of the program, and she gave all the money away in fraudulent loans.

[Oldsop]

For downtown areas its all about parking spaces.

[KennethBowen]

Reasonably priced health insurance for a family might encourage entrepreneurship. I know it's one of the benefits tying me to a traditional job.

[PocketWatch]

One thing that most small business people lack is a solid foundation in actually how to run a business, real nuts-and-bolts stuff. My years of experience as a Business Consultant to small and medium sized businesses tells me that most entrepreneurs are really, really good at whatever it is that they do, but have no clue about the business of business. A business degree or an MBA is not what I'm talking about. I've got both, and while they were and are valuable in diciplining the mind, they do not give the day-to-day skills and tools needed to be successful beyond a certain point.

I would highly recommend to anyone out there that has a mind to start a business to learn about how to structure their books properly to be able to see what is happening every week, month, quarter, and year, to learn to manage cash flow at least 12 weeks out on a rolling basis, to learn how to manage people properly, to structure an intelligent incentive program that focuses on productivity, how to plan a month/quarter/year operating plan and stick to it, and on and on... None of this is taught in B-school, but all of it is essential to survive and grow.

[noaxe397]

I wonder how much the Bill Gates story plans into the myth of the entrpreneur?

[Samalabear]

It's huge.

[wehrke]

Very interesting study! I would love to read through it all.