Anatomy of an Entrepreneur

The Anatomy of an
Entrepreneur

Making of a
Successful
Entrepreneur
Authors:
Vivek Wadhwa
Raj Aggarwal
Krisztina “Z” Holly
Alex Salkever

November 2009

Electronic copy available at: http://ssrn.com/abstract=1507384

Vivek Wadhwa
Associate Director, Center for Entrepreneurship and Research Commercialization
Pratt School of Engineering, Duke University
Senior Research Associate
Labor & Worklife Program, Harvard Law School

Raj Aggarwal
Sullivan Professor
College of Business Administration, The University of Akron

Krisztina “Z” Holly
Vice Provost for Innovation, University of Southern California
Executive Director, USC Stevens Institute for Innovation

Alex Salkever
Visiting Researcher
Masters of Engineering Management Program
Pratt School of Engineering, Duke University

Special Thanks: Bob Litan, E.J. Reedy

Student Researchers:
Karna Vishwas, Jeffery Lee, Moline Prak, Francisco Regalado, Neeti Agarwal, Savithri
Arulanandasamy, Tahsin Hashem, Swetha Kolluri, Ayoola Lapite, Lynn Lee, Vinay Lekharaju, Aibek
Nurkadyr, Rachel Prabhakaran, Keertana Ravindran, Arjun Reddy, Anisha Sequeira

©2009 by the Ewing Marion Kauffman Foundation. All rights reserved.


The Anatomy of an Entrepreneur
Making of a Successful Entrepreneur
November 2009

The Anatomy of an Entrepreneur: Making of a Successful Entrepreneur 1


Table of Contents
Introduction and Findings .....................................................................................................................4
Experience, Management, and Luck: The Keys to Success.......................................................................4
Professional Networks, Education, Funding, Personal Networks: Important.............................................5
Location, Investor Advice, Alumni Networks,
and Regional Assistance: Not so Important .............................................................................................5
Entrepreneurs Perceive Very Few Obstacles for Themselves.....................................................................5
Entrepreneurs Believe Entrepreneurship is Very Risky and is Hard Work .................................................6
Using Personal Savings is the Norm, Venture Capital Comes to the Experienced,
and Friends and Family are Always There................................................................................................6
Other Success Factors .............................................................................................................................6
Entrepreneurship is Believed To Be Stressful, With Unanticipated Challenges .........................................7

Methodology, Definitions, and Background ........................................................................................7
Figure 1: Type of Business Currently Running or Founded.................................................................8
Figures 2 and 2a: Respondents by Region .........................................................................................8
Figure 3: Number of Businesses Started by Respondents...................................................................8

Detailed Findings ....................................................................................................................................9
Success Factors........................................................................................................................................................9
Figure 4: Importance of Prior Industry/Work Experience ...................................................................9
Figure 5: Importance of Lessons Learned from Previous Successes ...................................................9
Figure 6: Importance of Lessons Learned from Previous Failures.......................................................9
Figure 7: Importance of Company's Management Team ..................................................................10
Figure 8: Importance of Good Fortune ............................................................................................10
Figure 9: Importance of Professional/Business Networks .................................................................10
Figure 10: Importance of Personal/Social Networks ........................................................................10
Figure 11: Importance of University Education ...............................................................................11
Figure 12: Importance of University Education for Ivy-League Graduates .......................................11
Figure 13: Importance of Availability of Financing/Capital ..............................................................11

2 The Anatomy of an Entrepreneur: Making of a Successful Entrepreneur

Figure 14: Importance of Availability of Financing/Capital for Founders
of Venture-Backed Companies ........................................................................................................11
Figure 15: Importance of Location of Business................................................................................12
Figure 16: Importance of Location of Business by Region
in which Founders’ Firm is Located.................................................................................................12
Figure 17: Importance of Advice/Assistance Provided
by Company Investors (All Responses) ............................................................................................13
Figure 18: Importance of Advice/Assistance Provided
by Company Investors (excludes N/A).............................................................................................13
Figure 19: Importance of Advice/Assistance Provided by Company
Investors for Founders of Venture-Backed Businesses ......................................................................13
Figure 20: Importance of University/Alumni Contacts/Networks .....................................................14
Figure 21: Importance of University/Alumni Contacts/Networks for Ivy-League Grads....................14
Figure 22: Importance of Assistance Provided by State/Region........................................................14
Figure 23: Importance of Assistance Provided by State/Region
by Region in Which Founder’s Firm is Located ...............................................................................15
Other Factors: Faith, Hard Work, and Perseverance..................................................................................15

Challenges They Faced in Starting Their Businesses.........................................................................16
Figure 24: Challenges Faced by Founders in Starting Their Business(es) ..........................................16
Figure 25: Ranking of the Challenges Faced by Founders in Starting Business(es) ...........................16
Other Factors .................................................................................................................................................17

Inhibitors to Entrepreneurship ............................................................................................................18
Figure 26: Factors that Prevent Others from Becoming Entrepreneurs .............................................18
Figure 27: Ranking of Factors that Prevent Others from Becoming Entrepreneurs ...........................19
Sources of Funding ........................................................................................................................................19
Figure 28: Main Sources of Funding................................................................................................19

Analysis and Conclusions.....................................................................................................................20


I n t r o d u c t i o n a n d F i n d i n g s

Introduction and In this paper, we explore company founders’
opinions and observations about their own trajectory
Findings and what influenced the success or failure of their
businesses. By understanding what entrepreneurs think
According to the U.S. Small Business
and believe, we hope to provide more insights into
Administration, since the mid-1990s, small businesses
how to better support entrepreneurs and create
generally have created 60 to 80 percent of the net
societal, political, and economic conditions that can
new employment in the United States. Further, they
more efficiently foster entrepreneurship.
found that net job creation in the immediate years
following the 1990-1991 and 2001 recessions This research is based on a survey of 549 company
stemmed from employment generated by small firms founders in a variety of industries, including aerospace
with fewer than 500 employees.1 Therefore, it would and defense, computer and electronics, health care,
seem that one good way to boost economic recovery and services.
is to encourage more business creation. To do this,
While our research cannot be generalized strictly to
policymakers need to understand the backgrounds and
the entire population of entrepreneurs in the United
motivations of the founders of such businesses. They
States, it is meant to be illustrative of the backgrounds
also need to understand what inhibits others from
of entrepreneurs in industries that we expected to be
starting businesses and becoming entrepreneurs.
higher growth.2 We surveyed founders of businesses
Our earlier research paper, Anatomy of an that had made it past the startup stage. So this
Entrepreneur, provided some insights into the research focuses on the successful businesses rather
motivations of founders of high-growth companies, as than all businesses that are started in the industries
well as their socio-economic, educational, and familial we selected.
backgrounds. We found that technology entrepreneurs
Here are some of our key findings. Detailed statistics
are most likely to come from middle-class
and charts are available in the latter sections of this
backgrounds, to have parents who are less educated
paper. Note that we use the terms “company
than they are, and to be married with children when
founder” and “entrepreneur” interchangeably.
they launch their first companies. Their primary
motivations for launching a company are financial and
emotional. They wanted to build wealth and had a Experience, Management, and Luck:
business idea on which they wanted to capitalize. The Keys to Success
Many said they had always wanted their own We asked company founders to rank the importance
companies some day. of a series of factors on the success of their most

By understanding what entrepreneurs think and believe, we hope to
provide more insights into how to better support entrepreneurs and
create societal, political, and economic conditions that can more
efficiently foster entrepreneurship.

1. U.S. Small Business Administration, Office of Advocacy, The Small Business Economy, Washington, 2009
2. The Survey of Business Owners from the Census Bureau is a good source of overview statistics on business owners in the United States but is only completed every
five years and has very limited space for questions - http://www.census.gov/econ/sbo/index.html. Other private surveys, such as the Kauffman Firm Survey, also have
information on owner backgrounds but are focused on a different population of businesses and longitudinal data collection - http://www.kauffman.org/research-and-
policy/kauffman-firm-survey.aspx.



73 percent said professional networks were important to the success of
their current businesses. In comparison, 62 percent of respondents
felt the same way about personal networks.

recent startups and to tell us what other factors were entrepreneurs. Only 11 percent received venture
important. capital, and 9 percent received angel financing for
• 96 percent ranked prior work experience as an their first startups.
important success factor; 58 percent ranked this as
extremely important. Location, Investor Advice, Alumni
Networks, and Regional Assistance:
• 88 percent said that learning from previous
successes, and 78 percent said that learning from
Not so Important
previous failures, played an important role in their • Entrepreneurs were almost evenly divided about the
present successes. 40 percent said that lessons from importance of the location of their businesses.
failures were extremely important (the factor rating 50 percent said location was important. But this
second-highest as “extremely important”). varied by region: 58 percent in the Southwest,
51 percent in the West, 44 percent in New England,
• 82 percent said their management team was 40 percent in the Midwest, and 37 percent of those
important to their success. 35 percent said this was located in the Mid-Atlantic ranked location as
extremely important. important.
• 73 percent said that good fortune was an important • Of the entrepreneurs who received advice or
factor in their success. 22 percent ranked this as assistance from their company’s investors, only
extremely important. 36 percent ranked it as important, 38 percent
saying that it was not at all important. Surprisingly,
Professional Networks, Education, venture-backed businesses also did not put a
Funding, Personal Networks: Important significant premium on advice offered by their
• 73 percent said professional networks were investors—only 55 percent ranked it as important,
important to the success of their current businesses. with 32 percent saying it was only slightly
In comparison, 62 percent of respondents felt the important.
same way about personal networks. • Only 19 percent believed that university or alumni
• 70 percent said their university education was networks were important. Of the Ivy-League
important. Ivy-League graduates valued this more, graduates, 29 percent ranked these as important.
with 86 percent indicating this was important. Only • The vast majority (86 percent) of entrepreneurs
20 percent of all entrepreneurs and 18 percent of ranked the assistance provided by the state or
Ivy-League graduates ranked university education as region as not at all or slightly important.
extremely important, however. (Our previous paper
had documented that 95 percent of company Entrepreneurs Perceive Very Few
founders had earned Bachelor’s degrees and 47 Obstacles for Themselves
percent had more advanced degrees). We asked company founders to rank the challenges
• 68 percent of the overall sample considered they faced in starting their businesses. In hindsight, the
availability of financing/capital as important. 96 only factors that a majority considered a challenge
percent of the entrepreneurs who had raised were the time and effort required, capital/financing,
venture capital for their most recent businesses and experience in running a business.
ranked this as important. • 61 percent said amount of time and effort required
• Venture capital and private/angel investments play a was a challenge; 13 percent said this was an
relatively small role in the startups of first-time extremely big challenge



• 52 percent said lack of available capital/financing Using Personal Savings is the Norm,
was a challenge; 11 percent ranked this as an Venture Capital Comes to the
extremely big challenge Experienced, and Friends and Family are
• 52 percent said lack of prior experience in running a Always There
business was a challenge, but only 4 percent The average number of companies started by the
considered this to be an extremely big challenge.
company founders in our sample was 2.3 and 41
• 41 percent said they had concerns about protecting percent were running their first businesses. We
their firm’s intellectual property, but only 5 percent analyzed the sources of funding for the businesses
considered this to be an extremely big challenge. started by the serial entrepreneurs:
Even factors which entrepreneurs believe are • The most significant source of funding for all
problems for others (listed below) weren’t significant businesses was company founders’ personal savings:
issues for them. 70 percent said they had used personal savings as a
main source of funding for their first business, more
Entrepreneurs Believe Entrepreneurship is than four times the number chiefly financed by any
other type of funding. Even in subsequent startups,
Very Risky and is Hard Work
more than half of the entrepreneurs relied on their
We asked the company founders to provide an personal savings.
opinion on the factors which may prevent others from
• Venture capital and private/angel investments play a
starting their own businesses. We wanted to
relatively small role in the startups of first-time
understand the barriers potential entrepreneurs may
entrepreneurs, but the percentage who took
face from the perspective of those that had already
venture and angel funding increased with
faced these. subsequent business launches, with 26 percent and
• The factor most commonly ranked as important—by 22 percent, respectively, of entrepreneurs’ most
98 percent—was lack of willingness or of ability to recent startups receiving such funding.
take risks, with 50 percent believing this to be an • Friends and family provided funding for 16 percent
extremely important barrier to entrepreneurship. and banks provided funding for 16 percent of the
This clearly indicates that these company founders respondents’ most recent startups. Corporate
considered entrepreneurship to be a risky endeavor. investments played the major role in 7 percent.
• 93 percent said that the amount of time and effort It seems that entrepreneurs are forced to use
required was an important barrier. This mirrors the personal savings in their initial startup, but it becomes
views they expressed about their own challenges. easier for some entrepreneurs to raise angel and
• 91 percent said that difficulty in raising capital was venture funding after they have started more
an important inhibitor. companies.
• 89 percent said business management skills, 84
percent said knowledge of how to start a business, Other Success Factors
and 83 percent said knowledge about the industry We allowed entrepreneurs to write in factors that
and markets were important issues. they considered important but were not included in
• 73 percent believed that family or financial pressures our list. The most commonly mentioned factor was the
to keep a traditional, steady job were issues. importance of faith and God. Many considered this

The most significant source of funding for all businesses was their personal
savings: 70 percent said they had used personal savings as a main source of
funding for their first business, more than four times the number chiefly
financed by any other type of funding.


M e t h o d o l o g y, d e f i n i t i o n s , a n d b a c k g r o u n d

extremely important to their success. Other factors We asked respondents to list factors that our survey
listed by respondents included the importance hard may not have considered. The most common and
work, perseverance/determination, timing, spouse highly ranked factors were the stress involved in
forbearance and support, optimism, naivety, and running a business; the difficulty of maintaining a
balance in life; challenges with understanding and
willingness to risk everything.
developing products for markets that kept changing;
problems with government regulations, taxes, and
Entrepreneurship is Believed to be costs of employee benefits; and lack of knowledge
Stressful, with Unanticipated Challenges about raising capital.

Methodology, visited the Web sites of these companies to make sure
the company was still in operation and to obtain
Definitions, and names of founders and contact information. We

Background contacted company founders via email and requested
they complete an online survey consisting of a series
The primary data source for this work is a subset of of questions about their own personal and family
an existing dataset of corporate records included in the backgrounds as well as their views on and motivations
OneSource Information Services Companies database. toward starting a business. Our team of researchers
To construct our dataset, we extracted records of sent up to four unsolicited emails to these founders. In
companies based in the following industries: some cases, we followed up with phone calls.
Automotive & Aerospace We allowed each company executive to tell us if
• Aerospace & Defense they were a founder. We provided guidelines for
Computers & Electronics defining a “founder” as any early employee, typically
• Audio & Video Equipment joining the company in its first year, before the
company developed its products and perfected its
• Computer Hardware
business model.
• Computer Networks
All questions on the survey except name, company,
• Computer Peripherals
and email address were optional. Five hundred and
• Computer Services forty-nine respondents took the survey and answered
• Computer Storage Devices the majority of the questions asked. Five hundred and
• Electronic Instr. & Controls ten (or 93 percent) of these respondents answered all
of the questions asked. We estimate that, of the
• Scientific & Technical Instr.
founders we could reach, approximately 40 percent
• Semiconductors completed the survey and answered the majority of
• Software & Programming the questions asked. We discarded responses that
Health Care were less than half complete.
• Biotechnology & Drugs Of our sample, 8 percent were women and 18
• Health Care Facilities percent were foreign-born. The largest of the foreign-
• Medical Equipment & Supplies born group were born in India (4 percent) and the
United Kingdom (2 percent).
Services
• Computer Services We asked the founders to categorize their
companies by industry. These responses were not
• Engineering Consultants
always consistent with the OneSource classification of
• Software & Programming these companies. The chart below details the
We extracted randomized records by region. We classification reported by respondents.


M e t h o d o l o g y, d e f i n i t i o n s , a n d b a c k g r o u n d

Figure 1:
Type of Business Currently Running Figure 2:
or Founded Respondents by Region
Computer Hardware/
Software 30% West 25%
Engineering
Consultants 18%
Southwest 14%
Medical 4%
Defense 4% South 21%
Energy 4% New England 14%
Biotechnology 5%
Midwest 15%
Telecommunication 10%
Other 23% Mid Atlantic 11% 23%
0 5 10 15 20 25 30 0 5 10 15 20 25
Percentage Percentage

Figure 2a:
Respondents by Regions

West

Southwest

South
Midwest

Mid-Atlantic
New England

The majority of the entrepreneurs in our sample were
Figure 3:
serial entrepreneurs; the average number of businesses How Many Businesses Have You Started?
launched by respondents was approximately 2.3.3
But 41 percent were running the first business they 1 41%
had started. 2 26%
3 17%
We analyzed some responses by graduates of 4 8%
“Ivy-League” schools. The “Ivy League” is an athletic 5 2%
conference comprising eight elite private institutions 6 2%
of higher education in the northeastern United States. 7 2%
8 1%
These eight schools are: Harvard University, Yale
9 0.5%
University, University of Pennsylvania, Princeton More than 10 1%
University, Columbia University, Brown University, 0 10 20 30 40 50
Dartmouth College, and Cornell University. Percentage

3. In this calculation, we assigned the weighted value ten to respondents who had indicated they had launched ten or more businesses. The potential for
underestimating the average number of businesses launched per respondent is likely minimal, due to the small number of respondents claiming to have launched ten
or more businesses.


D e t a i l e d F i n d i n g s

Detailed Findings
Success Factors
We asked company founders to rank the importance of a series of factors on the success of their most recent
startups. They were asked to select whether the given factor was not at all important, slightly important,
important, very important, extremely important, or not applicable. We also allowed them to enter other factors
and rank the importance of these factors.

Experience contributes to success Figure 4:
Respondents overwhelmingly indicated that Importance of Prior Industry/
experience was the most important factor in the Work Experience
success of their most recent startups: 96 percent
Extremely important 58%
believed prior work experience constituted an
important factor, and 58 percent ranked it as Very important 27%
extremely important. 88 percent said that learning
Important 11%
from previous successes was important, and
78 percent said that learning from failure was Slightly important 3%
important. Lessons from failures were judged as
Not at all important 2%
an extremely important factor by 40 percent of
respondents, the second-highest percentage in N/A 0.5%
the extremely important category. 0 10 20 30 40 50 60
Percentage

Figure 5:
Importance of Lessons Learned from
Previous Successes


Very important 31%

Important 19%

Slightly important 4%


N/A 5%
0 5 10 15 20 25 30 35 40
Lessons from failures were judged Percentage

as an extremely important factor by
Figure 6:
40 percent of respondents, the Importance of Lessons Learned from
second-highest percentage in the Previous Failures

extremely important category. Extremely important 40%

Very important 24%

Important 14%



N/A 10%
0 5 10 15 20 25 30 35 40
Percentage



Figure 7:
Importance of Company’s Management
Team


Very important 29%

Important 18%
Management team importance
Entrepreneurs felt strongly that their management Slightly important 7%
teams were important, with 82 percent of Not at all important 7%
respondents indicating that this constituted an
important factor in the success of their current N/A 4%
businesses. 0 5 10 15 20 25 30 35
Percentage

Figure 8:
Importance of Good Fortune


Very important 19%

Important 32%

Good fortune Not at all important 9%
The factor next-highest-rated as important was
good fortune, at 73 percent, with 22 percent N/A 4%
ranking it as extremely important. 0 5 10 15 20 25 30 35
Percentage

The importance of networks
Professional networks were ranked by 73 percent of respondents as important to the success of their current
businesses. In comparison, 62 percent of respondents felt the same way about personal networks.

Figure 9:
Importance of Professional/ Figure 10:
Business Networks Importance of Personal/Social Networks

Extremely important 22% Extremely important 13%

Very important 24% Very important 23%

Important 26% Important 25%

Slightly important 13% Slightly important 18%
Not at all important 14% Not at all important 18%

N/A 2% N/A 3%
0 5 10 15 20 25 30 0 5 10 15 20 25



University education was important to success
University education was ranked as important by 70 percent of respondents. This percentage was higher for Ivy-
League school graduates (86 percent). Only 20 percent of all entrepreneurs and 18 percent of Ivy-League
graduates, however, ranked university education as extremely important.

Figure 12:
Figure 11: Importance of University Education for
Importance of University Education Ivy-League Graduates

Extremely important 20% Extremely important 18%
Very important 22%
Very important 32%
Important 28%
Important 36%

Not at all important
13%

N/A 2% Not at all important 14%

0 5 10 15 20 25 30 0 5 10 15 20 25 30 35 40

Availability of financing/capital Figure 13:
Availability of financing/capital was considered Importance of Availability of
important to the success of their current Financing/Capital
businesses by 68 percent of respondents. This
factor was ranked much higher by entrepreneurs
who had raised venture capital for their most Very important 23%
recent businesses. 96 percent of this group said
Important 23%
this was important.


N/A 4%
0 5 10 15 20 25
Percentage

Figure 14:
Importance of Availability of Financing/Capital
for Founders of Venture-backed Companies
Among entrepreneurs who had
raised venture capital for their most
recent businesses, 96 percent said Very important 36%
the availability of financing/capital
Important 20%
was important to their current
business success. Slightly important 3%


0 5 10 15 20 25 30 35 40
Percentage



The role of business location Figure 15:
Importance of Location of Business
Entrepreneurs were almost evenly divided
about the importance of the location of their Extremely important 7%
businesses. 50 percent ranked location as not at
all important or slightly important. The Very important 13%
importance of company location did vary by 27%
Important
region, though. Compared with 58 percent of
the entrepreneurs in the Southwest and 51 Slightly important 25%
percent in the West, 37 percent of those Not at all important 25%
located in the Mid-Atlantic and 40 percent in
the Midwest ranked location as important. N/A 3%
0 5 10 15 20 25 30
Percentage

Figure 16:
Importance of Location of Buiness by Region
in which Founders’ Firm is Located

Mid Atlantic

Midwest

New England

South

Southwest

West

0 10 20 30 40 50
Percentage

Extremely important Very important Important
Slightly important Not at all important N/A

Overall, 50 percent of entrepreneurs ranked location
as slightly or not at all important.



Figure 17:
Importance of Advice/Assistance Provided by
Investor advice and assistance Company Investors (all responses)
Of the entrepreneurs who received advice or
assistance from their company’s investors, only
36 percent ranked it as important, 38 percent Very important 10%
saying that it was not at all important.
Surprisingly, venture-backed businesses also did Important 15%
not put a significant premium on advice offered Slightly important 21%
by their investors. In businesses that had
received venture capital, 55 percent ranked it as Not at all important 30%

important and 32 percent said it was only N/A 19%
slightly important.
0 5 10 15 2
20 25 30 35
Percentage

Figure 18:
Importance of Advice/Assistance Provided by
Company Investors (excludes N/A )


Very important 13%

Important 19%



Investor advice or assistance 0 5 10 15 20 25 30 35 40
Percentage
was ranked as more important
by those who received venture
capital than for those who
did not.
Figure 19:
Importance of Advice/Assistance Provided
by Company Investors for Founders of
Venture-backed Businesses


Very important 20%

Important 29%



0 5 10 15 20 25 30 35



Figure 20:
University or alumni network importance
Importance of University/Alumni
Only 19 percent of the respondents believed
Contacts/Networks
that university or alumni networks were
important, very important, or extremely Extremely important 4%
important for their businesses. The graduates
Very important 4%
of Ivy-League universities ranked this higher at
29 percent. Important 11%

This finding was surprising, given the Slightly important 14%
conventional wisdom that these networks are
particularly valuable for business contacts.
Clearly, entrepreneurs felt that professional N/A 12%
networks were more important than alumni 0 10 20 30 40 50 60
networks for the success of their businesses. Percentage

Figure 21:
Importance of University/Alumni
Given the conventional wisdom Contacts/Networks for Ivy-League Grads
that university or alumni networks Extremely important 7%
are particularly valuable for
Very important 4%
business contacts, it was
18%
surprising that only 19 percent Important

of respondents ranked these Slightly important 32%

networks as important, very Not at all important 36%

important or extremely N/A 4%
important. 0 5 10 15 20 25 30 35 40
Percentage

Figure 22:
Importance of Assistance Provided by
Assistance from state or region State/Region
The vast majority (86 percent) of
entrepreneurs ranked the assistance provided by Extremely important 1%
the state or region as not at all or slightly Very important 2%
important.
Important 4%



N/A 18%
0 10 20 30 40 50 60 70 80
Percentage



Midwest and Southwest entrepreneurs put a slightly higher premium on this assistance than others did, with
19 percent and 15 percent, respectively, ranking it as important. Entrepreneurs from New England put the lowest
premium on it, with only 1 percent ranking it as important, followed by the West and South, both with 4 percent.

Figure 23:
Importance of Assistance Provided by State/Region in
Which Founder’s Firm is Located

Mid Atlantic

Midwest

New England

South

Southwest

West

0 20 40 60 80 100
Percentage
Extremely important Very important Important Slightly important

Not at all important N/A

Other Factors: Faith, Hard Work, and Perseverance
We asked respondents to list other factors that were not
included in the set we had used. Nearly 100 respondents wrote in
additional factors. Here are some of the more common responses
that generally were rated very important or extremely important in
the approximate order of the number of times in which these were
mentioned.
• Faith, belief in God
• Hard work
• Perseverance/determination
• Timing/luck
• Spouse forbearance and support
• Listening to clients
• Optimism, naivety
• Willingness to risk everything
• Lessons learned from father’s mistakes
• Ability to adapt and change
• Ability to make difficult and unpopular decisions
• Creativity


Challenges they Faced in Starting Their Businesses
We asked company founders to rank the challenges they faced in starting their businesses on a scale of 1–5,
with 1 = not at all a challenge, 2 = small challenge, 3 = somewhat of a challenge, 4 = big challenge,
5 = extremely big challenge.
The results show that these entrepreneurs perceive very few obstacles that can stand in the way of their success.
The only factors that a small majority considered somewhat of a challenge, big challenge, or extremely big
challenge were the time and effort required, capital/financing, and experience in running a business. And only
13 percent ranked time and effort, and 11 percent ranked capital/financing required as extremely big challenges.
Most factors were ranked as not at all a challenge or a small challenge by the majority.

Figure 24:
Challenges Faced by Founders in Starting Their Business(es)
Amount of time
and effort required
Lack of available
capital/financing
Lack of prior experience
in running a business
Concern about the
consequences of failure
Concern about protecting
company’s intellectual property
Lack of available
mentors or advisors
Lack of industry
knowledge
Availability of health insurance/risk
of losing existing coverage
Family or financial pressures to
keep a traditional, steady job
Difficulty of co-founder(s)
recruitment
0 10 20 30 40 50 60 70 80
Percentage
Extremely big challenge Big challenge Somewhat of a challenge Small challenge Not a challenge

Figure 25:
Ranking of the Challenges Faced by Founders
in Starting Business(es)
Difficulty of co-founder(s)
recruitment 1.6%
Family or financial pressures
to keep a traditional, steady job 1.8%
Availability of health insurance/ 1.9%
risk of losing existing coverage
Lack of industry knowledge 2%

Lack of available mentors or advisors 2%
Concern about the
consequences of failure 2.2%
Concern about protecting
company’s intellectual capital 2.3%
Lack of prior experience
in running a business 2.5%
1=Not at all a challenge
Lack of available capital/financing 2.6% 2= Small challenge
3=Somewhat of a challenge
Amount of time and effort required 2.9% 4=Big challenge
5=Extremely big challenge
0.0 0.5 1.0 1.5 2.0 2.5 3.0
Percentage


C h a l l e n g e s t h e y f a c e d s t a r t i n g t h e i r b u s i n e s s e s

Other Factors
We asked respondents to list other factors that were not
included in the set we had used. Here are some of the
more common responses. These are ranked in the
approximate order of the number of times in which these
were mentioned. The only factor ranked as an extremely
big challenge was the first: work–life balance.
• Stress of running a business/maintaining a balance
in life
• Perfecting a business model
• Government regulations/rules/taxes/cost of employee
benefits
• Lack of knowledge about raising venture capital
• Technology cycles/market conditions
• Finding and maintaining good employees who share
the business vision and values
• Ability to communicate/market products
• Sales cycle/building a sales team
• Reputation of sector which business was in (skepticism
about technology)
• Ability to scale management and infrastructure with
company growth


Inhibitors to Entrepreneurship
We asked the company founders to provide an opinion on the factors that may prevent others from starting
their own businesses. We wanted to understand the barriers potential entrepreneurs may face from the
perspective of those that had already faced these.
The overall responses indicate that the respondents perceive the barriers to entrepreneurship being much
greater for others than what they personally faced.
The highest-ranked factor was the willingness or ability to take risks. 98 percent said this was an important, very
important, or extremely important factor, and 50 percent ranked this as extremely important. This clearly indicates
that these company founders considered entrepreneurship to be a risky endeavor.
The second highest-ranking inhibitor was the time and effort required. 93 percent ranked this as an important,
very important, or extremely important factor. This mirrors the views they expressed about their own challenges.
Difficulty in raising capital was considered to be a significant inhibitor (by 91 percent of respondents), as were
business-management skills (by 89 percent) and knowledge of how to start a business (by 84 percent).

Figure 26:
Factors that Prevent Others from
Becoming Entrepreneurs
Willingness or lack
of ability to take risks

Amount of time
and effort required
Difficulties in raising
capital/financing
Lack of business
management skills

Knowledge about
the industry and markets
Knowledge about
how to start a business
Family or financial pressures to
keep a traditional, steady job
Availability of health insurance/risk
of losing existing coverage
Difficulties in recruiting
co-founders

0 10 20 30 40 50
Percentage

Extremely important factor Very important factor Important factor
Not very important factor Not a factor


I n h i b i t o r s t o E n t r e p r e n e u r s h i p

Figure 27:
Ranking of Factors that Prevent Others from
Becoming Entrepreneurs
Difficulties in recruiting co-founders
2.5%

Availability of health insurance/
risk of losing existing coverage 2.7%
Family or financial pressures
to keep a traditional, steady job 3.2%

Knowledge about 3.3%
how to start a business
Knowledge about the 3.4%
industry and markets

Lack of business management skills 3.6%

Difficulties in raising capital/financing 3.8%
1=Not at all a challenge
Amount of time and effort required 4.0% 2= Small challenge
3=Somewhat of a challenge
Willingness or lack of ability to take risks 4.3%
% 4=Big challenge
5=Extremely big challenge
0 1 2 3 4 5
Percentage

Sources of Funding
We asked survey respondents a series of questions about their business background and sources of funding. We
asked about their most recent business, two previous businesses, and their first business. We present an analysis
of the sources of funding for businesses started by serial entrepreneurs.
We learned that the most significant source of funding for all businesses started by respondents was their
personal savings: 70 percent said they had used personal savings as a main source of funding for their first
businesses, more than four times the number for any other category. Even in subsequent startups, more than half
of the entrepreneurs relied on their
personal savings.
Friends and family and bank loans Figure 28:
were a source of funding for around Main Sources of Funding
13 percent to 16 percent of our
Corporate investment
sample.
Bank loan(s)
Venture capital and private/angel
investments played a role in the first
Private/angel investor(s)
startups of only a few entrepreneurs—
just 11 percent received venture Venture capital
capital, and 9 percent received angel
financing. But the proportion of Business partner(s)
entrepreneurs who take angel and
Personal savings
venture funding increases with each
subsequent business launch by the
Friends and family
entrepreneur. The percentage of the
sample of serial entrepreneurs Other
receiving venture capital for their
latest startup was 26 percent and 0 10 20 30 40 50 60 70 80
22 percent received private/angel Percentage
financing. Current business Previous business 1 Previous Business 2 First business started


Analysis and Conclusions
The responses to this survey clearly contradict some strongly held
beliefs about starting a business and entrepreneurship. The four most
important factors for entrepreneurial success, according to our
respondents, are prior work experience, learning from successes and
failures, management teams, and luck.
Networks and financing also were important factors. However, when
asked about sources of funding, few took venture capital or angel
financing in their first ventures. The lesser role of venture capital funding
implied by the responses indicates that perhaps this avenue of funding is
less useful for first-time entrepreneurs than even bank funding. Further,
the lack of importance entrepreneurs place on investor advice implies
that they value “smart money” less than expected, and that
entrepreneurs are even more self-reliant than previously assumed.
The lack of reliance on alumni networks also implies that the stated
value of attending a top-grade institution, with one of the explicit goals
being to obtain access to the alumni network, has been overstated as a
benefit for startups. However, lessons learned in college are greatly
valued, particularly for alumni of Ivy League schools.
The emergence of professional networks as an important success
factor for startups implies that such weak yet functional ties are perhaps
the most useful as opposed to close personal ties or extremely weak ties
like those found in alumni networks. This could be a fertile area for study
of social networks with regard to startups.
Understanding what makes entrepreneurs successful could help
develop better policies to foster entrepreneurship and increase the
numbers of high-growth companies.


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