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Jonathan Erickson

Dr. Dobb's Bloggers

Entrepreneurs and Tech Startups: Who's Doing What When?

April 30, 2008

Crossing my desk today is this report of a really interesting study about tech entrepreneurs and the start-ups they start up .  Is it in sync with what you're seeing?

Challenging the perception of American technology entrepreneurs as 20-something wunderkinds launching businesses from college dorm rooms, a new study by the Ewing Marion Kauffman Foundation and researchers at Duke and Harvard universities reveals most U.S.-born technology and engineering company founders are middle-aged, well-educated, and hold degrees from a wide assortment of universities.

In fact, twice as many U.S.-born tech entrepreneurs start ventures in their 50s as do those in their early 20s. Further, elite, highly ranked schools are over-represented in the ranks of these founders, and Ivy-League graduates achieve the greatest business success; however, 92 percent of U.S.-born founders graduate from other universities, according to the study, Education and Tech Entrepreneurship. The study analyzed U.S. engineering and tech companies founded from 1995-2005, representing the most current decade of data.

"Because entrepreneurship is an indicator of economic vitality in regions and across the country, this study raises important policy questions about how to foster greater tech entrepreneurship to boost economic growth," said Robert Litan, vice president of Research and Policy at the Kauffman Foundation. "Probably the most compelling fact in the study is that advanced education is critical to the success of tech startups."

U.S.-born engineering and tech company founders are overwhelmingly well-educated. While there are significant differences in the types of degrees these entrepreneurs obtain and the time they take to start a company after they graduate, the study reveals a direct correlation between a founder's education and company performance.

In 2005, the average sales revenue of all startups in the sample was around $5.7 million, employing an average of 42 workers. Startups established by founders with advanced Ivy-League degrees had higher average sales and employment -- $6.7 million and 55 workers, respectively. The success of these groups contrasted sharply with startups established by founders with high school degrees with average revenues and employees at $2.2 million and 18 workers, respectively.

Among other findings:

  • The average and median age of U.S.-born founders was 39 when they started their companies. Only about 1 percent of U.S.-born founders of tech companies were teenagers.
  • The vast majority (92 percent) of U.S.-born tech founders held bachelor's degrees, 31 percent held master's degrees, and 10 percent had completed PhDs. Nearly half of these degrees were in science-, technology-, engineering- and mathematics-related disciplines. One third was in business, accounting and finance.
  • U.S.-born tech founders holding MBA degrees established companies more quickly (13 years) than others. Those with PhDs typically waited 21 years to become tech entrepreneurs.
  • The top 10 universities from which U.S.-born tech founders received their highest degrees are Harvard, Stanford, University of Pennsylvania, MIT, University of Texas, University of California-Berkeley, University of Missouri, Pennsylvania State University, University of Southern California, and University of Virginia.
  • Nearly half (45 percent) of the tech startups were established in the same state where U.S.-born tech founders received their education. Of the U.S.-born tech founders receiving degrees from California, 69 percent later created a startup in the state; Michigan, 58 percent; Texas, 53 percent; and Ohio, 52 percent. In contrast, Maryland retained only 15 percent; Indiana, 18 percent; and New York, 21 percent.

"While education clearly is an advantage for tech founders in the United States, experience also is a key factor," said Vivek Wadhwa, the study's lead researcher and a Wertheim fellow with the Harvard Law School and executive in residence at Duke University. "That a large number of U.S.-born tech founders have worked in business for many years also is important in understanding the supply of tech entrepreneurs."

Other researchers include Richard Freeman, Herbert Asherman chair in economics, Harvard University and director, Labor Studies Program, National Bureau of Economic Research; and Ben Rissing, Wertheim Fellow, Labor and Worklife Program, Harvard Law School and research scholar, Pratt School of Engineering, Duke University.

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