9 Myths About Entrepreneurs

in Title 9 Myths about Entrepreneurs and Entrepreneurship Professor Laura L. Hollis, JD Clinical Professor of Business Administration November 4, 2008

#1. Entrepreneurship is a “young person’s game;” most first-time entrepreneurs are either in college or right out of it FALSE In 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 Press
Guest 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!
Source: Wadhwa, Freeman and Rissing, Education and Tech Entrepreneurship, Report of the Kauffman Foundation, May 2008

#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 ( S cience, T echnology, E ngineering, or M athematics
Source: Wadhwa, Freeman and Rissing, Education and Tech Entrepreneurship, Report of the Kauffman Foundation, May 2008

#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.

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9 Myths About Entrepreneurs

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