Rossana Weitekamp, 516-792-1462, email@example.com
Barbara Pruitt, 816-932-1288, firstname.lastname@example.org, Kauffman Foundation
Understanding entrepreneurs' beliefs and establishing policies that encourage business creation can hasten economic recovery
(KANSAS CITY, Mo.), November 17, 2009 – In the years immediately following the 1990-1991 and 2001 recessions, net job creation came from small, entrepreneurial companies, according to the U.S. Small Business Administration. While fostering new business creation could again help the United States move more swiftly toward ending the current recession, little has been known about the factors that cultivate and support entrepreneurialism.
A new study from the Ewing Marion Kauffman Foundation, "Making of a Successful Entrepreneur," provides insight into company owners’ views about what influences the success or failure of a startup business. The study is being released in conjunction with the Kauffman Foundation’s Nov. 16-22, 2009, Global Entrepreneurship Week, which annually introduces millions of young people around the world to entrepreneurship.
"New employment is a harbinger of economic recovery," said Robert E. Litan, vice president of Research and Policy at the Kauffman Foundation. "This study provides an understanding of the factors that help entrepreneurs achieve success. If we, as a nation, respond to this data by developing policies that encourage entrepreneurship, we have the potential to increase the numbers of high-growth companies that will create jobs and accelerate economic recovery."
Vivek Wadhwa, leader of the research team, said, "Entrepreneurs tell us their ranks remain small because others fear the risk and time required to start a venture. But the current economy has given us an opportunity: We could harness the energy of the many workers who are now unemployed, teach them how to be entrepreneurs and provide them with seed financing for their ventures. These workers have nothing to lose, and the economy has a lot to gain."
Wadhwa said these are the kinds of insights the survey report will deliver. The research also found that entrepreneurs identified prior work experience, learning from previous successes and failures, a strong management team and good fortune as the most important factors in their success. The survey researched the beliefs of 549 company founders of successful businesses in high-growth industries, including aerospace, defense, computing, electronics and health care.
Nearly all of the company founders surveyed – 98 percent – ranked prior work experience as an important success factor, and 58 percent ranked it as extremely important. Learning from both successes (88 percent) and failures (78 percent) also played a key role in respondents’ current successes. In fact, 40 percent cited lessons learned from failures as extremely important – the second-highest "extremely important" rating.
The company's management team contributed to success for 82 percent of those surveyed, with 35 percent ranking this factor as extremely important. For 73 percent of the entrepreneurs surveyed, luck was an important factor in success; 22 percent ranked good fortune as extremely important.
The survey also found that:
- Professional networks were important to the success of their current businesses for 73 percent of the entrepreneurs. In comparison, 62 percent felt the same way about personal networks. University or alumni networks, on the other hand, were important to only 19 percent of the respondents. Among Ivy-League graduates, 29 percent placed importance on alumni networks.
- Only 11 percent of the first-time entrepreneurs received venture capital, and 9 percent received private/angel financing. Of the overall sample, 68 percent considered availability of financing/capital as important. Of the entrepreneurs who had raised venture capital for their most recent businesses, 96 percent considered financing important.
- Eighty-six percent of Ivy-League graduates ranked university education as important, as compared with 70 percent of the overall sample. Only 20 percent of entrepreneurs and 18 percent of Ivy-League graduates ranked university education as extremely important.
- Most company founders (86 percent) ranked state or regional assistance as slightly or not at all important.
- In identifying barriers to entrepreneurial success, the most commonly named factor – by 98 percent of respondents – was lack of willingness or ability to take risks. Other barriers cited by respondents were the time and effort required (93 percent), difficulty raising capital (91 percent), business management skills (89 percent), knowledge about how to start a business (84 percent), industry and market knowledge (83 percent), and family/financial pressures to keep a traditional, steady job (73 percent).