What makes and entrepreneur, and why

so few women (and minorities)?

Vivek Wadhwa
Visiting Scholar, UC-Berkeley

Director of Research, Center for Entrepreneurship and Research

Commercialization and Exec in Residence, Pratt School of
Engineering, Duke University

Senior Research Associate, Harvard Law School

Columnist, BusinessWeek, TechCrunch

www.Wadhwa.com Twitter: VWadhwa

© 2010 Vivek Wadhwa

 Entrepreneurship Research
Based on 3 projects:
– Survey of 652 CEO’s/CTO’s of 502 tech companies
– Interviews with 144 Immigrant tech company founders
– Detailed survey of 549+ founders of companies in 12 high-growth
industries

Common Myths:
– Tech entrepreneurs: unmarried, male, rich, college-dropouts obsessed
with making money
– Ivy-league education provides huge advantage
– Venture Capital prerequisite for economic growth

© 2010
Vivek Wadhwa
 Tech entrepreneurs: Not young

US Tech Founder Age at the Time of Startup Establishment

0 - 19 1.2%

20 - 29 14.2%

30 - 39
Founder Age

37.5%

40 - 49 34.1%

50 - 59 10.5%

60 - 69 2.5%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0%

Percentage of all Respondents

© 2010 Vivek Wadhwa

 Married with children

69.9%

40.3% Average Number of Children

Marital Status

28.0%

24.9%
16.4%

11.0%

3.4%
4.5%
0.9%
0.7%
0 1 2 3 4 5
Single Married Divorced/Separated Widowed

© 2010 Vivek Wadhwa

 Entrepreneurs: Not from rich families

36.9%
34.6%

21.8%

5.4%

0.7% 0.6%

LOWER-LOWER CLASS LOWER-MIDDLE CLASS LOWER-UPPER CLASS UPPER-LOWER CLASS UPPER-MIDDLE CLASS UPPER-UPPER CLASS

© 2010 Vivek Wadhwa

 Tech entrepreneurs: Not college dropouts
Associates
Degree, High School
Certification, MD, Diploma or Economics, STEM Fields 46.5%
JD, Arts,
Some 3.8% Lower, 5.9% 1.8%
3.5% Humanities
College,
2.3% and Social
Sciences, Other, Applied
Law, 4.6%
2.8% Sciences*,
4.2%
9.0%
Healthcare,
PhD, 5.5%
10.0%

Engineering
27.6%

Bachelors,
44.0%
Business,
Masters, Accounting, Mathematics
31.0% Finance, 1.5%
Computer
33.4%
Science,
Information
Technology
9.0%

Highest Completed Degree Fields of Highest Degree

© 2010 Vivek Wadhwa

 Even better educated than their parents

27.8% 36.8%

24.5%

Father Mother
19.7%

22.7%

19.3%

10.0%

5.8% 5.8% 10.0%

5.2% 5.6%
8.3%

1.0%
0.2% 0.2%

© 2010 Vivek Wadhwa

 Pretty smart in high school,
but drank too much in college

51.2% University
High School

36.5%

29.9%
26.1%
23.2%
20.1%

3.7% 3.1% 2.9%

1.4% 1.6%
0.4%

Top 10% Top 30% Average Bottom Bottom N/A Top 10% Top 30% Average Bottom Bottom N/A
30% 10% 30% 10%

© 2010 Vivek Wadhwa

 Education counts…not necessarily ivy-league

$8

50
$7
Average 2005 Sales (Millions of USD)

Average 2005 Total Employees

$6
40

$5
30
$4

$3 20

$2
10
$1

$0 0
All Startups Startups w/ an Ivy-Leauge Founder Startups w/ a High School Founder

Average 2005 Sales Average 2005 Employment

What makes the difference is higher education: not the degree or school.

© 2010 Vivek Wadhwa

 Entrepreneurs: Highly experienced

Approximately how many years did you work for another

employer prior to starting your first business?

27.6%
24.6%
23.3%

14.3%

10.3%

0-5 years 6-10 years 11-15 years 16-20 years 20+ years
Entrepreneurship wasn’t necessarily in the genes
or pre-planned
How interested were you in becoming an
Which Members of Your Family entrepreneur while you were completing
Started a Business Before You Did? your higher education?

51.9%

38.8%

34.7%

27.5%
24.5%

15.2%

6.9%

7.2% 6.1%

I was the first in Father Mother Siblings

my immediate
family to start a Not at all Not very Didn't think Somewhat Extremely
business interested interested about it interested interested

© 2010 Vivek Wadhwa

Reasons for becoming an entrepreneur

Entepreneurial friend or family role model 2.1

Always wanted own company 3.1

Startup company culture appealing 3.0

Developed a technology in lab 1.4

Wanted to capitalize on a business idea 3.1

Co-founder encouraged to start company 1.7

Wanted to build wealth 3.2

Working for someone else didn't appeal 2.9

Couldn't find traditional employment 1.2

1= Not important factor, 5 = Extremely important factor

© 2010 Vivek Wadhwa

 Bootstrapping is the norm – not VC

Corporate investment 7.3%

Bank loan(s) 14.6%

Private/angel investor(s) 12.3%

Venture capital 14.2%

Business partner(s) 16.9%

Personal savings 64.4%

Friends and family 17.8%

Other 7.8%

© 2010 Vivek Wadhwa

 Success factors

Your prior industry/work experience 4.4

Lessons you learned from your previous successes 4.1

Lessons you learned from your previous failures 4.0

Company's management team 3.8

Good fortune 3.3

Professional/business networks 3.3

Availability of financing/capital 3.2

Your university education 3.2

Personal/social networks 3.0

Location 2.5

Advice/assistance provided by company investors 2.2

University/alumni contacts/networks 1.7

Assistance provided by the state/region 1.3

1= Not at all important, 5 = Extremely important

© 2010 Vivek Wadhwa
 Obstacles faced by entrepreneurs

Difficulty of co-founder(s) recruitment 1.6

Family or financial pressures to keep a traditional,… 1.8

Availability of health insurance/risk of losing… 1.9

Lack of industry knowledge 2.0

Lack of available mentors or advisors 2.0

Concern about the consequences of failure 2.2

Concern about protecting company's intellectual… 2.3

Lack of prior experience in running a business 2.5

Lack of available capital/financing 2.6

Amount of time and effort required 2.9

1.0 1.5 2.0 2.5 3.0

1= Not at all a challenge, 2=Small challenge, 3=Somewhat of a challenge, 4= Big Challenge, 5=Extremely big challenge

1= Not at all a challenge, 5 = Extremely big challenge

 What stops others from becoming
entrepreneurs?
Difficulties in recruiting co-founders 2.5

Availability of health insurance/risk of losing existing

2.7
coverage
Family or financial pressures to keep a traditional,
3.2
steady job
Knowledge about how to start a business 3.3

Knowledge about the industry and markets 3.4

Lack of business management skills 3.6

Difficulties in raising capital/financing 3.8

Amount of time and effort required 4.0

Willingness or lack of ability to take risks 4.3

1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5

 Difference between men and women

Estimated Age When Founding Marital Status When Starting

Current Company Business
41.00 80.0%

39.00 60.0%
Estimated Age When
Age

FEMALE
Founding Current 40.0%
37.00 Company MALE
20.0%
35.00 .0%
FEMALE MALE Divorced Married Single Widowed

Number of Children Living in Percent Receiving Graduate

Household When Starting Education
Business
60.0%
50.0% No Graduate
40.0% Education
FEMALE
.0% 20.0% Graduate Education
0 1 2 3 4 5 MALE
.0%
Number of Children
Female Male
Difference between men and women:
Motivations for starting business
Difference between men and women:
Main sources of funding
Difference between men and women:
Perceived challenges
 Key differences
• Women were much more likely than men to have
obtained funding from a business partner
• Both sexes had same reasons for becoming
entrepreneurs
• Both sexes had the same the life circumstances
• Women were more often motivated to become
entrepreneurs when a cofounder recruited them.
• Both sexes faced same obstacles—time and effort
• Women faced family or financial pressure to
maintain a steady, traditional job.
 But women…
• Start only 3% of tech firms and 1% of high-tech firms (Kauffman)
• Are almost absent in high-level tech positions
• Contribute to fewer than 5% of all IT patents and 1.2% of
open-source software

While Proportion of women-led companies receiving venture

capital has dropped dramatically over the past few years

And things are even worse for minorities: Blacks and Hispanics
constituted only 1.5% and 4.7% of the Valley’s tech
population – well below national averages of 7.1% and 5.3%.
 Despite the fact that:
• Women-led companies more capital-efficient, and venture-backed
companies run by a woman have 12% higher revenues, than others
• Organizations most inclusive of women in top management achieve 35%
higher ROE and 34% better total return to shareholders
• Girls now match boys in mathematical achievement; 140 women enroll in
higher education for every 100 men; and women earn more than 50 %of
all bachelor’s and master’s degrees and nearly 50% of all doctorates

Credit: Cindy Padnos, Illuminate Ventures