When pitching to VC’s, entrepreneurs hype the heck out of their ideas, years of experience and management teams. But I’ve never heard of anyone touting their luck or connection to God. After reading the posts on TechCrunch, one could easily get the impression that God doesn’t play much of role in Silicon Valley. But ask any successful entrepreneur in private what made them successful, and you might just hear a different story. In a research project my team just completed, the majority of 549 company founders told us that their most important success factor, after “experience” and “management team”, was “good fortune”. Many respondents wrote in comments stressing the extreme importance of faith and God.
You didn’t think that successful entrepreneurs were this pious did you? Neither did I. After all, what did God have to do with Google aside from Jeff Jarvis stealing his book title from fans of Jesus and their much copied meme? Did God build the Internet? Did he build the microchip? I’ve never been religious myself and have always believed that with hard work and determination, you can surmount just about any obstacles. But I also learned the hard way that you can do everything right and fail. Sometimes you do just about everything wrong and make it big. My belief: success is 51% luck and 49% execution. You need to execute with precision, but a little luck goes a long way. It is always good to have God on your side. So it was interesting and illuminating (pun intended) to see what other entrepreneurs thought about this.
To collect and collate precisely that type data, I and several colleagues (with the support of the Kauffman Foundation) researched the backgrounds, motivation and success factors of company founders in several high growth industries including aerospace and defense, computer and electronics, health care, and services. Our earlier paper titled Anatomy of an Entrepreneur revealed that these founders typically came from middle-class backgrounds, have parents who are less educated than they are, and tend to be married with children when they launch their first company. Most had always wanted to start their own companies. They were driven by a desire to build wealth, commercialize business idea they had and to stop working for others.
For a new paper, titled Making of a Successful Entrepreneur, we analyzed the factors which made these company founders successful. Nearly all (96%) said that prior work experience was an important factor in their success and 58% ranked this as extremely important. The vast majority (88%) said that previous success and failures were important. But lessons from failures were judged as extremely important by more respondents than lessons from success. That’s right, those that had experienced failure valued it more highly than their successes.
Management teams were ranked as important by 82%. The next highest ranked factor was good fortune, with 73% ranking this as important, and 22% ranking this as extremely important. When asked what other factors played a role in their success, many who responded stressed the extreme importance of faith and God. It wasn’t just those with names from one religion who said this. Rather, it seems that Christians, Jews, Hindus and Muslims alike share the same beliefs. Yes, these people were on a Mission from God – or, at the very least, they strongly felt that their faith fed the entrepreneurial drive and the intangibles required to succeed in the brutal endeavor of making something from nothing, of birthing a company.
Another surprising bit of wisdom we got from these entrepreneurs was this. The Lord may be their co-pilot but their most trusted banker was the same guy they saw in the mirror every morning. Anyone who follows TechCrunch probably assumes that the vast majority of successful technology startups receive some sort of outside capital and that, in fact, the outside capital plays a key role in allowing these startups to get off the ground. But our sample of entrepreneurs told us that personal savings was the primary source of funding.
And this was not by a small margin. Roughly 70% of our respondents used personal savings to fund their first businesses. Even the serial entrepreneurs who probably could have tapped venture capital preferred to keep control of their own funding sources by bootstrapping. In second, third or fourth startups, over half of all entrepreneurs relied on personal savings to underwrite their launch.
My academic colleagues don’t like to hear this, but company founders didn’t rank university education as highly as other factors. Yes, 70 percent said their university education was important and Ivy-League graduates valued this more, with 86 percent indicating this was important. But only 20 percent of all entrepreneurs and 18 percent of Ivy-League graduates ranked university education as extremely important, however. And the alum networks which are supposed to be really valuable for business contacts, weren’t ranked that highly. Only 19% of the entrepreneurs believed that university or alumni networks were important for their business. Even the Ivy grads didn’t think that their legendary networks were so important: only 29% ranked their legendary networks ranked these as important, and of these only 10.5% said these were extremely or very important.
Hardly any of the company founders ranked state or local government assistance as important. But those from the Midwest and Southwest put a slightly higher premium on this assistance than others, 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. That seems logical, since high-growth startup mechanisms are most developed and the communities to support them most mature in the West and Northeast.
All told, even a skeptic like me was extremely surprised at how much these entrepreneurs valued things that no amount of money could buy – thriftiness (personal savings), faith (belief in the supreme being and oneself), and self-selected networks (friends and weak social ties). The moral of all this, I guess, is luck may be critical but self is essential to the successful startup.
Editor’s note: Guest writer Vivek Wadhwa is an entrepreneur turned academic. He is a Visiting Scholar at UC-Berkeley, Senior Research Associate at Harvard Law School and Director of Research at the Center for Entrepreneurship and Research Commercialization at Duke University. Follow him on Twitter at @vwadhwa.