Dan Richards is a serial founder and former public company CEO, and an award-winning member of the marketing faculty at the Rotman School of Management, where he oversees the credit course associated with MBA student internships.
Some college and university students graduating this spring will face a major decision: whether to start their own companies or seek corporate roles instead.
Today’s students bring much more startup drive and energy than those before them. That drive can come with impatience. They are anxious to act on opportunities, sometimes pointing to Bill Gates, Richard Branson, Steve Jobs, Mark Zuckerberg and Michael Dell as examples of super-successful founders who never worked for anyone else.
Talking to these students, my response is that if they’ve done their homework and are consumed by an idea, then by all means pursue the dream. But before doing that they should understand the bigger picture of what leads to successful startups, and consider the benefits of spending time with a larger company first.
Increasing the odds of startup success
When students think about startups, they focus on the successes and ignore the failures. Research firm CB Insights has done the math: more than 90 per cent of startups fail. And of the 10 per cent that survive, many limp along but never gain momentum.
One way to increase the odds of success is to have a co-founder – solo founders are significantly less likely to succeed. Another way to increase the odds is to spend some time working for a larger company first. Students look at names like Gates and Zuckerberg and miss the fact that historically the majority of successful founders spent time working for larger organizations.
We can call this the experience premium. Ali Tamaseb, author of the book Super Founders: What Data Reveals About Billion-Dollar Startups, found that the median age at which founders started their billion-dollar businesses was 34. Even more striking, a 2021 study published in the Harvard Business Review found that, for the startups that grew the fastest in their first five years, the average age of a founder was 45.
I’ve seen this first-hand. Of the 12 founders of successful fintech firms who spoke to students at a Rotman School of Management MBA elective I taught last fall, 11 had first worked for banks, retailers or consulting or tech firms. Only one had begun his entrepreneurial journey straight out of school.
Planting the seeds for future success
In my conversations with students about choosing their first jobs, we discuss three goals for their initial roles after graduation. The first is to contribute on the job and start to develop a reputation as someone people can rely on to get work done on time, and to a good standard. The second is to start to build a network of relationships, both inside and outside the company they’re working for. And the third is to learn as much as possible and begin to develop the knowledge and skills that will be the foundation for future success.
Some students with entrepreneurial impulses don’t understand how much they can gain from working in the right corporate role. One Toronto chief executive officer told me about a conversation he’d had with his son, who was attending a top U.S. business school and had spent the summer between first and second year in California working for Apple. Asked if he was going back to Apple after graduation, his son answered that he and a couple of classmates were planning to launch a startup instead, because he doubted the tech giant had anything to teach him.
It’s important to note that taking a corporate role doesn’t mean giving up on your startup dream. I’ve had Rotman graduates who worked for startup incubators within RBC and General Mills talk to my classes. Last fall, one of my classes heard from co-founders who ran their business on the side while they worked at Procter and Gamble, until they built enough momentum to justify quitting and devoting themselves full time. And I’ve seen graduates spend 12 months of weekends brainstorming with classmates until they come up with an idea they can commit to.
When I graduated from business school many years ago, among my classmates was Tom Stemberg. He graduated top of the class, joined a fast-growing retailer where he did extremely well, then after six years clashed with the CEO over strategy and was fired. He quickly found a role at another top retailer and did well for a period of years, but again had a conflict with the CEO and was fired a second time.
Thirteen years after graduating from business school, Tom founded a little company you may have heard of called Staples. When I was talking to him a few years ago at a reunion, he said: “Maybe I didn’t need to spend 13 years in a corporate role, but without some period of time I wouldn’t have seen the opportunity for Staples. And even if I had seen it, I couldn’t have executed on it, raised the funding or pulled together the founding team.”
Here’s what Stemberg had to say about launching a startup right out of school: “When NBA teams could draft basketball players out of high school, there were a few players like Lebron James and Kobe Bryant with such exceptional talent that they were bound to succeed. But for every Lebron and Kobe, there were many high school players who flamed out in the NBA, who might have succeeded if they’d spent a couple of years playing in college. That’s true of basketball players – and it’s also true of startup founders.”
When I talk with students who are considering a startup right out of school, I share Stemberg’s observation. And then I ask them to think about whether they are in Lebron’s category. If the answer is no, I suggest they consider investing three or four years at a larger company. That’s because the verdict of history is clear: For most founders, investing that time will substantially increase the odds of success when they ultimately follow their startup dream.
This column is part of Globe Careers’ Leadership Lab series, where executives and experts share their views and advice about the world of work. Find all Leadership Lab stories at tgam.ca/leadershiplab and guidelines for how to contribute to the column here.