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.”