I went to college and graduate school in their entirety without dropping out.
I don’t have a lot of money (nor access to much).
And yet – I am an entrepreneur.
The truth is, the majority of entrepreneurs are more similar to me than to their opposite. Society and media have chosen a few outliers to these standards and made them so much larger than life, that it has now clouded our vision of who can be an entrepreneur and what an entrepreneur should be.
So let’s have a look at some of this “common knowledge” that is nothing more than myth:
- “Entrepreneurs are born” – there’s not a gene for entrepreneurship. Trust me, if there were, we at MIT would have isolated it, studied it, and learned to replicate it. More than half of entrepreneurs are the first in their family to start a company, a rate that is fairly close to any other career such as engineering, education, or the arts. So while there may be some parental encouragement and predisposition, it’s statistically similar to most other fields.
- “Entrepreneurs learn from experience, not school” – there seems to be a popular belief that in order for entrepreneurs to be successful, they need to drop out of school to devote themselves 100% to starting a company as soon as possible. But education matters for entrepreneurs. 95.1% of entrepreneurs have bachelor’s degrees, and 47% even have advanced degrees! Those other small portion are often more forced into the need for starting their own venture versus having the means to attain an education.
- “Entrepreneurs are risk-takers” – while startups do have risk, entrepreneurs aren’t inherently risk-loving people – they’re really great risk mitigators. They take calculated risks – constantly building decision trees, whether real or mentally, for every different situation their business encounters. Which product feature should they choose? Decision tree of the costs and benefits of each, choosing the one with the highest payoff. Where should they invest money? Decision tree of the expected payback based on the needs of customers and their expected lifetime value. Entrepreneurs tend not to be gamblers, but instead are very calculated in the risks that they take.
- “Entrepreneurs need to be… charismatic, ruthless, smart, loner, creative” – our perception of entrepreneurs is skewed by a few outliers. Entrepreneurs like Steve Jobs, Elon Musk, Mark Zuckerburg, and Bill Gates make us think that you need to have these characteristics to be successful as an entrepreneur. They each represent the <.01% that grab the public attention, but aren’t representative of the vast majority of very successful entrepreneurs that make it in the startup world. It takes all types, and there’s not one mold. Plus, entrepreneurship is a team sport, with average team sizes being 2.4-3.3 (depending on the source), best suited to a mix of co-founders of a hacker (tech person), hustler (business person), and hipster (designer). While every generation has an arrogant leader that is idolized (Steve Jobs, Jack Welch, etc.), studies show that the best leaders hold very different qualities. Good to Great studied what allows companies to achieve exponential growth, and it comes down to superior leadership – Level 5 leaders – containing an ideal mix of humility and determination. These leaders know how to look internally when things are going poorly, while attributing successes to others when things go well.
- “Only 10% of startups succeed” – this one is a doozy. The truth is that it’s 10% of new products that succeed. But a product is different from the startup itself. It’s what a startup produces, but it usually evolves and changes over time, and rarely ends up the same as when the company set out. And a company is more than a product – it’s an integrated circuit of customer focus, business model, and commercialization strategy. While the rate of first time entrepreneurs isn’t much higher, it is up a little bit at 18%. And the more repeated effort of an entrepreneur, the higher this rate. (fundersandfounders.com)
- “Most companies fail” – 18% is still a pretty gloomy success rate, and yes, that means that most startups fail. But there are ways to increase your chances and stack the odds in your favor. In fact, the MIT success rate of startups is a whopping 76%! 25,800 companies are still operating out of 33,600 started. The operating companies account for $2 trillion annual revenue, which to put in perspective, would be the 8th largest economy in the world if they were their own country. While MIT students may have some selection bias of intelligence, it’s the entrepreneurial process that is the key difference that accounts for this huge leap in success. The Martin Trust Center for MIT Entrepreneurship teaches Disciplined Entrepreneurship – a 24 step process that guides students through assessing the needs of their customers, filling those needs, reaching them, extracting value financially, building it, then growing and scaling. Check out www.d-eship.com for more.
- “Gotta spend $$ to make $$!” – funding should be a much later consideration, not an early one, and it usually takes much less to start a company than one typically imagines. Depending on the source, the average amount of money to start a company is $10k-$30k. So again, we are skewed by media sharing information about the millions of dollars that just a few companies are raising, while the majority of companies are able to be started on much less. In addition, the source of funding is rarely VC’s, or venture capitalists, which is the source that many people think is the first step, but is actually a much later stage and higher dollar round. A study of the sources of funding of MIT Alumni companies show that the majority of funding comes from the founders’ savings, with only manufacturing based companies having slightly more money from investors, since they need more up front capital.
There is not one mold of an entrepreneur.
They don’t need to be the best at every aspect of a company.
They tend to be educated.
They are resourceful about funding the company.
And this all means that you, too, can be an entrepreneur, even if you haven’t had your genome coded for “entrepreneurial DNA.”