the Brief - Kauffman Foundation

EWING MARION KAUFFMAN FOUNDATION
A Snapshot of the Emerging Entrepreneur
The Kauffman Foundation interviewed thirty-five EY Entrepreneur Of The Year 2015 winners in the emerging
category from across the country. We would like to thank these high-growth entrepreneurs for helping us
understand how they achieved their success in such a short time. From the information gathered in these
interviews, over the next year, the Foundation will create several more briefings and stories on the characteristics of
emerging entrepreneurs, which will help entrepreneurs and those who support them around the country.
Where the Entrepreneurs are Based
Below are ten attributes that surfaced from these thirty-five
interviews with EY emerging entrepreneurs—companies that
are five years or younger with demonstrated rapid growth, who
represent a diverse set of sectors. These attributes provide some
initial insight into what makes these successful founders tick.
Ten Attributes:
1. EY emerging companies make a big difference to local
employment. New businesses account for nearly all net new
job creation and almost 20 percent of gross job creation in the
United States.1 The EY emerging companies interviewed hire
local, young talent: 37 percent recruit from local universities
and 37 percent recruit from their same region; 40 percent
recruit recent grads and 20 percent recruit people with little
experience. “We have so many great universities here [locally],
and so few dominant technology companies, that we have an
abundance of graduates from these programs, which are topnotch programs,” said one entrepreneur.
2. EY emerging entrepreneurs are motivated by a love
of entrepreneurship. These entrepreneurs are motivated to
start their companies for a wide range of reasons, but the
most common is that they love being an entrepreneur
(69 percent). Some love being their own boss, starting a
project from scratch, and working on small teams. Other
common motivations include solving a problem that they faced
or they saw potential customers facing (49 percent). Others
were driven by promising economic gain (49 percent) or were
“pushed” into starting a business: they lost or disliked their job
or thought they could provide a product or service better on
their own.
3. Experience is important. Prior research suggests that
founders with previous startup and managerial experience
tend to be more successful than those without.2 This holds true
for EY emerging entrepreneurs. A majority of these successful
companies were founded by entrepreneurs with experience—
both with running a business (69 percent) and working in their
respective industries (74 percent).
4. Cofounders are important for all entrepreneurs,
especially first timers. A majority of EY emerging
entrepreneurs (63 percent) founded the company with one
or more cofounders. Of those who founded the company
by themselves, 85 percent were serial entrepreneurs. This
suggests that first-time entrepreneurs likely start companies
with cofounders to increase their knowledge of their industry
or how to start their company. Cofounders of those surveyed
often were people the entrepreneurs knew well—previous
1. Haltiwanger, J., Jarmin, R., Miranda, J., “Who Creates Jobs? Small Versus Large Versus Young” (The Review of Economics and Statistics, 2013), 360.
2. Gompers, P., Kovner, A., Lerner, J., and Scharfstein, D. “Skill vs. Luck in Entrepreneurship and Venture Capital: Evidence from Serial Entrepreneurs.” (National Bureau of
Economic Research, 2006), 7.
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8. EY emerging entrepreneurs learn from customers and
markets. Though experienced, these entrepreneurs don’t
assume they know everything, and they rely on customers
or market intelligence to improve products and services.
Fifty-seven percent of companies have added a new product
or service line, and 66 percent changed their product or service
due to customer demands. As one entrepreneur stated, “We
take a lot of that customer feedback to decide where we’re
going to invest.”
colleagues (43 percent) or personal contacts, such as friends
and family (38 percent), though we know from other research
that these choices have consequences.3
5. Even rapidly growing companies are funded by their
founders. Research on Inc. 500 companies found that
59 percent of the companies were financed by the entrepreneurs’ own funds.4 Findings are similar for EY emerging
entrepreneurs: 52 percent mentioned using a substantial
amount of their own money or money from their previous
business to start their company, and 31 percent completely
financed the company themselves (with zero investors).
9. They also learn from mentors. Mentorship often is
considered a key to entrepreneurial success.5 Among this
group of seasoned entrepreneurs, only 11 percent said they
do not have a mentor. The EY emerging entrepreneurs largely
sought knowledge about their market from professionals
with deep sector experience (40 percent), or mentoring on
leadership and management (37 percent).
6. All entrepreneurs face difficulties raising funds. Even
some of these highly successful entrepreneurs were turned
down for funding, and 80 percent of the entrepreneurs who
were turned down were serial entrepreneurs, meaning that
even experienced entrepreneurs find it challenging to raise
funding. However, the evidence suggests that when most
entrepreneurs are able to demonstrate the progress of their
company, they attract funding later. Of the entrepreneurs
turned down for funding, more than three-quarters eventually
were able to access external funding.
7. Entrepreneurs tend to give up equity to grow their
business. Most EY emerging entrepreneurs use equity to gain
funding and attract employees, executives, and cofounders.
Aside from their cofounders, entrepreneurs give equity to
investors (43 percent) and employees (32 percent). A small
number of these emerging entrepreneurs owned 100 percent
of their company.
10. EY emerging entrepreneurs give back too. Half of the
entrepreneurs (54 percent) gave back to other entrepreneurs
by mentoring, giving presentation advice, or encouraging
entrepreneurs to start a business. Interestingly, of those
entrepreneurs who said they didn’t have a mentor, 75 percent
of them did not give back in any of the ways mentioned
above; those who receive the value of mentoring are
more likely to give back. EY emerging entrepreneurs have
worked with groups such as Youth Entrepreneur Council,
MIT Entrepreneurial Masters and more. “So I mentor a lot
of people—not just in manufacturing but also the startup
community,” stated one entrepreneur.
Sectors Represented by the Entrepreneurs
Oil
Manufacturing
Media
Power
Consumer
Products
Gas
Retail
Leisure
Entertainment
Reduction
Hospitality
Nonprofit delivery
Distribution
Violence
Wellness/gourmet
Care
Industry
Utilities
meal
service
Financial
Education
Health Arts
Cleantech
Fashion
Tech/Pharma
food
Mining Telecommunications
Biotech/Med
Metals
Services Technology
Continue to check www.kauffman.org/emerging for more findings from these interviews over the next year.
3. Wasserman, Noam. “The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup.” (Princeton University Press, 2013).
4. Bhide, Amar. “The Origin and Evolution of New Businesses” (The Oxford University Press, 1999.)
5. Eesley, C., Wang, Y., “The Effects of Mentoring in Entrepreneurial Career Choice” (Berkley Fung Institute, 2015), 24.
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