Mid-Career Executives, Personal Business Experience Drive Startup Success

In two recent academic journal articles from the United Kingdom (UK), the authors look at the characteristics that lead to successful entrepreneurs and startup firms. In both articles, the founders’ business experience – both corporate and entrepreneurial – was a strong indicator of startup success, sustainability, and job creation. Their findings indicate that national innovation policies and entrepreneurial programs in the UK should shift from focusing almost solely on faculty-led university spinoffs and millennials to a more inclusive approach that also supports mid-career professionals launching entrepreneurial ventures.

University of Glasgow researchers (Ross Brown and Colin Mason) found Scottish tech startups founded by mid-career professionals from the corporate world were more likely to become a high-growth firm (more than 10 employees) than university spinoffs, according to a recent study – Inside the High-Tech Black Box: A Critique of Technology Entrepreneurship Policy. These startups founded by mid-career professionals derived their competitive advantages from open innovation sources such as relationships with end-users and customers that were built during the founder’s time in business.  These mid-career startup founders stressed the importance of customer/user as a key driver of their innovation process. Brown and Mason contend that startups led by mid-career professionals can benefit greatly from open innovation due to limited resources and market reach of their products.

The researchers found that most successful Scottish startups do not undertake a large amount of in-house R&D, thus having limited protected intellectual property (IP) rights. These firms also report limited Venture Capital backing, mostly driven by limited IP rights. The findings, however, suggest that these firms are more sustainable, more likely to stay local, and show higher potential to become high-growth firms due to their market-driven nature.

Driven by their empirical findings, the researchers conclude by contending that national innovation policies should shift from emphasizing the support of the technology push model by faculty-led university spinoffs to support firms that are more outwardly oriented or market driven. To assist these mid-career entrepreneurs, national policies and entrepreneurial programs should provide support to help link these firms with potential customers and end-users. The researchers provide some UK-specific policy recommendations that may be applicable to the U.S. and regions across the country. Read the study…

Entrepreneurial experiences improve subsequent startup performance, according to a recent research study from the University of Sussex’s Alex Coad. In the study, Coad looked at 6,547 startup firms from 2004 to 2014, using a unique dataset on customer records at Barclays Bank. The author found that prior personal business experience leads to an increase in expected startup size by about 50 percent. The author concludes they come to the table with more “chips,” instead of the prevailing thought that experienced entrepreneurs learn how to better play the game. Similar to the Brown and Mason study, these chips are typically business connections such as customers, end-users, suppliers, and investors. Read the study…

Although the studies were conducted in the UK, domestic tech-based economic development (TBED) organizations also could benefit greatly from expanding their programs to support mid-career professionals who are typically underserved by current initiatives. Both studies concluded with similar findings – prior business experience (both corporate and entrepreneurial) helps in the creation of sustainable, high-growth startups and produce more jobs at both creation and over time. Each study’s researchers concluded that prior business connections were the determining factor in the size of firms and their potential for high-growth. These connections assist in helping attract capital and develop market-driven products/services instead of the technology push model.

Brown and Mason also raise an interesting point in their conclusions: mid-career entrepreneurs are more likely to create high-growth firms and those firms are more likely to stay in the region of origin because of consumer/end-user relationships. If job creation is a primary reason for TBED initiatives, shifting efforts to mid-career professionals from university spinoffs and millennials may create more sustainable return on investments.