Ed Roberts, Author, Entrepreneur, Professor - MIT Sloan

Ed Roberts hosted a SIP session called "Founding and Growing the Technology-Based Enterprise". This was right up my alley. Ed has been researching technology-based startups for 40 years and has a lot of insights on creating successful startups.

Ed Roberts bio

Notes:

Started at MIT in 1957 in the EE dept

Joined Sloan in 1958 as an assistant to Jay Forrester (created System Dynamics)

Got a Masters and then a PhD in Economics in 1962

In '62, his doctoral dissertation was the only work on technology in the Sloan School

25 years of studying technology-based firms (up to 1985): 769 total companies

Created a 11-page questionnaire they used to collect data

Started as research on people who left MIT labs to start new companies

Iceberg phenomena: companies aren't aware of how many people leave to start companies

At one company, the VP of R&D thought there were only 5 spinoffs from his company, but after research they found 45 and the best did 50% of the original company's revenues

Found that entrepreneurs are more productive than the average worker in terms of published papers, patents, etc.

Published a book in 1991: Entrepreneurs in High Technology (now out of print but available on Amazon)

Who becomes technology-based entrepreneurs? ("becomes" not necessarily who are successful)
- Disproportionate share came from families where the father was self-employed
- Women were extraordinarily exceptional - very few
- Entrepreneurs have a moderate need for achievement, moderate need for power, but a high need for independence
- Development-oriented work background (not research)

50% of companies in his study were founded on a part-time basis despite this probably violating employee and IP agreements

Quick movement of advanced technology from source. If you delay for 3 yrs or more, the amount of tech transfer decays to 0

Part-time founders transfer more tech than full-time founders

What makes technology-based firms succeed?
As measured 5-7 years post founding:
High performers 15% - high profit growth and profitability, low variability
Succeeding 15% - positive profit growth and profitability
Merely Surviving 54% - growth and profitability is 0
Failures 16% - closed shop

Average entrepreneur has less than a high school diploma, but their data showed avg tech entrepreneur has a college diploma

SBA says 80-90% of companies fail within 18 months, but their data showed only 16% failed after 5-7 years

Didn't find a distinction based on where entrepreneur went to college

83% of entrepreneurs were highly satisfied with their performance 5-7 years post-founding and 17% were not satisfied. The entrepreneurs that were not satisfied did not correlate to those that failed

Found no correlation measures between personal satisfaction and economic success of the company

Successful founders' characteristics:
- Made, not born (found no birth characteristics that predict success)
- High need for achievement and optimally with moderate need for power
- If you have a high need for power you limit other people from stepping up
- Data is clear, individuals don't succeed. The larger the founding team, the higher the chance of success
- Solo entrepreneurs seldom succeed, 2 are more likely to succeed, 3 are even more likely, 4 are even more likely, and 5 are even more likely (don't have enough data after 5)
- Solo entrepreneurs are more likely to have a high need for power

Characteristics of successful startups
- High degree of advanced tech transfer
- Product orientation, not consulting or research. Very few firms transition from one to another successful
- Marketing orientation and practices
- Focused growth strategy - focused on 1 idea

Performed a new study in 2003 of MIT entrepreneurs based on alumni questionnaire

The average MIT alumni entrepreneurs founded 1.8 companies. The range goes from 1 to 17!

Have a hypothesis that the more startups you found, the more successful they become

Age distribution at first founding: gradual shifting to younger and older entrepreneurs (the middle is being vacated)

Median age of founding first company is constantly decreasing: 1950s: 40.5, 1960s: 39, 1970s: 35, 1980s: 32, 1990s: 28

Will continue to analyze the data over the next couple of years. Some papers are forthcoming.