The Anatomy of an Entrepreneur

Posted by: Nick Leiber on July 8, 2009

This is a guest blog by Emily Schmitt, who joined BusinessWeek’s Small Business team and Investing team in June.

When Ken Rapp was 16 years old, his mom died of malignant melanoma. Her death made him wonder why, with all the advances in science, there was no cure for the disease. So 10 years ago, at the age of 37, Rapp used his 14 years working as an engineer and sales manager for laboratory automation and robotics maker Zymark (CALP), to start his own company to facilitate pharmaceutical breakthroughs. Today his Hopkinton, Mass.-based company, VelQuest, sells software and other products designed to streamline the recording process and increase the speed by which medicines go to market. Clients include Pfizer (PFE) and Eli Lilly (LLY). Rapp says the company’s 2008 revenue was up 50% from 2007.

But it was not just his heartfelt idea that played a role in his decision to pursue entrepreneurship, a new study released by the Kauffman Foundation on July 8 suggests: his family background also improved the odds. Indeed, the study, similar to another Kauffman report released in June, found that the makeup of entrepreneurs running high-growth companies goes against the stereotype of a young college dropout (think Bill Gates and Steve Jobs).

The study, titled “The Anatomy of an Entrepreneur,” led by co-authors Vivek Wadhwa, Raj Aggarwal, Krisztina “Z” Holly, and former BusinessWeek tech editor Alex Salkever is an attempt to get a feel for the background and motivation of American entrepreneurs, including their level of education, socioeconomic status, and work experience. The team set out to uncover what makes entrepreneurs across high-growth industries tick, surveying 549 successful business founders between August 2008 and March 2009. The study found they were 40 years old on average when they started their first companies. About 90% were well-educated and came from middle-class or upper-lower-class backgrounds.

“The results make sense. If you come from a relatively poor family, you really want to get ahead; you’re motivated to succeed,” says Wadhwa, a senior research associate at the Labor & Worklife Program at Harvard Law School and executive in residence at Duke University, who pointed to the study’s finding that most respondents, about 37%, described their upbringings as lower-middle class. (Wadhwa is a frequent contributor to BusinessWeek.) Other results show that 48% of business owners hold a bachelor’s degree and around 70% were married when they founded their business. What’s more, 32% of respondents cited wealth creation as the main motivator for starting their business and around 25% said they wanted to capitalize on an idea they had.

Carol Clark, who has founded four companies in her 62 years, also fits the profile of the typical entrepreneur in this study. She says she thrives on the risk involved in running her own company, which gives her the chance to earn more than a standard wage. Clark, who lives in Hattiesburg, Miss., co-founded a hang gliding school in Salt Lake City when she was 32 years old. Today she owns DigiDentist, a dental patient education software company that she founded when she was 55 years old. Clark is well educated. She holds a bachelor’s degree in psychology from San Francisco State University and started (but did not finish) master’s work in speech communication at Oregon State. She says the thought of waking up at six in the morning to pull on pantyhose and sit at a desk appalled her. “I’ve had a lot of office jobs, too, and I don’t have a problem with authority per se, but I’m too smart to really work in a situation where it doesn’t demand the most of me,” said Clark. Why does she love being an entrepreneur? “I think it’s the appeal of having to rely on myself.” she says.

Understanding what makes entrepreneurs like Rapp and Clark tick is key to helping foster business during recessions, says Wadhwa. “The American Dream is the code word for entrepreneurship. It’s why we recover from recession, why everyone else wants to be us.”

Reader Comments

Domenick Celentano

July 8, 2009 1:38 PM

Hi Emily,

What a great job putting some fine empirical data to the makings of an Entrepreneur. Several other blogs are portraying the demise of Entrepreneurship due to the lack of capital and the high cost of health care.

Albeit, these are detriments, the stats you quote tend to mitigate these "shorter" term economic barriers. I plan on showing my Entrepreneurship class your posting tommorrow; it adds some real world perspective to the text book.

Dom

John G

July 9, 2009 9:55 AM

Emily, I agree that this is indeed very interesting and understanding what makes entrepreneurs tick. I also downloaded the Kauffman study and gained a lot of other information from this.

Mike A

July 9, 2009 3:11 PM

When I was working on my MBA, I learned to greatly respect the plight of the entrepreneur. From what little published theory I could find, none of which was peer reviewed, I saw that most who did have advanced education had that education in areas not associated with business and/or finance. Most just knew how to create that better mousetrap and had the convictions to follow through. In fact, had they been better educated in business or finance, they probably would have recognized the risks involved in their endeavour and never continued on. When those unanticipated problems did arise, they found ways to overcome them. In some cases, it is pure survival. In others, it is just being stubborn. In any case, it is what made America what it is.

Might hat is off to all those entrepreneurs!!!

Katie Charland

July 9, 2009 6:18 PM

One of the classes I took when completing my masters focused on social entrepreneurship. Several of the lessons focused on what made certain people become entrepreneurs, particularly entrepreneurs interested in social causes. The takeaway from that class was that entrepreneurs merely find a hole in society and have an idea on how to fill. Essentially, social entrepreneurs almost have a different way of thinking.

What I think separates the average person from an entrepreneur all rests in between their ears. Entrepreneurs either don't have or can control that negative voice that tells them "it's not possible". Perhaps their upbringing or a difficult event from their past it what turned it off, but I believe that is really the defining difference.

What is great about that way of thinking is that it can be solved right? I mean there are people like Blair Singer and boycottrecession.com that give people tips on how to control that "little voice". That is why books like The Secret do so well. People know they could control, entrepreneurs merely take that extra step and actually do so.

Britt

July 9, 2009 11:56 PM

I DEFINITELY empathize with the panty hose part! Haven't done that in YEARS! Interesting tidbit on Carol Clark, and the incredible importance of being okay with risk. Because that is definitely something that you will have to do as entrepreneur! Thanks for posting this article!

Britt
http://www.chickrag.com

Mike Sags

July 10, 2009 2:18 PM

Just read the study. This is fantastic and enlightening!! I knew I wasn't alone when I started my first venture at the age of 40. I've done it thrice now and come from a poor family, no-name college, am better educated than my parents and want to build wealth before I retire.

Thanks for posting this.

Geri Stengel

July 11, 2009 11:46 PM

The Anatomy of an Entrepreneur provides great insights. Help Ventureneer provide even more by taking this survey about the resources entrepreneurs use and telling others to do so too. The more people who take the survey the more accurate and useful the results. http://bit.ly/yV2GF. Results will be shared for FREE.

P Harris

July 12, 2009 4:10 PM

Very interesting report and very interesting examples. I can relate and agree. I read that Obama is looking at providing small businesses new support. This should help set policy.

Sharon G.

July 13, 2009 12:13 AM

I agree with the posts here. This was eye-opening for me. I am a 42 year old Mom who came to the point that I wanted to make it big before it was too late. Started my eye-care business and did very well. I thought I was alone. This says there are many small business owners like me! Thanks for the blog!!!!!

gayatri

July 13, 2009 12:18 AM

I downloaded the report and found very interesting statistics in this. I live in Pune, India and find that i am very much like my counterparts in America! I am also a 41 year old professional who was married, from a middle-class household and wanted to build wealth for my children before I was too old. Glad to learn that Americans are like me also.

Jessy

July 13, 2009 12:02 PM

I somehow always had the experience that working for a boss was very risky. In 5 years time, I had 8 different jobs. Went through retrenchement, bankruptcy, re-organising, mergers, etc. So entrepreneurship is the way to go for me. Much more clarity, security and not to forget FUN!!

Doreen B

July 13, 2009 12:19 PM

I agree with the posts here after many years working for small companies and always thinking I could do this. My company www.funlovingpets.com is growing everyday. Great blog

Susan C.

July 13, 2009 6:39 PM

I hate saying "me too", but I had to! I started my law practice when I was 38 after I got sick of working for others. I knew I wouldn't have much more time to strike out on my own and would perpetually be working for others.

Thanks very much for this blog. Emily, I would love to read more about this subject. This hits home to your loyal readers.

sharon g

July 13, 2009 7:57 PM

I'd love to read more about this subject also. With all the hoopla in the press about teenage tech stars, people like us begin to develop inferiority complexes. Like when my kids complained I was using Facebook!

Dom Celentano

July 13, 2009 8:20 PM

Anyone here ever heard of Myers Brigss? If so you that people are either Concrete thinkers or Abstract thinkers. The majority of people are concrete... hence why Entrepreneurs appear different and have the little voice in their head.

Real Entrepreneurs are Abstract, they see the bigger picture and see what others can not.

For all you Entrpreneurs, there are several web sites that you can go to and take a free Myers Briggs analysis... you may be suprised at what you find out...

d

Sharon Wilson

July 14, 2009 12:22 AM

Thank you for this inspiring post! Being an entrepreneur means taking calculated risks. It's also helpful for entrepreneurs to use the order form process and be pleasantly surprised at how solutions to your problems seem to fall into your lap! http://www.spiritualpreneurs.com/what-can-simply-having-clarity-do-for-your-business/

christine

July 14, 2009 8:10 AM

This is really good - and inspiring information. I DEFINITELY empathize with the panty hose part! Haven't done that in YEARS! Interesting tidbit on Carol Clark, and the incredible importance of being okay with risk. Because that is definitely something that you will have to do as entrepreneur

Christine
Http://www.howtocontrolmrsa.com

Stephen Duke

July 14, 2009 9:59 AM

A lot of posters here miss the point - as does the article.

There are lots of "independent business owners," but few are actually "entrepreneurs." Most are skilled technitions or managers in their fields and they work IN their own business, but fewer still work ON their business. There is a difference.

Self-employment is on one end of the continuum and Entrepreneurship is on the opposite. The difference is what the individual actually does for the business: Are they simply doing what they were doing for the "Man" before they started working for themselves? Or, are they working at building a "world classs company" that does the things they once did for a living?

Don't be dilusional about self-employment, even if you are not working by yourself - it is still not entrepreneurial. One must really be working on building a company that is less egoistic and more centered around its stakeholders i.e. what's in it for them, instead of what's in it for me. When you understand this, you understand the difference between the self-employed business owner and the entrepreneur.

Stephen Duke

Domenick Celentano

July 15, 2009 8:06 AM

Stephen....

The book, The E-myth vettes out the differeences between small business people and entrepeneurs.

The economy needs both....

The disntinghusihing factors in an Entrpreneur are:

1. Scalability
2. Replicability

Small Business people generally are in business as you say for "technical" skills.... in education we refer to them as Artisan Entrepreneurs.

I think it would make a great future posting to discuss why most business dont scale... this would allow a deeper dive into the differences articulated in your post. Maybe Nick will consider that for a future posting.

Harvard Business Reiew has done some fine articles and business case notes on this subbject as well...

Dom

Vivek Wadhwa

July 15, 2009 12:47 PM

Steven/Dom, I find your discussion about the difference between entrepreneurs and small business people very interesting. Frankly I had never given this any thought. But the report which my team published, and which Emily did a great job "bringing to life" in this article, looked specifically at successful companies in several high-growth industries. Some of these may have been "independent business owners", but given our methodology it is likely that the results were skewed towards "entrepreneurs".

You may want to download the "Anatomy of an Entrepreneur" paper and read more. Here is a link -- http://ssrn.com/abstract=1431263.

I am presently working on part 2 of this research which analyzes some of the other information we gathered. This will detail success factors, inhibitors to entrepreneurship, funding sources, etc. There is a lot more fascinating data still to report!

Thank you everyone for the feedback. This is very helpful.

Vivek Wadhwa
Duke University/Harvard Law School
www.globalizationresearch.com

Writer Emily Schmitt

July 15, 2009 3:28 PM

Thanks for all of the interesting comments. I'm glad this study has sparked a conversation. The Kauffman study sheds light on the makings of not only entrepreneurs, but to an extent small business owners. It's certainly helpful to us writers to have an understanding of the motivations and goals of those who will drive our economic recovery.

Looking forward to more comments!

Domenick Celentano

July 15, 2009 9:36 PM

Hi Emily and Vivek,

I always start my Entrepreneurship classes or my FoodPreneur seminars with a bit of discussion how Enterpreneurs and Small Business people are different... again for the cut is scalability and replicability.

Vivek, thanks for the link to the report... cant wait to read it and incorporate some of it into my summer class.

Emily, looking forward to part 2!

D

Writer Emily Schmitt

July 16, 2009 11:35 AM

Thanks, Domenick. I'm also looking forward to part two. I'm interested in hearing more about your course and what your students (and you) think about the future of entrepreneurship. Feel free to email me if you want to discuss further.

Stephen Duke

July 16, 2009 11:44 AM

Hello Domenick,

I completely agree with you. I too have read Gerber's "E-Myth Mastery." I don't agree with his entire approach. However, it was enlightening for me. I learned that I was actually a manager in my own business for many years when I thought I was an "entrepreneur." I knew there was something wrong but couldn't put my finger on it. I created and sold three businesses that way. Only once did I get it right, but even then, I didn't realize it - didn't capitalized on it.

Today, with lessons learned, I am working on a new venture with a bigger vision, better strategy, and more confidence.

Here's to that!

SD

Domenick Celentano

July 16, 2009 8:24 PM

Hi Emily and Stephen...

Emily, I will definitely drop you an email and suggest the students post some of their thoughts on The Anatomy of an Entpreneur. Actually part of the class participation is reading this and several other blogs on Entrepreneurship.

Stephen... Gerbers book is great but he tends to simplify things a bit more than I care for. And not everyone is cut out to be an Entrepreneur... however you did what I have found through my mentoring and counseling of new business people... you learned some lessons... maybe some of those were business courses or seminars.

Hope to hear your continued progress on this blog....

D

Nachiket Mor

July 17, 2009 11:05 AM

We work in remote rural India and are facing a very similar situation -- how do we idenfity people who are likely entrepreneurs in rural landscapes. I wonder if you think that these insights will carry across cultures and absolute income levels. For the enduring growth and removal of poverty in rural India, in our view, this issue needs to be addressed and thought through urgently!

Vivek Wadhwa

July 18, 2009 12:28 AM

Nachiket, you ask a very good question -- do the same lessons apply to rural India? My guess is that they do. That anyone with a decent level of education, experience and motivation can succeed as an entrepreneur. They don't have to be IIT grads, but they do have to be literate, though so that they understand the basics of accounting, marketing and even sales (these skills are required in any business anywhere in the world).

Stephen, you have really got me thinking and I haven't come up with a response to your comments yet. I am going to have to research the difference between an entrepreneur and independent business owner and perhaps write an article when I figure this one out!

Dom, please do have your students post their comments. I find that students always have the most interesting and fresh perspectives. Most of the research I have done has been conducted by my students and often inspired by the tough questions they have asked.

By the way, part 2 of Anatomy of an Entrepreneur will probably be out in about 6-7 weeks. I have a draft which needs to be double checked and reviewed by my colleagues and the Kauffman Foundation.

elizabeth

July 20, 2009 5:18 PM

thanks for the interesting diagram on the difference between entrepeneurs and small business people. Im figuring out which one I am.

www.personalspace.biz

Sapience

July 21, 2009 1:23 AM

I entirely agree with you. But don't think the approach should be like this. I am also searching for this type of course that is 'Anatomy of Entrepreneur'. Because it's my great desire that I become a Managing Director of my company.
---------------------------------
William Brown
Sapience

Domenick Celentano

July 21, 2009 9:32 AM

Hi Elizabeth and Bill...

My take is an Entrepreneur understands Scalabilty and Replicability... small business people dont address these key issues.

Bill, you spurred some thought on my part... we dont have a course in the Anatomy of an Entrepreneur... however that would be a great curriculum.

Vivek is doing some follow on research here.

Maybe Emily can post a question as the interest there might be in a program outlining the Anatomy from the readers of this forum... food for thought...

Dom

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What's it like to run your own company today? Entrepreneurs face multiple hurdles new and old, from raising capital and managing employees to keeping up with technology and competing in a global marketplace. In this blog, the Small Business channel's John Tozzi and Nick Leiber discuss the news, trends, and ideas that matter to small business owners. Follow them on Twitter @newentrepreneur.

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