9 Myths about Entrepreneurs and Entrepreneurship

Professor Laura L. Hollis, JD Clinical Professor of Business Administration November 4, 2008

in Title

#1. Entrepreneurship is a young persons 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 entrepreneurs 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 youre in it for the money, get out now; its 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 hightech 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 selfefficacy - 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 hightech companies held degrees in business, finance or accounting 47% held degrees in STEM-related fields (Science, Technology, Engineering, or Mathematics
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 cant 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 entrepreneurs 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
Source: Scott Shane, The Illusions of Entrepreneurship, Yale University Press

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