1. The Anatomy of an Entrepreneur Making of aSuccessful Entrepreneur Authors:Vivek Wadhwa Raj AggarwalKrisztina Z Holly Alex Salkever November 2009 Electronic copy available at: http://ssrn.com/abstract=1507384

2. Vivek Wadhwa Associate Director, Center for Entrepreneurship and Research Commercialization Pratt School of Engineering, Duke University Senior Research Associate Labor & Worklife Program, Harvard Law SchoolRaj AggarwalSullivan Professor College of Business Administration, The University of Akron Krisztina Z HollyVice Provost for Innovation, University of Southern California Executive Director, USC Stevens Institute for InnovationAlex Salkever Visiting ResearcherMasters of Engineering Management ProgramPratt School of Engineering, Duke University Special Thanks: Bob Litan, E.J. ReedyStudent Researchers: Karna Vishwas, Jeffery Lee, Moline Prak, Francisco Regalado, Neeti Agarwal, Savithri Arulanandasamy, Tahsin Hashem, Swetha Kolluri, Ayoola Lapite, Lynn Lee, Vinay Lekharaju, AibekNurkadyr, Rachel Prabhakaran, Keertana Ravindran, Arjun Reddy, Anisha Sequeira2009 by the Ewing Marion Kauffman Foundation. All rights reserved.Electronic copy available at: http://ssrn.com/abstract=1507384 3. The Anatomy of an Entrepreneur Making of a Successful Entrepreneur November 2009 The Anatomy of an Entrepreneur: Making of a Successful Entrepreneur 1 Electronic copy available at: http://ssrn.com/abstract=1507384 4. Table of Contents Introduction and Findings .....................................................................................................................4 Experience, Management, and Luck: The Keys to Success.......................................................................4 Professional Networks, Education, Funding, Personal Networks: Important.............................................5 Location, Investor Advice, Alumni Networks, and Regional Assistance: Not so Important .............................................................................................5 Entrepreneurs Perceive Very Few Obstacles for Themselves.....................................................................5 Entrepreneurs Believe Entrepreneurship is Very Risky and is Hard Work .................................................6 Using Personal Savings is the Norm, Venture Capital Comes to the Experienced, and Friends and Family are Always There................................................................................................6 Other Success Factors .............................................................................................................................6 Entrepreneurship is Believed To Be Stressful, With Unanticipated Challenges .........................................7 Methodology, Definitions, and Background ........................................................................................7 Figure 1: Type of Business Currently Running or Founded.................................................................8 Figures 2 and 2a: Respondents by Region .........................................................................................8 Figure 3: Number of Businesses Started by Respondents...................................................................8 Detailed Findings ....................................................................................................................................9 Success Factors........................................................................................................................................................9 Figure 4: Importance of Prior Industry/Work Experience ...................................................................9 Figure 5: Importance of Lessons Learned from Previous Successes ...................................................9 Figure 6: Importance of Lessons Learned from Previous Failures.......................................................9 Figure 7: Importance of Company's Management Team ..................................................................10 Figure 8: Importance of Good Fortune ............................................................................................10 Figure 9: Importance of Professional/Business Networks .................................................................10 Figure 10: Importance of Personal/Social Networks ........................................................................10 Figure 11: Importance of University Education ...............................................................................11 Figure 12: Importance of University Education for Ivy-League Graduates .......................................11 Figure 13: Importance of Availability of Financing/Capital ..............................................................11 2The Anatomy of an Entrepreneur: Making of a Successful Entrepreneur 5. Figure 14: Importance of Availability of Financing/Capital for Foundersof Venture-Backed Companies ........................................................................................................11Figure 15: Importance of Location of Business................................................................................12Figure 16: Importance of Location of Business by Regionin which Founders Firm is Located.................................................................................................12Figure 17: Importance of Advice/Assistance Providedby Company Investors (All Responses) ............................................................................................13Figure 18: Importance of Advice/Assistance Providedby Company Investors (excludes N/A).............................................................................................13Figure 19: Importance of Advice/Assistance Provided by CompanyInvestors for Founders of Venture-Backed Businesses ......................................................................13Figure 20: Importance of University/Alumni Contacts/Networks .....................................................14Figure 21: Importance of University/Alumni Contacts/Networks for Ivy-League Grads....................14Figure 22: Importance of Assistance Provided by State/Region........................................................14Figure 23: Importance of Assistance Provided by State/Regionby Region in Which Founders Firm is Located ...............................................................................15Other Factors: Faith, Hard Work, and Perseverance..................................................................................15 Challenges They Faced in Starting Their Businesses.........................................................................16Figure 24: Challenges Faced by Founders in Starting Their Business(es) ..........................................16Figure 25: Ranking of the Challenges Faced by Founders in Starting Business(es) ...........................16Other Factors .................................................................................................................................................17 Inhibitors to Entrepreneurship ............................................................................................................18Figure 26: Factors that Prevent Others from Becoming Entrepreneurs .............................................18Figure 27: Ranking of Factors that Prevent Others from Becoming Entrepreneurs ...........................19Sources of Funding ........................................................................................................................................19Figure 28: Main Sources of Funding................................................................................................19 Analysis and Conclusions.....................................................................................................................20The Anatomy of an Entrepreneur: Making of a Successful Entrepreneur 3 6. I n t r o d u c t i o n a n dF i n d i n g s Introduction andIn this paper, we explore company founders opinions and observations about their own trajectory Findingsand what influenced the success or failure of their businesses. By understanding what entrepreneurs thinkAccording to the U.S. Small Business and believe, we hope to provide more insights into Administration, since the mid-1990s, small businesses how to better support entrepreneurs and create generally have created 60 to 80 percent of the net societal, political, and economic conditions that can new employment in the United States. Further, they more efficiently foster entrepreneurship. found that net job creation in the immediate years following the 1990-1991 and 2001 recessions This research is based on a survey of 549 company stemmed from employment generated by small firmsfounders in a variety of industries, including aerospace with fewer than 500 employees.1 Therefore, it would and defense, computer and electronics, health care, seem that one good way to boost economic recovery and services. is to encourage more business creation. To do this, While our research cannot be generalized strictly to policymakers need to understand the backgrounds and the entire population of entrepreneurs in the United motivations of the founders of such businesses. They States, it is meant to be illustrative of the backgrounds also need to understand what inhibits others from of entrepreneurs in industries that we expected to be starting businesses and becoming entrepreneurs. higher growth.2 We surveyed founders of businesses Our earlier research paper, Anatomy of an that had made it past the startup stage. So this Entrepreneur, provided some insights into the research focuses on the successful businesses rather motivations of founders of high-growth companies, asthan all businesses that are started in the industries well as their socio-economic, educational, and familial we selected. backgrounds. We found that technology entrepreneurs Here are some of our key findings. Detailed statistics are most likely to come from middle-class and charts are available in the latter sections of this backgrounds, to have parents who are less educated paper. Note that we use the terms company than they are, and to be married with children when founder and entrepreneur interchangeably. they launch their first companies. Their primary motivations for launching a company are financial and emotional. They wanted to build wealth and had aExperience, Management, and Luck: business idea on which they wanted to capitalize. The Keys to Success Many said they had always wanted their ownWe asked company founders to rank the importance companies some day. of a series of factors on the success of their most By understanding what entrepreneurs think and believe, we hope to provide more insights into how to better support entrepreneurs and create societal, political, and economic conditions that can more efficiently foster entrepreneurship.1. U.S. Small Business Administration, Office of Advocacy, The Small Business Economy, Washington, 2009 2. The Survey of Business Owners from the Census Bureau is a good source of overview statistics on business owners in the United States but is only completed every five years and has very limited space for questions - http://www.census.gov/econ/sbo/index.html. Other private surveys, such as the Kauffman Firm Survey, also have information on owner backgrounds but are focused on a different population of businesses and longitudinal data collection - http://www.kauffman.org/research-and- policy/kauffman-firm-survey.aspx. 4 The Anatomy of an Entrepreneur: Making of a Successful Entrepreneur 7. I n t r o d u c t i o n a n dF i n d i n g s 73 percent said professional networks were important to the success of their current businesses. In comparison, 62 percent of respondents felt the same way about personal networks. recent startups and to tell us what other factors wereentrepreneurs. Only 11 percent received venture important.capital, and 9 percent received angel financing for 96 percent ranked prior work experience as an their first startups. important success factor; 58 percent ranked this as extremely important.Location, Investor Advice, Alumni Networks, and Regional Assistance: 88 percent said that learning from previous successes, and 78 percent said that learning from Not so Important previous failures, played an important role in their Entrepreneurs were almost evenly divided about the present successes. 40 percent said that lessons fromimportance of the location of their businesses. failures were extremely important (the factor rating50 percent said location was important. But this second-highest as extremely important). varied by region: 58 percent in the Southwest, 51 percent in the West, 44 percent in New England, 82 percent said their management team was 40 percent in the Midwest, and 37 percent of those important to their success. 35 percent said this waslocated in the Mid-Atlantic ranked location as extremely important.important. 73 percent said that good fortune was an important Of the entrepreneurs who received advice or factor in their success. 22 percent ranked this asassistance from their companys investors, only extremely important.36 percent ranked it as important, 38 percent saying that it was not at all important. Surprisingly, Professional Networks, Education, venture-backed businesses also did not put a Funding, Personal Networks: Important significant premium on advice offered by their 73 percent said professional networks wereinvestorsonly 55 percent ranked it as important, important to the success of their current businesses. with 32 percent saying it was only slightly In comparison, 62 percent of respondents felt the important. same way about personal networks. Only 19 percent believed that university or alumni 70 percent said their university education wasnetworks were important. Of the Ivy-League important. Ivy-League graduates valued this more, graduates, 29 percent ranked these as important. with 86 percent indicating this was important. Only The vast majority (86 percent) of entrepreneurs 20 percent of all entrepreneurs and 18 percent of ranked the assistance provided by the state or Ivy-League graduates ranked university education as region as not at all or slightly important. extremely important, however. (Our previous paper had documented that 95 percent of company Entrepreneurs Perceive Very Few founders had earned Bachelors degrees and 47 Obstacles for Themselves percent had more advanced degrees). We asked company founders to rank the challenges 68 percent of the overall sample considered they faced in starting their businesses. In hindsight, the availability of financing/capital as important. 96only factors that a majority considered a challenge percent of the entrepreneurs who had raised were the time and effort required, capital/financing, venture capital for their most recent businessesand experience in running a business. ranked this as important. 61 percent said amount of time and effort required Venture capital and private/angel investments play awas a challenge; 13 percent said this was an relatively small role in the startups of first-time extremely big challengeThe Anatomy of an Entrepreneur: Making of a Successful Entrepreneur 5 8. I n t r o d u c t i o na n d F i n d i n g s 52 percent said lack of available capital/financingUsing Personal Savings is the Norm, was a challenge; 11 percent ranked this as anVenture Capital Comes to the extremely big challengeExperienced, and Friends and Family are 52 percent said lack of prior experience in running aAlways There business was a challenge, but only 4 percent The average number of companies started by the considered this to be an extremely big challenge.company founders in our sample was 2.3 and 41 41 percent said they had concerns about protecting percent were running their first businesses. We their firms intellectual property, but only 5 percent analyzed the sources of funding for the businesses considered this to be an extremely big challenge.started by the serial entrepreneurs:Even factors which entrepreneurs believe are The most significant source of funding for all problems for others (listed below) werent significant businesses was company founders personal savings: issues for them. 70 percent said they had used personal savings as amain source of funding for their first business, more Entrepreneurs Believe Entrepreneurship isthan four times the number chiefly financed by anyother type of funding. Even in subsequent startups, Very Risky and is Hard Workmore than half of the entrepreneurs relied on their We asked the company founders to provide anpersonal savings. opinion on the factors which may prevent others from Venture capital and private/angel investments play a starting their own businesses. We wanted torelatively small role in the startups of first-time understand the barriers potential entrepreneurs mayentrepreneurs, but the percentage who took face from the perspective of those that had alreadyventure and angel funding increased with faced these. subsequent business launches, with 26 percent and The factor most commonly ranked as importantby22 percent, respectively, of entrepreneurs most 98 percentwas lack of willingness or of ability torecent startups receiving such funding. take risks, with 50 percent believing this to be an Friends and family provided funding for 16 percent extremely important barrier to entrepreneurship. and banks provided funding for 16 percent of the This clearly indicates that these company founders respondents most recent startups. Corporate considered entrepreneurship to be a risky endeavor.investments played the major role in 7 percent. 93 percent said that the amount of time and effort It seems that entrepreneurs are forced to use required was an important barrier. This mirrors thepersonal savings in their initial startup, but it becomes views they expressed about their own challenges. easier for some entrepreneurs to raise angel and 91 percent said that difficulty in raising capital was venture funding after they have started more an important inhibitor.companies. 89 percent said business management skills, 84 percent said knowledge of how to start a business, Other Success Factors and 83 percent said knowledge about the industry We allowed entrepreneurs to write in factors that and markets were important issues. they considered important but were not included in 73 percent believed that family or financial pressures our list. The most commonly mentioned factor was the to keep a traditional, steady job were issues. importance of faith and God. Many considered thisThe most significant source of funding for all businesses was their personal savings: 70 percent said they had used personal savings as a main source of funding for their first business, more than four times the number chiefly financed by any other type of funding. 6 The Anatomy of an Entrepreneur: Making of a Successful Entrepreneur 9. M e t h o d o l o g y,d e f i n i t i o n s ,a n db a c k g r o u n d extremely important to their success. Other factorsWe asked respondents to list factors that our survey listed by respondents included the importance hard may not have considered. The most common and work, perseverance/determination, timing, spouse highly ranked factors were the stress involved in forbearance and support, optimism, naivety, andrunning a business; the difficulty of maintaining abalance in life; challenges with understanding and willingness to risk everything.developing products for markets that kept changing;problems with government regulations, taxes, and Entrepreneurship is Believed to be costs of employee benefits; and lack of knowledge Stressful, with Unanticipated Challenges about raising capital. Methodology, visited the Web sites of these companies to make surethe company was still in operation and to obtain Definitions, and names of founders and contact information. WeBackground contacted company founders via email and requestedthey complete an online survey consisting of a series The primary data source for this work is a subset of of questions about their own personal and family an existing dataset of corporate records included in the backgrounds as well as their views on and motivations OneSource Information Services Companies database. toward starting a business. Our team of researchers To construct our dataset, we extracted records ofsent up to four unsolicited emails to these founders. In companies based in the following industries: some cases, we followed up with phone calls. Automotive & AerospaceWe allowed each company executive to tell us if Aerospace & Defensethey were a founder. We provided guidelines for Computers & Electronicsdefining a founder as any early employee, typically Audio & Video Equipmentjoining the company in its first year, before thecompany developed its products and perfected its Computer Hardwarebusiness model. Computer NetworksAll questions on the survey except name, company, Computer Peripheralsand email address were optional. Five hundred and Computer Servicesforty-nine respondents took the survey and answered Computer Storage Devices the majority of the questions asked. Five hundred and Electronic Instr. & Controls ten (or 93 percent) of these respondents answered allof the questions asked. We estimate that, of the Scientific & Technical Instr.founders we could reach, approximately 40 percent Semiconductors completed the survey and answered the majority of Software & Programming the questions asked. We discarded responses that Health Carewere less than half complete. Biotechnology & DrugsOf our sample, 8 percent were women and 18 Health Care Facilities percent were foreign-born. The largest of the foreign- Medical Equipment & Supplies born group were born in India (4 percent) and theUnited Kingdom (2 percent). Services Computer Services We asked the founders to categorize theircompanies by industry. These responses were not Engineering Consultantsalways consistent with the OneSource classification of Software & Programming these companies. The chart below details the We extracted randomized records by region. Weclassification reported by respondents. The Anatomy of an Entrepreneur: Making of a Successful Entrepreneur 7 10. M e t h o d o l o g y,d e f i n i t i o n s , a n db a c k g r o u n d Figure 1: Type of Business Currently Running Figure 2: or Founded Respondents by Region Computer Hardware/ Software30% West 25%Engineering Consultants 18%Southwest14% Medical 4%Defense4% South 21%Energy 4%New England 14% Biotechnology5%Midwest15%Telecommunication 10%Other 23% Mid Atlantic 11% 23% 0 5 10 15 20 25 30 05 101520 25Percentage PercentageFigure 2a: Respondents by RegionsWest Southwest SouthMidwest Mid-AtlanticNew EnglandThe majority of the entrepreneurs in our sample wereFigure 3:serial entrepreneurs; the average number of businessesHow Many Businesses Have You Started?launched by respondents was approximately 2.3.3But 41 percent were running the first business they 1 41%had started.226%317%We analyzed some responses by graduates of48%Ivy-League schools. The Ivy League is an athletic 52%conference comprising eight elite private institutions62%of higher education in the northeastern United States.72%81%These eight schools are: Harvard University, Yale9 0.5%University, University of Pennsylvania, PrincetonMore than 101%University, Columbia University, Brown University,010 2030 40 50Dartmouth College, and Cornell University. Percentage3. In this calculation, we assigned the weighted value ten to respondents who had indicated they had launched ten or more businesses. The potential forunderestimating the average number of businesses launched per respondent is likely minimal, due to the small number of respondents claiming to have launched tenor more businesses. 8The Anatomy of an Entrepreneur: Making of a Successful Entrepreneur 11. D e t a i l e dF i n d i n g s Detailed Findings Success Factors We asked company founders to rank the importance of a series of factors on the success of their most recent startups. They were asked to select whether the given factor was not at all important, slightly important, important, very important, extremely important, or not applicable. We also allowed them to enter other factors and rank the importance of these factors. Experience contributes to successFigure 4:Respondents overwhelmingly indicated that Importance of Prior Industry/ experience was the most important factor in theWork Experience success of their most recent startups: 96 percentExtremely important 58% believed prior work experience constituted an important factor, and 58 percent ranked it as Very important 27% extremely important. 88 percent said that learningImportant11% from previous successes was important, and 78 percent said that learning from failure wasSlightly important3% important. Lessons from failures were judged as Not at all important2% an extremely important factor by 40 percent of respondents, the second-highest percentage in N/A0.5% the extremely important category.01020304050 60 PercentageFigure 5:Importance of Lessons Learned fromPrevious Successes Extremely important 39%Very important31% Important 19% Slightly important 4%Not at all important3% N/A5%05 10 15 20 2530 35 40 Lessons from failures were judged Percentageas an extremely important factor byFigure 6: 40 percent of respondents, the Importance of Lessons Learned from second-highest percentage in the Previous Failuresextremely important category.Extremely important 40%Very important24% Important14%Slightly important5%Not at all important 6%N/A 10%051015 20 2530 35 40 Percentage The Anatomy of an Entrepreneur: Making of a Successful Entrepreneur9 12. D e t a i l e d F i n d i n g sFigure 7:Importance of Companys ManagementTeam Extremely important35%Very important29% Important 18% Management team importance Entrepreneurs felt strongly that their managementSlightly important7% teams were important, with 82 percent ofNot at all important 7% respondents indicating that this constituted an important factor in the success of their current N/A4% businesses.05 10 15 20 2530 35PercentageFigure 8:Importance of Good Fortune Extremely important 22%Very important 19% Important32% Slightly important13% Good fortuneNot at all important 9% The factor next-highest-rated as important was good fortune, at 73 percent, with 22 percent N/A 4% ranking it as extremely important. 05 10 15 20 2530 35Percentage The importance of networks Professional networks were ranked by 73 percent of respondents as important to the success of their current businesses. In comparison, 62 percent of respondents felt the same way about personal networks. Figure 9: Importance of Professional/Figure 10: Business NetworksImportance of Personal/Social NetworksExtremely important22% Extremely important 13% Very important 24% Very important23%Important 26%Important25% Slightly important13% Slightly important 18%Not at all important 14% Not at all important 18%N/A 2% N/A3% 0510 15 20 25 30 0 510 15 2025PercentagePercentage10The Anatomy of an Entrepreneur: Making of a Successful Entrepreneur 13. D e t a i l e dF i n d i n g s University education was important to success University education was ranked as important by 70 percent of respondents. This percentage was higher for Ivy- League school graduates (86 percent). Only 20 percent of all entrepreneurs and 18 percent of Ivy-League graduates, however, ranked university education as extremely important.Figure 12: Figure 11: Importance of University Education for Importance of University Education Ivy-League GraduatesExtremely important 20% Extremely important18%Very important 22%Very important32% Important28% Important 36% Slightly important 14% Not at all importantSlightly important0%13%N/A 2% Not at all important14%05 10 15 20 25 300 5 10 15 20 25 3035 40 Percentage Percentage Availability of financing/capitalFigure 13: Availability of financing/capital was considered Importance of Availability of important to the success of their currentFinancing/Capital businesses by 68 percent of respondents. This Extremely important 23% factor was ranked much higher by entrepreneurs who had raised venture capital for their mostVery important 23% recent businesses. 96 percent of this group said Important 23% this was important.Slightly important11% Not at all important17% N/A 4% 0510 15 2025Percentage Figure 14: Importance of Availability of Financing/Capital for Founders of Venture-backed Companies Among entrepreneurs who had Extremely important 40% raised venture capital for their most recent businesses, 96 percent saidVery important36% the availability of financing/capitalImportant20% was important to their current business success.Slightly important 3%Not at all important 1% 0 5 10 15 20 25 3035 40PercentageThe Anatomy of an Entrepreneur: Making of a Successful Entrepreneur11 14. D e t a i l e d F i n d i n g s The role of business location Figure 15: Importance of Location of BusinessEntrepreneurs were almost evenly divided about the importance of the location of theirExtremely important7% businesses. 50 percent ranked location as not at all important or slightly important. TheVery important 13% importance of company location did vary by 27%Important region, though. Compared with 58 percent of the entrepreneurs in the Southwest and 51Slightly important25% percent in the West, 37 percent of those Not at all important25% located in the Mid-Atlantic and 40 percent in the Midwest ranked location as important. N/A3% 0 510 15 20 25 30 Percentage Figure 16: Importance of Location of Buiness by Region in which Founders Firm is Located Mid AtlanticMidwest New England South SouthwestWest 0 10203040 50PercentageExtremely importantVery important Important Slightly important Not at all important N/AOverall, 50 percent of entrepreneurs ranked locationas slightly or not at all important. 12 The Anatomy of an Entrepreneur: Making of a Successful Entrepreneur 15. D e t a i l e d F i n d i n g s Figure 17: Importance of Advice/Assistance Provided by Investor advice and assistanceCompany Investors (all responses)Of the entrepreneurs who received advice or Extremely important4% assistance from their companys investors, only 36 percent ranked it as important, 38 percentVery important10% saying that it was not at all important. Surprisingly, venture-backed businesses also didImportant15% not put a significant premium on advice offeredSlightly important21% by their investors. In businesses that had received venture capital, 55 percent ranked it asNot at all important 30%important and 32 percent said it was onlyN/A 19% slightly important. 051015 22025 30 35 Percentage Figure 18: Importance of Advice/Assistance Provided by Company Investors (excludes N/A )Extremely important5% Very important13%Important19% Slightly important26% Not at all important38%Investor advice or assistance 05 10 152025 3035 40 Percentage was ranked as more important by those who received venture capital than for those who did not. Figure 19: Importance of Advice/Assistance Provided by Company Investors for Founders of Venture-backed BusinessesExtremely important 6% Very important20%Important29%Slightly important 32% Not at all important13%051015 2025 3035 The Anatomy of an Entrepreneur: Making of a Successful Entrepreneur 13 16. D e t a i l e d F i n d i n g s Figure 20: University or alumni network importance Importance of University/Alumni Only 19 percent of the respondents believed Contacts/Networks that university or alumni networks were important, very important, or extremely Extremely important4% important for their businesses. The graduatesVery important4% of Ivy-League universities ranked this higher at 29 percent. Important 11%This finding was surprising, given the Slightly important 14% conventional wisdom that these networks areNot at all important 55% particularly valuable for business contacts. Clearly, entrepreneurs felt that professionalN/A 12% networks were more important than alumni010 2030405060 networks for the success of their businesses. Percentage Figure 21: Importance of University/Alumni Given the conventional wisdom Contacts/Networks for Ivy-League Grads that university or alumni networksExtremely important 7% are particularly valuable forVery important 4% business contacts, it was18% surprising that only 19 percent Important of respondents ranked these Slightly important32%networks as important, veryNot at all important 36%important or extremelyN/A 4% important.0 51015 20 2530 3540 Percentage Figure 22: Importance of Assistance Provided by Assistance from state or region State/Region The vast majority (86 percent) of entrepreneurs ranked the assistance provided by Extremely important 1% the state or region as not at all or slightlyVery important 2% important. Important4% Slightly important7% Not at all important 68% N/A 18% 0 10 2030 40 506070 80 Percentage 14The Anatomy of an Entrepreneur: Making of a Successful Entrepreneur 17. D e t a i l e d F i n d i n g s Midwest and Southwest entrepreneurs put a slightly higher premium on this assistance than others did, with 19 percent and 15 percent, respectively, ranking it as important. Entrepreneurs from New England put the lowest premium on it, with only 1 percent ranking it as important, followed by the West and South, both with 4 percent.Figure 23: Importance of Assistance Provided by State/Region in Which Founders Firm is Located Mid AtlanticMidwest New England South SouthwestWest 0 2040 60 80 100 Percentage Extremely importantVery important Important Slightly importantNot at all important N/A Other Factors: Faith, Hard Work, and Perseverance We asked respondents to list other factors that were not included in the set we had used. Nearly 100 respondents wrote in additional factors. Here are some of the more common responses that generally were rated very important or extremely important in the approximate order of the number of times in which these were mentioned. Faith, belief in God Hard work Perseverance/determination Timing/luck Spouse forbearance and support Listening to clients Optimism, naivety Willingness to risk everything Lessons learned from fathers mistakes Ability to adapt and change Ability to make difficult and unpopular decisions Creativity The Anatomy of an Entrepreneur: Making of a Successful Entrepreneur15 18. Challenges they Faced in Starting Their BusinessesWe asked company founders to rank the challenges they faced in starting their businesses on a scale of 15,with 1 = not at all a challenge, 2 = small challenge, 3 = somewhat of a challenge, 4 = big challenge,5 = extremely big challenge.The results show that these entrepreneurs perceive very few obstacles that can stand in the way of their success.The only factors that a small majority considered somewhat of a challenge, big challenge, or extremely bigchallenge were the time and effort required, capital/financing, and experience in running a business. And only13 percent ranked time and effort, and 11 percent ranked capital/financing required as extremely big challenges.Most factors were ranked as not at all a challenge or a small challenge by the majority.Figure 24:Challenges Faced by Founders in Starting Their Business(es)Amount of timeand effort required Lack of available capital/financingLack of prior experiencein running a business Concern about the consequences of failure Concern about protectingcompanys intellectual propertyLack of availablementors or advisors Lack of industry knowledge Availability of health insurance/riskof losing existing coverage Family or financial pressures to keep a traditional, steady jobDifficulty of co-founder(s)recruitment 010 20 3040 50607080 Percentage Extremely big challenge Big challenge Somewhat of a challengeSmall challengeNot a challengeFigure 25:Ranking of the Challenges Faced by Foundersin Starting Business(es)Difficulty of co-founder(s)recruitment1.6%Family or financial pressures to keep a traditional, steady job1.8% Availability of health insurance/1.9%risk of losing existing coverage Lack of industry knowledge2% Lack of available mentors or advisors2% Concern about the consequences of failure 2.2% Concern about protecting companys intellectual capital 2.3%Lack of prior experiencein running a business 2.5%1=Not at all a challenge Lack of available capital/financing2.6%2= Small challenge3=Somewhat of a challenge Amount of time and effort required 2.9%4=Big challenge5=Extremely big challenge 0.0 0.5 1.01.52.02.5 3.0 Percentage 16The Anatomy of an Entrepreneur: Making of a Successful Entrepreneur 19. C h a l l e n g e st h e y f a c e d s t a r t i n g t h e i r b u s i n e s s e sOther FactorsWe asked respondents to list other factors that were notincluded in the set we had used. Here are some of themore common responses. These are ranked in theapproximate order of the number of times in which thesewere mentioned. The only factor ranked as an extremelybig challenge was the first: worklife balance. Stress of running a business/maintaining a balance in life Perfecting a business model Government regulations/rules/taxes/cost of employee benefits Lack of knowledge about raising venture capital Technology cycles/market conditions Finding and maintaining good employees who share the business vision and values Ability to communicate/market products Sales cycle/building a sales team Reputation of sector which business was in (skepticism about technology) Ability to scale management and infrastructure with company growth The Anatomy of an Entrepreneur: Making of a Successful Entrepreneur17 20. Inhibitors to EntrepreneurshipWe asked the company founders to provide an opinion on the factors that may prevent others from startingtheir own businesses. We wanted to understand the barriers potential entrepreneurs may face from theperspective of those that had already faced these.The overall responses indicate that the respondents perceive the barriers to entrepreneurship being muchgreater for others than what they personally faced.The highest-ranked factor was the willingness or ability to take risks. 98 percent said this was an important, veryimportant, or extremely important factor, and 50 percent ranked this as extremely important. This clearly indicatesthat these company founders considered entrepreneurship to be a risky endeavor.The second highest-ranking inhibitor was the time and effort required. 93 percent ranked this as an important,very important, or extremely important factor. This mirrors the views they expressed about their own challenges.Difficulty in raising capital was considered to be a significant inhibitor (by 91 percent of respondents), as werebusiness-management skills (by 89 percent) and knowledge of how to start a business (by 84 percent).Figure 26:Factors that Prevent Others fromBecoming Entrepreneurs Willingness or lack of ability to take risksAmount of time and effort requiredDifficulties in raisingcapital/financing Lack of businessmanagement skills Knowledge about the industry and marketsKnowledge about how to start a business Family or financial pressures to keep a traditional, steady job Availability of health insurance/riskof losing existing coverage Difficulties in recruitingco-founders 01020 304050Percentage Extremely important factorVery important factorImportant factor Not very important factorNot a factor 18 The Anatomy of an Entrepreneur: Making of a Successful Entrepreneur 21. I n h i b i t o r s t o E n t r e p r e n e u r s h i pFigure 27:Ranking of Factors that Prevent Others fromBecoming Entrepreneurs Difficulties in recruiting co-founders 2.5% Availability of health insurance/ risk of losing existing coverage2.7%Family or financial pressures to keep a traditional, steady job3.2%Knowledge about3.3%how to start a business Knowledge about the3.4%industry and markets Lack of business management skills 3.6% Difficulties in raising capital/financing3.8% 1=Not at all a challengeAmount of time and effort required4.0% 2= Small challenge 3=Somewhat of a challenge Willingness or lack of ability to take risks 4.3% % 4=Big challenge 5=Extremely big challenge0 1 2 34 5Percentage Sources of Funding We asked survey respondents a series of questions about their business background and sources of funding. We asked about their most recent business, two previous businesses, and their first business. We present an analysis of the sources of funding for businesses started by serial entrepreneurs. We learned that the most significant source of funding for all businesses started by respondents was their personal savings: 70 percent said they had used personal savings as a main source of funding for their first businesses, more than four times the number for any other category. Even in subsequent startups, more than half of the entrepreneurs relied on their personal savings. Friends and family and bank loansFigure 28: were a source of funding for aroundMain Sources of Funding 13 percent to 16 percent of ourCorporate investment sample.Bank loan(s)Venture capital and private/angel investments played a role in the firstPrivate/angel investor(s) startups of only a few entrepreneurs just 11 percent received ventureVenture capital capital, and 9 percent received angel financing. But the proportion of Business partner(s) entrepreneurs who take angel andPersonal savings venture funding increases with each subsequent business launch by theFriends and family entrepreneur. The percentage of the sample of serial entrepreneurs Other receiving venture capital for their latest startup was 26 percent and0 10 2030 4050 60 70 80 22 percent received private/angelPercentage financing. Current businessPrevious business 1Previous Business 2First business startedThe Anatomy of an Entrepreneur: Making of a Successful Entrepreneur 19 22. Analysis and Conclusions The responses to this survey clearly contradict some strongly heldbeliefs about starting a business and entrepreneurship. The four mostimportant factors for entrepreneurial success, according to ourrespondents, are prior work experience, learning from successes andfailures, management teams, and luck. Networks and financing also were important factors. However, whenasked about sources of funding, few took venture capital or angelfinancing in their first ventures. The lesser role of venture capital fundingimplied by the responses indicates that perhaps this avenue of funding isless useful for first-time entrepreneurs than even bank funding. Further,the lack of importance entrepreneurs place on investor advice impliesthat they value smart money less than expected, and thatentrepreneurs are even more self-reliant than previously assumed.The lack of reliance on alumni networks also implies that the statedvalue of attending a top-grade institution, with one of the explicit goalsbeing to obtain access to the alumni network, has been overstated as abenefit for startups. However, lessons learned in college are greatlyvalued, particularly for alumni of Ivy League schools. The emergence of professional networks as an important successfactor for startups implies that such weak yet functional ties are perhapsthe most useful as opposed to close personal ties or extremely weak tieslike those found in alumni networks. This could be a fertile area for studyof social networks with regard to startups.Understanding what makes entrepreneurs successful could helpdevelop better policies to foster entrepreneurship and increase thenumbers of high-growth companies. 20The Anatomy of an Entrepreneur: Making of a Successful Entrepreneur 23. The Anatomy of an Entrepreneur: Making of a Successful Entrepreneur 21 24. 4 8 0 1 R O C K H I L L R OA D K A N S A S C I T Y, M I S S O U R I 6 4 1 1 0 816-932-1000 w w w. k a u f f m a n . o r g 1109JP500