Business & Entrepreneurship

Wait for It

Shannon Abbey/lindareps

Even for entrepreneurs, slow and steady wins the race.

Those who play it safe and wait to quit their day jobs until new businesses show clear potential are 33 percent less likely to fail than those who dive in headfirst, a UW–Madison study found.

Joseph Raffiee MBA’10, PhD’16 and Jie Feng PhD’15 conducted the research during their graduate work in the Wisconsin School of Business. They compared the tendencies of aptly named “hybrid entrepreneurs” with people who take a more traditional approach to a startup.

Hybrid entrepreneurs follow risk-aversion theory — they tend to minimize risks. Launching a new business little by little gives them “breathing room,” says Feng, now an assistant professor at Rutgers University.

Prior to examining data from the Bureau of Labor Statistics, the two had studied small businesses and big companies such as eBay and Nike that started as side ventures for entrepreneurs who were looking to go out on their own. They also spoke with colleagues who wanted to start businesses but were afraid to abandon their current jobs.

With that information in hand, they wondered whether an incremental approach to a brand-new start-up would eventually yield a more successful business.

The study supported that hypothesis, as well as shattered the myth that all entrepreneurs are uber-confident risk-takers. While people who followed the traditional start-up method often fit that mold, the hybrids barely differed from nonentrepreneurs in terms of those character traits.

Raffiee, now an assistant professor at USC’s Marshall School of Business, says that particular finding was good news for folks who are eager to start a business but don’t see themselves in the idealized prototype of a risk-taker. “A lot of people want to be entrepreneurs,” he says.


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