The heroes of entrepreneurship are often college-drop outs who left school to create billion dollar fortunes – think of Bill Gates, Steve Jobs, or Mark Zuckerberg. Such is the power of this college drop-out archetype that some prominent members of the entrepreneurial community have actively encouraged potential entrepreneurs to not go to college at all. What should we make of the idea of the entrepreneurial prodigy? Is it better to found a company as a fresh-faced drop-out or as an experienced (and maybe older) individual?
The evidence suggests that the cult of the naïve entrepreneur is over-rated. A wide variety of studies by academics have found that industry experience helps entrepreneurs succeed. One reason why this is the case is that entrepreneurship involves risk, not just for the entrepreneur, but also for investors, partners, and other stakeholders. Raising money, getting customers, and finding partners involves convincing them that you are a good risk to take, and that you know what you are doing. Having links to prior companies (or institutions like Wharton) is one way that entrepreneurs establish credibility.
Prof. Matthew Bidwell and I have been using our survey data of Wharton alumni to examine how founders draw on past experience to be successful. We found that, as might be expected, the more innovative a startup tries to be, the lower the chance that it succeeds, or is ever profitable. However, founders can almost entirely mitigate the downside of being innovative by showing that they also have roots in established companies. If founders use the name of their prior employer in their company marketing material, it seems to reassure potential stakeholders that they have credibility, and helps the new venture achieve success.
This doesn’t mean that you can’t be a prodigy, but it suggests that the popular focus on the college dropout-as-founder overlooks the fact that having industry experience, and even big company experience, has value for entrepreneurs.