9 Myths About Entrepreneurs

in Title9 Myths about Entrepreneurs and

Entrepreneurship

Professor Laura L. Hollis, JDClinical Professor of Business AdministrationNovember 4, 2008

#1. Entrepreneurship is a “young person’s game;” most first-time entrepreneurs are either in college or right out of it

FALSEIn fact, the average age of a first-time entrepreneur starting a technology business is 39! And since this is an average, that means that just as many start-up founders are older as are younger.

Source: Wadhwa, Freeman and Rissing, Education and Tech Entrepreneurship, Report of the Kauffman Foundation, May 2008

#2. Successful entrepreneurs are those who come up with the most creative, original ideas for their businesses

FALSE•It depends on what you mean by “creative” and “original.”• According to some studies, anywhere from 70% - 90% of the ideas for a new business come from an entrepreneur’s previous employment or existing business contacts. •In other words, the more experience you get working for someone else, the more likely you are to come up with an idea for a new business.

Source: Prof. Ikhlaq Sidhu, Center for Entrepreneurship and Technology, University of California, Berkeley

#3. Most entrepreneurs are motivated by money or “greed”

FALSE•And not just “false,” but way, way off.•Most entrepreneurs are motivated by a desire to work for themselves, and a passion for solving problems – particularly difficult, entrenched human problems.• Even the most successful entrepreneurs will tell you that if you’re “in it for the money,” get out now; it’s much easier to make money working for someone else!

Sources: Scott Shane, The Illusions of Entrepreneurship, Yale University PressGuest lectures, Lectures in Entrepreneurship course, University of Illinois, 2001-2008

#4. Most successful entrepreneurs – especially in high-tech companies – have Ph.Ds in science

FALSE•6% of U.S. born tech company founders have a high school diploma or less•2% have an associates’ degree, some college, or a certification•44% have a bachelors degree•30% have a masters•4% have an MD•4% have a JD•Only 10% of high-tech company founders have a Ph.D!


#5. Entrepreneurs are “born different”

FALSE•In fact, a good number of people who become entrepreneurs never planned to be.•Although there are correlations between certain types of behavior or psychological traits and entrepreneurship, it seems that as many successful entrepreneurs learn these skills and acquire these attributes as are “born” with them.•And we know that some of the most significant personality traits associated with entrepreneurship – such as “self-efficacy” - CAN be taught

Source: Bill Lucas, MIT and Sarah Cooper, Cambridge University

#6. To be successful, an entrepreneur needs a degree in business

FALSE• Although many self-employed people have business degrees, there is a stronger correlation between a degree in the sciences or engineering• According to a recent study, 34% of U.S. founders of high-tech companies held degrees in business, finance or accounting• 47% held degrees in STEM-related fields (Science, Technology, Engineering, or Mathematics


#7. Most entrepreneurs are millionaires

FALSE•Most new businesses fail•The average self-employed person earns less than they would working for someone else•Entrepreneurs work more hours, on average, than those working for someone else

Source: Scott Shane, The Illusions of Entrepreneurship, Yale University Press

#8. You can’t be an entrepreneur without venture capital

FALSE• only .03% of new companies are financed by venture capital• the average amount of money used to start a business is between $15,000 - $20,000• the most common source of this money is the entrepreneur’s savings; not banks, or even loans from friends and family• 65% of entrepreneurs finance their companies use some form of personal debt• fewer than 1 in 12 start-ups gets investment money (equity financing) from family and friends


#9: Entrepreneurs are happier than those who work for other people

TRUE• But! It depends upon what measure you are looking at• Remember, entrepreneurs work more hours than those working for someone else• And, they tend to make less money• And, most new businesses fail• That said, self-employed people report HIGHER job satisfaction• dramatically higher – 62.5% versus 45.9%• Why? Autonomy, flexibility, greater impact and greater control.
