Myths about entrepreneurs(washingtonpost.com)
washingtonpost.com
Myths about entrepreneurs
http://www.washingtonpost.com/opinions/five-myths-about-entrepreneurs/2011/06/29/gIQALtCBhI_story.html?hpid=z3
12 comments
The big clue is how few of the companies in his survey have ever had venture capital -- which he cites as "myth-busting" about startups, but really just revealingly myth-busts his sample set.
I could go next month and start an innovative book shop with a wine bar instead of just coffee drinks, but that's why we have the distinct term "startup" to mean a new business likely capable of exponential scaling once it proves product-market fit, the only kind VCs want to plug into, and not just a new small business that is likely always going to stay small or at best grow slowly, that will be fun and might pay the bills but would never be worth outside equity investment.
Wadhwa gives no indication that I could tell that he's made any attempt at that distinction, except in the negative with the very low VC rate of his sample group, and with the claim that they are in twelve "high growth" industries. Twelve entire industries is a pretty broad segment of the entire economy, and doesn't approach the defining distinction of startups.
EDIT TO ADD: his selection criteria were just involvement in any of fifteen (17 except two are listed twice) industries indicated as high-growth, and which include for example "engineering consultants", "health care facilities", and "audio and video equipment" though a little later it says some of the respondents were also from "other (non-technology)", so it's pretty non-selective. He also defined a "founder" as "an early employee, who typically joined the company in its first year..." so his definition of "founder" is also pretty loosey-goosey. Good thing he cleared up myths about startup founders.
I could go next month and start an innovative book shop with a wine bar instead of just coffee drinks, but that's why we have the distinct term "startup" to mean a new business likely capable of exponential scaling once it proves product-market fit, the only kind VCs want to plug into, and not just a new small business that is likely always going to stay small or at best grow slowly, that will be fun and might pay the bills but would never be worth outside equity investment.
Wadhwa gives no indication that I could tell that he's made any attempt at that distinction, except in the negative with the very low VC rate of his sample group, and with the claim that they are in twelve "high growth" industries. Twelve entire industries is a pretty broad segment of the entire economy, and doesn't approach the defining distinction of startups.
EDIT TO ADD: his selection criteria were just involvement in any of fifteen (17 except two are listed twice) industries indicated as high-growth, and which include for example "engineering consultants", "health care facilities", and "audio and video equipment" though a little later it says some of the respondents were also from "other (non-technology)", so it's pretty non-selective. He also defined a "founder" as "an early employee, who typically joined the company in its first year..." so his definition of "founder" is also pretty loosey-goosey. Good thing he cleared up myths about startup founders.
I want to agree with you because I find Vivek's writings repetitive, highly subjective, and often misleading. But to be fair, without seeing the study I can't be sure whether he's talking about startups or entrepreneurs in general. The title of the article is Five myths about entrepreneurs, but the content seems geared toward the tech sector. Unfortunately, the excerpt doesn't say which 12 "high-growth" sectors the study focused on.
> 4. Women can’t cut it in the tech world.
Vivek throws out this straw man (straw woman?), but other than a rare sexist I don't hear anyone saying that. There may be observations that the number of women in tech is low - and a lot of speculation as to why - but no one's saying women can't cut it.
> 4. Women can’t cut it in the tech world.
Vivek throws out this straw man (straw woman?), but other than a rare sexist I don't hear anyone saying that. There may be observations that the number of women in tech is low - and a lot of speculation as to why - but no one's saying women can't cut it.
> but other than a rare sexist I don't hear anyone saying that.
The thing about rare sexists is that they are not all that rare.
The thing about rare sexists is that they are not all that rare.
Is a new carpet cleaner a startup?
Most important one imho = #5:
Our analysis of more than 500 companies in high-growth industries revealed that not even 11 percent of these companies took venture capital at any stage of their existence. The Kauffman Foundation ran a similar analysis of companies on the Inc. magazine 500 list and found that only 16 percent of them raised venture capital.
The results speak for themselves.
Our analysis of more than 500 companies in high-growth industries revealed that not even 11 percent of these companies took venture capital at any stage of their existence. The Kauffman Foundation ran a similar analysis of companies on the Inc. magazine 500 list and found that only 16 percent of them raised venture capital.
The results speak for themselves.
I'm not sure that when people say "you're born with it," they mean literally that it's genetic. I think they mean that it's innate, in whatever makes up a person's personality by the time they might be starting a business. Thinking that business acumen can't be taught isn't disproven by analyzing family history.
That said, I think most of what matters can be taught!
That said, I think most of what matters can be taught!
I've been an entrepreneur a long time and my take is:
1. Not a myth! Apple, Microsoft, Yahoo, Google, Facebook, Foursquare, ... There are counterexamples but certainly plenty of young ones. I'm 40+ now so no bias. :-) 2. Correct, myth. I could teach you to be an entrepreneur if you wanted to be one. 3. Myth 4. Myth. Gilt Groupe a good example. 5. Myth
1. Not a myth! Apple, Microsoft, Yahoo, Google, Facebook, Foursquare, ... There are counterexamples but certainly plenty of young ones. I'm 40+ now so no bias. :-) 2. Correct, myth. I could teach you to be an entrepreneur if you wanted to be one. 3. Myth 4. Myth. Gilt Groupe a good example. 5. Myth
The value in the Silicon Valley startup model this article seems to miss (and bash) is that it's there. With programs like YC, VC firms and plenty of prior startup examples (data), potential entrepreneurs (and also investors) can get a good sense what they need to do to succeed. Success of course is still statistical, but it's there.
For example I started a company in E.Europe, and here it's not clear at all what process you have to follow to succeed.
You may think that an entrepreneur has to figure that out, but that's not a good way to look at it. A good entrepreneur, since he's already involved in a venture with high overall risks, will minimize individual risks whenever possible. By following a model such as the YC/SV model, where he is advised, maximizes the inflow of information about his idea/BP etc, he can achieve that.
For example I started a company in E.Europe, and here it's not clear at all what process you have to follow to succeed.
You may think that an entrepreneur has to figure that out, but that's not a good way to look at it. A good entrepreneur, since he's already involved in a venture with high overall risks, will minimize individual risks whenever possible. By following a model such as the YC/SV model, where he is advised, maximizes the inflow of information about his idea/BP etc, he can achieve that.
There's a way to skew the representation of data in just about any way imaginable. You can change sample sizes, adjust test criteria, and even replace tests when they don't generate the desired result.
I think it's obvious that you don't need to be an ivy league drop out to run a successful start up. However, representing data this way portrays the image that this stereotype actually hurts the start up model - which I doubt is true. I'm not speaking quantitatively - just from my sense of logic.
If the goal of the article is to promote non ivy league drop outs to found companies, then I'm all for it. If it's trying to convince us that ivy league drop outs perform worse, then I don't buy it. People tend to drop out to start a company for a reason - and that reason is usually boredom.
I think it's obvious that you don't need to be an ivy league drop out to run a successful start up. However, representing data this way portrays the image that this stereotype actually hurts the start up model - which I doubt is true. I'm not speaking quantitatively - just from my sense of logic.
If the goal of the article is to promote non ivy league drop outs to found companies, then I'm all for it. If it's trying to convince us that ivy league drop outs perform worse, then I don't buy it. People tend to drop out to start a company for a reason - and that reason is usually boredom.
I read few weeks back in Y Combinator FAQ page that the average age of Y Combinator funded entrepreneurs is 26. Vivek's survey found the average age of founders to be 40. It would be interesting to know the average age of Y Combinator applicants.
Y Combinator is supplying relatively small amounts of capital, that is only likely to be useful if you haven't been working long enough to accumulate some savings. This is going to push their average down from the industry average.
I think another myth is that the majority of companies are started in the Bay Area. That might be true for tech, but for entrepreneurship overall in the U.S. I bet the Bay accounts for 10-15% tops.... does anyone have numbers? (I'm searching, but if you read regularly and have found some numbers please let me know)
I think that's only a myth to those that gravitate toward the Bay Area. Former Magellan fund manager Peter Lynch wrote that he liked companies based around Cleveland because half the US population fell within a 500 mile radius of it. The key point being that general entrepreneurship occurs in highly populated areas, which facilitates growth and expansion.
#2 is interesting: both the thesis and the antitheses are wrong! There can hardly be an "entrepreneur gene", but at the same time, what makes an entrepreneur is its ability to break rules, and breaking rules can't be taught.
I followed a couple of courses about entrepreneurship in a top B-school - not too many, though - and I am quite sure none of them turned corporate exec, engineers, consultants or lawyers into entrepreneurs if they were not ready for it in the first place.
I followed a couple of courses about entrepreneurship in a top B-school - not too many, though - and I am quite sure none of them turned corporate exec, engineers, consultants or lawyers into entrepreneurs if they were not ready for it in the first place.
"breaking rules can't be taught"
Really?
Really?
Yeah, it looks like a bit of a cop-out.
You don't need to teach people to break all the rules. That's not what you want. You want people to take calculated risks, and break the rules that need breaking.
You could teach the history of rule-breaking, and explain how why those rules needed to be broken. Teachers could do that pretty well.
You don't need to teach people to break all the rules. That's not what you want. You want people to take calculated risks, and break the rules that need breaking.
You could teach the history of rule-breaking, and explain how why those rules needed to be broken. Teachers could do that pretty well.
Entrepreneuship is not a really "calculated risk", its a deeply uncalculated one on the contrary: leave your job (or your normal career track), get no revenues for an undefined while, bet most of your credibility on idea that may change or become irrelevant, etc...
Teachers can tell stories about all of those, but they won't really "teach" them, since there are too personnal to be replicated.
Teachers can tell stories about all of those, but they won't really "teach" them, since there are too personnal to be replicated.
until you make it a rule... and that's not entrepreneurship either
As someone in his 40s who finished college and is located in silicon valley may I say THANK YOU!
Another major flaw in the presentation of this data has to do with the base rate fallacy. For example,
"founders of tech companies tend to be highly educated."
Observing that the majority of successful founders have college degrees tells you nothing about the effect of not having a college degree. If 1% of students drop out, 99% do not drop out, and of the founders from the 1%, 80% are successful and from the 99%, 20% are successful, we would still see the vast majority of successful companies coming from non-dropouts.
A very poor analysis published by a man with a pro-education agenda.
"founders of tech companies tend to be highly educated."
Observing that the majority of successful founders have college degrees tells you nothing about the effect of not having a college degree. If 1% of students drop out, 99% do not drop out, and of the founders from the 1%, 80% are successful and from the 99%, 20% are successful, we would still see the vast majority of successful companies coming from non-dropouts.
A very poor analysis published by a man with a pro-education agenda.
The "dropout" meme is interesting, because, even though it implies that the subjects did not finish college / postgrad / phd , they did enroll in it and in many cases found inspiration / colleages / ideas while doing it. This seems to be more common than people choosing not to go to college at all.
P.s. are there anti-education agendas; i would be curious to read about it
P.s. are there anti-education agendas; i would be curious to read about it
20under20 is a fairly well thought out "anti education agenda". It's not against the idea of learning, just the outdated concept of going $300k into debt for content you could have learned by yourself online. Predictably, Wadhwa is very much against the idea of doing anything that doesn't involve paying him and his colleagues for four years.
America’s typical tech entrepreneurs are in their 20s.
It seems to me that media is absolutely in love with this notion. The scrappy, brilliant kid who's going to change your world (e.g. Diaspora). Why is that?
It seems to me that media is absolutely in love with this notion. The scrappy, brilliant kid who's going to change your world (e.g. Diaspora). Why is that?
Everyone loves the story of the overnight success. No one wants to read about a 10-15 year struggle, with liberal doses of failure and setback. They'd rather read about someone who had a 'light bulb' moment and cashed out six months later. The reason is perhaps that everyone likes to think they too can do it - if amazing success is available almost overnight to other people, why not to them. Not as cool to dream about years and years of toil...
"Everyone loves the story of the overnight success... the reason is perhaps that everyone likes to think they too can do it..."
Perhaps it's the opposite. If they turn founders into mythical characters, then it's much easier to disregard the idea of ever starting a business. They don't have to take responsibility for their own lives or accomplishments.
Perhaps it's the opposite. If they turn founders into mythical characters, then it's much easier to disregard the idea of ever starting a business. They don't have to take responsibility for their own lives or accomplishments.
And you can keep the employees in line. They're supposed to be disposable and, ideally, outsource-able. Business journalism makes money reminding employees how powerless they are, and that they are too old and too genetically disadvantaged to emulate the mythical irreplaceable entrepreneurs.
Traditional forms of success usually involve some degree of gerontocracy. People who hold traditional positions of power in business, politics, law, and the media are in their 50's at the earliest, maybe their 40's but that would be considered young.
Unbridled optimism and naiveté? I certainly have much less of it now that I'm in my late 30s.
If I have to choose between joining a start-up populated with 20yos vs 30+yos, it's no contest.
For me, it's been the difference between shipping and being stuck in development hell forever.
The older crowd wins hands-down.
For me, it's been the difference between shipping and being stuck in development hell forever.
The older crowd wins hands-down.
The media in general loves to fit stories into archetypal stories that are easily digested by audiences. The 20 year old scrappy kid fits right into the "David vs. Goliath" archetype, people love to hear stories about someone winning against all odds.
The dream of get rich quick I'd put a wager on...
The key is really the misleading definitions at the beginning. He includes what we'd call lifestyle businesses as startups. Is a new carpet cleaner a startup?
Publish the raw data, Vivek, with the actual names of the businesses, their founders, their market caps, their sectors, and their revenue growths in a single publicly accessible, read-only Google Spreadsheet.
Because my feeling is that the actual businesses selected will differ strongly from the kinds of operations peoe on Hacker News are concerned with: Google, Facebook, Adobe, LinkedIn, Apple, Twitter etcetera, and the kinds of companies they acquire.
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Edit: here's the original study
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1431263
Note that this is a survey of 549 respondents across twelve industries. First, that is a relatively small sample to slice and dice on multiple axes simultaneously, though you can compare each attribute to the population at large.
More importantly though it is not a rank ordered survey within those industries. For example, identify the top N most profitable companies started in the last T years in the hardware sector, for different values of N and T. Who are their founders? What are their characteristics? They are going to look more like Jen Hsung Huang of Nvidia, another Stanford grad school product, than the demographic profile Wadhwa presents.