Born or Bred? What It Takes to Be an Entrepreneur

Is entrepreneurism born or bred? The question has been pondered endlessly by business professors and aspiring moguls, andit goes deep into the American psyche. The mythology of the self-made man (or woman) isn't a Horatio Algerfiction — it's a legacy that stretches from Henry Ford to Bill Gates to the next hopeful mega-entrepreneur toiling inhis or her garage.The question of whether nature or nurture makes an entrepreneur is not just academic; it's a question of vital importanceto today's booming business climate. Last year more than 700,000 new companies were launched, according to San Diego StateUniversity's Entrepreneurial Management Center. That's 1,400 percent more than pace of the 1950s. Colleges and universitiesthroughout the country report strong growth in student interest in entrepreneurship studies. This growth is reinforced byanother trend: as large corporations downsize, re-engineer and merge, they eliminate traditional job opportunities andreduce the sense of lifetime job security that once kept talented business people in the corporate fold. But does this growing interest in entrepreneurship translate into business success? Research suggests that there is anentrepreneurial personality that is either written in the genes or imprinted in early youth. Without these traits, anindividual is unlikely to venture into business ownership, much less succeed. Many business success stories havecharismatic, strong protagonists: Bill Gates of Microsoft, Kamran Elahian of PlanetWeb, Ed Lowe of Edward Lowe Industries,and Mark Thatcher of Teva — individuals who were willing to take risks and sacrifice to run their own businesses. The "bornentrepreneurs" share a number of characteristics that can lead to business success. COMMERCIAL LEANINGS Born entrepreneurs have commerce in their blood; often the venture that hits pay dirt is far from the first. Beforefounding Joe Boxer, Nicholas Graham owned a tie company called Summ Neckwear (named for Summa, the company of another bornentrepreneur: Howard Hughes). Andrew Parkinson, who founded Peapod online grocery-shopping service with his brother Thomas,recalls that the two worked their way through college selling such fraternity-oriented essentials as beer-keg carriers andnovelty T-shirts. Even Bobby Chandra, the 19-year-old founder/CEO of Blue, a portable document format application thatputs rich magazine layouts online, is working on his second software startup. Tom Scott, co-founder of Nantucket Nectarsalong with Tom First, says before entering the juice business, the partners scrambled to make a buck with a paintingbusiness on Cape Cod, then opened a floating store in 1988 and 1989 that did "everything from shampooing dogs to shipping scallops." LACK OF STRUCTURE Why would entrepreneurs prefer washing dogs to a 9-to-5 job? Because, as Richard Hagberg, president of Hagberg ConsultingGroup (HCG), told CNNfn [now CNN/Money], entrepreneurs "don't like to be hemmed in by schedules and boundaries. That's one of the reasonsthey became entrepreneurs." HCG, based in Foster City, Calif., studied the personalities and management styles of more than2,000 executives over a two-year period to identify the differences between entrepreneurs and other executives. "Quite honestly, I don't think I'd be a good employee for anybody," explains Thatcher, who felt oppressed by a corporatejob before he launched Teva, his sports-sandal company. "I just can't handle knowing where I'm going to be from nine tofive, five days a week, 50 weeks a year." Sometimes this need for independence leads entrepreneurs to leave the successful companies they found once structurebecomes a fact of business. Shikhar Ghosh, who founded Apex Corp., left to found e-commerce software company Open Market in1994 after Apex was bought by Electronic Data Systems. "From the beginning, I knew I didn't want to work for a largecorporation," he says. "Once the transition to EDS had been completed, I was looking for something new to do." Structure is a tough pill to swallow for entrepreneurs who are used to acting on their own impulses. "Entrepreneurs can beautocratic and really take control," says Robert Stark, a senior consultant at HCG. Anne Beiler, who founded Auntie Anne's Pretzels based on her principles of self-reliance and enterprise, admits that whatshe likes most about entrepreneurship is the ability to maintain control of her own schedule. "I have the freedom to dowhat I want to do," she says. "That might sound selfish, but I think most entrepreneurs do not make good followers." LACK OF FORMAL PLANNING Joe Boxer's Graham readily confesses, "I've never written a business plan in my life." Stark calls this lack of planning a"ready, fire, aim" mentality — entrepreneurs shoot first and ask questions later. "I'm not a believer of the business plan," say Tom O'Malia, the director of entrepreneurial studies at the University of Southern California. "When I ask a hundred successful entrepreneurs to show me the business plan they wrote, they can't. "When I ask them what they thought about what they saw, how they managed their risk, they start describing the process thatI have always called 'capability.' Capability is the statement of the concept and then testing it against customer risk,distribution, the financial risk, benefit risks, and then finally people risk." Most entrepreneurs are comfortable with making things up as they go along. This characteristic can be a liability when theyare forced to toe the business line. For example, Elahian had to rewrite the business plan for his first company, CAESystems, 19 times before he could obtain private funding. VISIONARY TENDENCIES While eschewing formal plans, entrepreneurs are able to see what's around the next bend. Andrew and Thomas Parkinson putPeapod online in 1989, long before the Internet had reached a mass level — before the World Wide Web was even invented. "Only 15 percent of homes had a PC and 5 percent of homes had a modem, but we saw the growth of PCs happening," says AndrewParkinson. "We didn't foresee the Internet, but we foresaw the use of technology to drive down the fulfillment cost ofproviding the service, and we just felt that PC ownership in general would grow a lot." Thatcher, a former geophysicist who was a river guide at heart, threw all of his resources into his sandals, even resortingto "car-camping" during hard times because of what he calls "an intuitive knowledge" that his idea would succeed. RISK-TAKING Following intuition takes a certain leap of faith, and entrepreneurs are inveterate risk-takers. Tommy Hessert, a race-cardriver, parlayed his innate love of risk (and of automobiles) into a string of car dealerships in the Philadelphia suburbs.In fact, everyone who starts a business risks both a weekly paycheck, and possibly lifeti me savings, for something far more tenuous. "Entrepreneurs are not afraid to fail," says David Efenninger, a partner at Praxis, a consulting company that helpscorporations become more entrepreneurial. "They are willing to go to the edge and really face the precipice. They believetheir concept is sound and that their environment will come around to it. They're willing to go bankrupt." PERSISTENCE Bankruptcy itself is not a deterrent to the born entrepreneur. Elahian's third business, Momenta, went bankrupt in 1992, a$58.4 million flop, but its leader bounced back with four subsequent startups. Born entrepreneurs persist in the face offailure. Says Thatcher: "Me, as far as being an entrepreneur and my personal makeup, I'm sort of relentless, which isimportant for an entrepreneur." Hagberg agrees: "Entrepreneurs are very tenacious, and they stay very focused. They can'tafford to be deflected." Entrepreneurs must be able to bounce back, since downturns are inevitable. "They've got drive and resilience in the face ofrejection," says Efenninger. "They don't get down on themselves and cash in the project because of temporary failures." O'Malia compares entrepreneurship to a marathon. Some runners hit the "wall" and stop. Born entrepreneurs will keep going,an essential characteristic since even "overnight successes" rarely happen overnight. Scott, for example, debunks theperception that Nantucket Nectars achieved instant success. "It never grew like wild fire. It never grew like magic. Itgrew through a lot of hard work," he says. "Good ideas last 10 minutes; execution of good ideas can last a lifetime." POSITIVE THINKING Optimism is key, even when that optimism has little reference to reality. Hagberg says entrepreneurs are "very upbeat,positive people who see opportunities as opposed to limits." "When you decide to be an entrepreneur, you cannot confuse yourself with the facts," says Elahian. "And the facts are thatit is very difficult to start a company." Hessert sustains himself and his car dealerships with positive attitude. "I wake up happy, I go to bed happy," he says."I'm not a moody person. I like people, I like employees, and I like customers." Jerry Yang, who co-founded Yahoo! with David Filo, says: "What made us really pull through the ups and downs and made allof it a lot easier is that we really love what we do. The passion element is what allows you to go after things that maynot make sense at the time, but if you feel it's right in your gut, you'll go after it." CHARISMA AND EXTROVERSION Passion is not just sustenance — it's contagion. The optimism and enthusiasm of the leader infects those who work forhim or her. Efenninger says that the most successful entrepreneurs exhibit great charisma and personal magnetism. "They get excited," he says. "They wear their emotions on their sleeves. They tend to be highly verbally developed. They'vegot that sort of sales orientation in that they have a silver tongue. They talk a good game. They can present their ideas well." Explains Royal P. Farras, founder of T/Maker, a graphic-design software company, and iPrint, an Internet printing company:"I really believe that companies are based on the image of people at the top. You look at Microsoft and its people, thatwhole philosophy and the passion that comes from the company is driven from the top down. Bill is the heart and soul ofthat company and everything he does is really a great wonderful example to the rest of the company. It has never ceased toamaze me how Microsoft always acts like a startup." Rob Ryan, who founded Ascend Communications, a data communications company, before retiring to his nonprofit foundation,Entrepreneur America, says that this charisma makes the entrepreneur: "I'm a passionate person who others want to follow. Ialso have vision in terms that I have great abilities to model a complex area and reduce it to something that I canarticulate to lay people, to investors, to employees, to vendors." HIGH-ENERGY LEVEL A corollary of passion is high energy. Ryan founded Entrepreneur America because he couldn't stand the the languor ofretirement. "You can't retire at 45 or 47 unless you are a doping playboy," he laughs, "and I don't think I've got those genes." Auntie Anne's Beiler has the same dilemma. "Maybe this sounds strange, but one of the biggest challenges I face now is to enjoy the fruits of my labor without feelingguilty," she says. "I have been such a hands-on person, growing up on a farm, raised Amish. We are doers, and you neverstop doing. And if you do, it's not a prestigious mark. You should work until you die." Elahian, who claims to be so high-energy that he never even gets jet-lag, explains the way entrepreneurs think: "Yourbrain requires you to have a high level of activity, so in many ways you are a slave to your brain. You have to go and dosomething to keep feeding your brain and letting your brain consume new information and grow and be challenged." STRONG SELF-IMAGE That desire for new challenges and new knowledge often corresponds with a well-developed sense of where weaknesses lie. "I think that entrepreneurs live by the eleventh commandment," O'Malia explains. "'Thou shalt not B.S. thyself.'Entrepreneurs are extremely realistic. If they find things they can't do, they have to make decisions about expanding theirteams or finding things that they do better." John Chuang, who founded MacTemps computer staffing services while still an undergraduate at Harvard University, agreeswith that assessment as it pertains to himself: "I am self-actualizing. I understand my weaknesses and I understand how toget things done in a larger organization. "In the early days, when we were in just one room, we thought we could do anything in a week: start a new office, launchnew programs, write a thesis. Now we understand that we have to coordinate things with the IT department and the financedepartment and the field offices, and it is more important to do it right even if it takes a couple of months." Chuang responded to the gaps in his knowledge by returning to Harvard Business School for an M.B.A., while still runninghis Cambridge, Mass.-based business. Other entrepreneurs seek different ways to fill in discrepancies between what theyknow and what they need to know. TEAM BUILDING HCG studies of CEOs and entrepreneurs uncovered several critical factors in executive leadership: visionary evangelism,consensus building and management and execution. "Entrepreneurs really rely, in some cases over-rely, on that first factor — persuading people, generating new ideas andrunning with new ideas," Stark says. "They frequently have weaknesses in the areas of being good managers, and even morefrequently in building consensus and teams." "I don't think I have good business sense," Yahoo!'s Yang readily admits. He acknowledged that weakness early, andcompensated by bringing on CEO Tim Koogle to grow their Internet directory from a time-consuming pastime to a company thatearned $67 million in revenues in 1997. This strategy — bringing in complementary outside managers — is a soundone. Stark suggests that these strong teams can make up for some of the gaps in any individual's abilities. "You have a lot of small organizations which are a group of highly skilled individuals, none of them especially visionary,but with a lot of good ideas, a lot of brain power," says Stark. "There's a lot of that in Silicon Valley, where peopleassociate because of their pro fession, their education or whatever and form a team. In those situations, often the oneperson who has those visionary skills would rise to the top." One example of this phenomenon is Kim Polese, a co-founder of Marimba, a Java-based application developer. Polese claimsthat she wanted to be an entrepreneur even as a little girl, but after college she was sidetracked into a lucrative job atSun Microsystems. There, she met the three individuals with whom she formed Marimba. From the fledgling software company,she emerged as both a natural entrepreneur and a talented CEO. "I've learned that I have a natural flair for this job [CEO] in several respects," she says. "One is that I find that Ilike being part of a team and bringing people together smart, motivated people, and then seeing what happens. If you getthe right people with the right attitude, creativity and intelligence, really great things can happen." Polese has found that some aspects of strong leadership can be learned, while other characteristics are inborn. O'Maliabreaks down what it takes to be an entrepreneur into two categories: "There are aptitudes and there are skill sets.Successful entrepreneurs — and, for that matter, successful baseball players or violinists or artists — have tohave both aptitude and skill sets. Both things that are important, but I think the people who are passion, who haveperseverance, who have perception will do better in the long run." William Bygrave, a software entrepreneur himself and now the head of the entrepreneurial program at Babson College,concurs. "People ask if I can produce a Bill Gates, or Donna Karan. The answer: no, of course not," he says. "But give mesomeone with the energy, drive and ambition, and I can make them a better entrepreneur." Blue's Chandra, who with two startups under his belt would seem to be a born entrepreneur, claims instead that he's atalented computer programmer who fell into business because of irresistible opportunities in the software industry. To makeup for his inexperience he's surrounded himself with computer and media industry pros, from COO Jim Lynch, former vicepresident at McAfee International, to board member Thomas Evans, president and publisher of US News and World Report. Nowhe intends to soak up the business knowledge that will enhance his inborn talents. "I think there are some skills that you can learn," he declares. "I mean, some people say you're a born leader or you're aborn manager, but there are concrete skills you can learn." ANSWERING OPPORTUNITY'S KNOCK If the theory that entrepreneurship is strictly inborn were true, then entrepreneurs like Chandra would not succeed. Thetruth is that in addition to those pre-ordained entrepreneurs, there exists a large group of individuals whose hiddenentrepreneurial leanings can be brought out by education and opportunity — entrepreneurs such as Polese and Yang whoare bred, not born. Several decades ago, perhaps, entrepreneurs-by-training may have been firm "company men." But today'seconomy has encouraged entrepreneurial leanings that might once have stayed buried. According to Efenninger, the prevalence of entrepreneurialism reflects "a broader culture, more risk-taking in this culturein every realm." "People probably have better opportunities now," agrees Stark. "There are opportunities, financialopportunities available to them." Mark Lange, former director of the Lundquist Center for Entrepreneurship at the University of Oregon and current directorof programs at the Edward Lowe Foundation believes that most entrepreneurs are born with an attitude that gives thempermission to strike out on their own and to succeed or fail. However, he adds, when opportunity knocks on the doors ofthose who aren't born with that attitude, sometimes it awakes the entrepreneur within. "You have to be honest," advises Graham. "You can't be someone else. If someone wants to do hat I do, it's not going towork. If I try to do what Richard Branson [founder of the Virgin Group] does, it's not going to work. You're settingyourself up for failure. You can take those examples and apply them to what you want to do, but you can't reach beyond whatyour capabilities are." Writer: Kelly J. Andrews, with additional reporting by Jennifer L. Kronstain and the editors of Entrepreneurial Edge.

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All rights reserved. The text of this publication, or any part thereof, maynot be reproduced in any manner whatsoever without written permission from thepublisher. This article originally appeared in the Volume 3 (Summer) 1998 issue Entrepreneurial Edge.