To succeed in the wild world of entrepreneurship, founders need to be all-in types--brave, determined, confident and risk tolerant, right?
That's the prevailing image anyway, and many aspiring business owners who feel they lack these qualities simply sit on the sidelines thinking they don't have what it takes to cut it as an entrepreneur.
But if you're discouraged because you're less of a swashbuckling Richard Branson type and more the kind to tread carefully, you might want to pay attention to some recent research out of the University of Wisconsin, Madison. Along with fellow graduate student Jie (Jasmine) Feng, lead author Joseph Raffiee investigated whether this jump-in-with-both-feet approach to starting a business is really best and also analyzed whether the popular conception of the daring entrepreneur is actually accurate.
What the team found will provide plenty of reassurance for those who worry they just don't have the required stomach for risk.
The Prevalence of Hybrid Entrepreneurs
Not only is it true that "a full 20 percent of CEOs on Inc. magazine's 500 fastest-growing private companies list indicated that they continued to work a paying job long after founding their organization," Raffiee explains in a write-up of the research, but many of our entrepreneurial icons actually waded into starting up slowly, keeping a corporate job for quite awhile while they tested the waters.
"Steve Wozniak remained an employee at Hewlett-Packard long after co-founding Apple," Raffiee points out, and "Pierre Omidyar launched eBay while working for a software development company."
The True Character of Successful Founders
These so-called "hybrid" entrepreneurs who keep their day jobs make for less thrilling copy and more complicated data analysis among researchers, so they're often undercounted, Raffiee notes, which skews the data on entrepreneurs' traits in general. If you only include the biggest risk takers in your research, no wonder you find that entrepreneurs are more fearless than the rest of us. But factor back in the often overlooked "hybrid entrepreneurs" who keep their day jobs while founding their businesses, and the personalities of entrepreneurs start to look more and more like, well, the personalities of the rest of us.
"We found that entrepreneurs who quit their jobs to found companies did have higher risk tolerance than those who remained employed. However, we also found that the risk-tolerance of hybrid entrepreneurs was, on average, no greater than the level of risk tolerance found among people who remained employed--i.e., no greater than the general population," Raffiee reports. "This finding suggests that risk tolerance influences how people become entrepreneurs more than it influences who becomes an entrepreneur."
A similar result appeared when the team looked at confidence. Yes, all-in entrepreneurs do have higher self-confidence, but hybrid entrepreneurs were no more sure of themselves than the average Joe.
The Million Dollar Question
All of this is good news for those fretting about whether they have the personality for entrepreneurship, but these findings on character would be cold comfort if hybrid entrepreneurs founded businesses that were less successful than their bolder entrepreneurial brethren. In that case, taking a "hybrid" approach would just amount to belonging to some lesser subclass of founder. But that's not what the researchers found.
"We examined businesses' survival times from the date the founder is full-time self-employed (i.e., the date the founder leaves his or her day job), and found that companies initially founded with a hybrid model were 33 percent more likely to survive than companies whose founders were full-time entrepreneurs at the time of founding," Raffiee writes.
That's right, being cautious makes your business more likely to succeed rather than less, according to this analysis.
"It's time to update the stereotype of the brash, confident (perhaps overconfident) entrepreneur. Perpetuating this stereotype may deter people with strong business ideas but low risk tolerance or self-confidence. Hybrid entrepreneurs should not feel that they aren't true entrepreneurs," Raffiee concludes.
Hear, hear to that!
Do you think stereotypes about entrepreneurs hold people back from starting businesses?