It's been said, "Good judgment comes from experience, and experience comes from bad judgment." And so it is with entrepreneurship.
As eighty-five nations on six continents join together for Global Entrepreneurship Week, and millions of young people around the world try their hand at entrepreneurship, it's a good time to explore the inner-workings of a successful entrepreneur. Because by understanding what makes entrepreneurs tick, we can better support this critical component of our economy.
Yesterday, the Kauffman Foundation released a study called "Making of a Successful Entrepreneur" - co-authored by Vivek Wadhwa, Raj Aggarwal, Alex Salkever, and me - that aimed to learn from entrepreneurs themselves what made them successful. We surveyed nearly 550 entrepreneurs about their journey, and the results of the study may surprise you.
There is a common image of entrepreneurs being young renegades that aren't polluted by old ways of thinking. They come into a new industry, with no former biases, and turn it upside down.
While that might be true sometimes, 96% of successful founders we surveyed said that prior work experience turned out to be the most relevant factor to a successful business. This is consistent with a remarkable finding from our previous paper, Anatomy of an Entrepreneur, that discovered the average age that successful entrepreneurs started their current business is 40. Additionally, nearly half (48%) had more than 10 years of experience working for another employer - and three-quarters had at least six years of experience - before heading out on the entrepreneurial path.
Further, learning from past successes and failures were important to most respondents. In fact, a full 40% of founders embraced learning from failure as "extremely important" to their eventual success in business. So in reality, success may come not from rejecting experience, but from building on deep understanding and know-how, and using that unique knowledge to determine a new way to approach a prevalent problem.
However, most entrepreneurs do not credit all of their success to their flawless insight or unparalleled intellect. Rather, 73% of entrepreneurs cited good fortune as an important success factor. So, don't believe an entrepreneur who gives you impression that his or her success was purely due to smarts!
Also important were management teams, professional networks, and university education. (In our previous paper, we found that a surprising 95% of successful company founders had at least a bachelor's degree.)
So, people do matter. But surprisingly, so does God. Many respondents wrote in that faith or God was also important to them in their challenging quest.
The survey also explored many other aspects of the entrepreneurial journey, including financing. Despite the myth that most successful entrepreneurs raise venture capital to launch their businesses, only 11% of respondents said they did so. Meanwhile, 70% of them said personal savings was the main source of funding for their first business, which is more than four times the number of any other type of financing.
However, founders had more than twice as much success raising VC funding in subsequent ventures, implying that venture capitalists also recognize the value of experience. Of those that did receive venture financing, 96% considered it important to their success.
Maybe Louis Pasteur got it right when he said, "Luck favors a prepared mind." And the moral of the story? It's never too late, and you're never too experienced, to become an entrepreneur. A few gray hairs might be to your advantage.
Krisztina "Z" Holly is vice provost for innovation and executive director of the USC Stevens Institute for Innovation at the University of Southern California. She is an entrepreneur, engineer, and the former founding executive director at the MIT Deshpande Center for Technological Innovation.