Slow and Steady Wins the Startup Race
Slow and Steady Wins the Startup Race
By Chad Brooks
Published: September 23, 2014
>> Slow and Steady Wins the Startup Race
Rather than throwing all they have
into a new business, entrepreneurs are best-served by starting off
slowly, new research suggests.
New businesses that are launched
while the founder is employed and still collecting a paycheck, and
only later become full-time, are one-third less likely to fail
than those that begin as a full-time operation, according to a
study in the current issue of the Academy of Management
"The hazard of exit is 33.3 percent
lower for individuals who enter full-time self-employment in a
staged process relative to those who enter directly from paid
work," the study's authors wrote.
Many would-be-entrepreneurs want to
go and start their own business, but those with a family are
concerned about the risk of not being able to pay their bills each
month, said Joseph Raffiee, a doctoral candidate at the
University of Wisconsin, Madison, and one of the study's authors.
He said launching a business slowly allows new entrepreneurs to
start on a small scale, with less up-front costs and downside
"Equally important, it provides a
learning experience about the enterprise in question and one's
suitability for it," Raffiee said in a statement. "One gets a
realistic preview of life as an entrepreneur as distinct from all
the glamorous portrayals of that life."
Given the benefits, it's not much of
a surprise that the "hybrid" route to starting a business is
superior in terms of survival, Raffiee said.
"Yet, so strong is the stereotype
entrepreneurs as brave mavericks who quit their day jobs
to pursue their dreams, that we are only now coming to realize that
there may be a better way than plunging right in," he said.
The researchers said many well-known
popular entrepreneurs took this exact route. According to the
study, Steve Wozniak remained an employee at
Hewlett-Packard long after co-founding Apple with
Steve Jobs and Pierre Omidyar launched eBay while
working for a software-development company. Even Henry Ford founded
the Detroit Automobile Company while he was employed by the Edison
Additionally, a 1997 survey revealed
that 20 percent of the CEOs of the U.S.'s fastest-growing companies
had continued to hold paying jobs long after founding their
The research revealed that those who
have a low
risk tolerance as well as a low core evaluation - which
measures self-esteem, self-confidence, emotional stability and
sense of being in control - were more likely to become
entrepreneurs through hybrid arrangements than via full-time
The current study was based on the
analysis of information collected by the National Longitudinal
Survey of Youth, 1979 cohort. Directed by the U.S. Bureau of Labor
Statistics, the survey enlisted a nationally representative sample
of about 12,700 men and women who were ages 14 to 22 when first
surveyed in 1979. The members of the cohort were interviewed
annually until 1994 and biennially thereafter. The study's analysis
covers the years 1994 to 2008, focusing on newly hired or newly
self-employed individuals and monitoring their employment over the
course of time.
The study's authors acknowledge that
their findings may be viewed as being somewhat at odds with the
commonly held belief that, in order to be successful, entrepreneurs
must devote their full attention to their business.
"While this may be the case, our
results suggest that it is worthwhile to take steps to determine if
the business idea warrants large-scale
commitment prior to doing so," the study's authors wrote.
"Given the uncertainty associated with new businesses,
entrepreneurs are best-served by making small initial commitments
early on, giving themselves the option to commit fully to their
business after they have had a chance to accumulate information and
assess its potential and prospects."
The study, "Should I Quit my Day
Job?: A Hybrid Path to Entrepreneurship," was co-authored by
Jie Feng, a doctoral student at the University of