Why Entrepreneurial Prodigies Are Over-Rated

By Ethan Mollick

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.

Mollick photoBio: Ethan Mollick is the Edward B. and Shirley R. Shils Assistant Professor of Management at The Wharton School.

One comment on “Why Entrepreneurial Prodigies Are Over-Rated

  1. I am perhaps an example of the thesis of this research. As a WG92, I had a successful 15 year career working for large companies, including AT&T, Lucent, Nextel, and Motorola, and a then found myself drawn to opportunities with a few smaller companies (<300 total employees), and then in 2012 ultimately founded my own company with some colleagues I had come to know and value over the course of my prior work experience. We have built a product (MMGuardian mobile parental control for smart devices), earned a spot in, and graduated from, the NJ EDA sponsored TechLaunch tech company accelerator program, raised angel seed funding, won industry awards and recognition (including the CTIA 2013 Emerging Tech Award for Best Mobile App in the Productivity, Utility, and Public Safety category), and are moving forward building relationships with larger industry players (wireless carriers and device OEMs) who are interested in our product offering for their customers. We will soon begin Series A fund raising, and continue to build and acquire new technologies to enhance, expand, and evolve our product feature/functionality and our marketing efforts.

    Like so many Wharton Grads and others in the business world, I always had a desire to launch my own venture, but I also hesitated for a long time because I always felt the need to go out and gather more relevant experiences to add to my professional "toolbox." And of course, along the way, gathering those experiences can yield its own rewards, which in my case also tended to obscure the entrepreneurial dream that was at one time a big part of the motivation for it all in the first place.

    But at last, in part because of the growing sense that building something of my own meant more to me than advancing along the traditional career path that I had somehow settled into, and in part because the life constraints those paths demanded seemed to be at odds with my personal and professional creativity, I launched into a completely entrepreneurial venture at an advanced stage of my career. An entrepreneurial prodigy I am not. But I have to say that for me, having the experiences, the contacts, and the industry knowledge has been absolutely invaluable in moving us forward, on the challenging, often grueling, and always uncertain path of entrepreneurship. My career background, and the career backgrounds of my co-founders, has been an invaluable asset in getting us this far, and I see first-hand the benefit it has provided us relative to where I think we would be without it. It is also clearly evident to me in our interactions with investors, channel partners, vendors, and customers that this experience provides an essential and otherwise hard to earn credibility that is so essential to building a business.

    Of course it is possible for young entrepreneurs to build this credibility along the way (many have proven that), and clearly even older entrepreneurs have to continually build their credibility in an environment that is new to them. For me, however, I can sleep better at night than I think I otherwise could knowing that I have these experiences and contacts that do so much to illuminate the path forward through uncharted territory. And perhaps more importantly, I think our investors and partners feel that way as well.

    Joel.

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