How the right mentor can foster young entrepreneurs
While entrepreneurs certainly require conventional business skills, they also need intangible qualities that don’t come from books.
These so-called soft skills include a self-starting drive, a willingness to handle risk and an ability to deal with the kaleidoscope of challenges in building a business from scratch.
Where does that mindset come from? One major source, according to a raft of studies, is parents. Parents are powerful role models, share practical experience and often provide both emotional and financial support.
The next best way to nurture entrepreneurship is to set up mentoring programs.
But how much do mentors truly influence a student’s career choice to start a company? What kinds of mentors have the most impact? What kinds of students are most likely to be affected? If the mentor is an entrepreneur, do they oversell the opportunities? On these and other questions there’s been surprisingly little research on what actually works.
“We know that there is a strong transmission from parents to children,” says Charles Eesley, a Stanford professor of management science and engineering. “Children see a role model, and know that starting a business of their own is entirely possible.”
But Eesley, who founded several companies before coming to Stanford and is also part of the Stanford Technology Ventures Program, said understanding the best practices in mentorship is a necessity.
“If we limit ourselves to people whose parents were entrepreneurs, we can’t expand the pool of entrepreneurs very much,” he says. “If we want people from low-income families and minority families to start their own businesses, we need to open things up and broaden the pool of potential role models.”
Now in a study co-authored with Yanbo Wang of the Cheung Kong Graduate School of Business in Beijing, Eesley offers some hard answers about what works with mentorship.
Eesley and Wang carried out a randomized trial over four years that tracked the career paths of Stanford students who took Eesley’s class on entrepreneurship. The student teams, each working on a new business concept, were randomly paired up with mentors. About 61% of the teams received mentors who had started their own companies, while the others had mentors who had not.
As part of the study process the researchers surveyed the students about their backgrounds, their appetite for risk and their career aspirations. At the outset of the study about three-quarters of the students surveyed had hopes of starting their own companies. Most had a fairly high tolerance for risk. About 31% said they had a parent who had been an entrepreneur.
What they found
Eesley and Wang then followed the students’ career paths for about two years after graduation.
Overall, about 34% of the students went on to either start a new company or join one. The study found that mentors who been entrepreneurs were most effective at spurring students to pursue entrepreneurial careers. About 37% of the students who had entrepreneur-mentors went on to start or join new companies, compared to 28% of those whose mentors were not entrepreneurs.
Since some of the students had entrepreneurial parents the study was able to assess whether the type of mentor made a difference to this subset. As expected, the parental effect overwhelmed the mentor effect. Among students who came from entrepreneurial families but didn’t initially have plans to follow starting a business as a career path, about 26% ultimately became entrepreneurs anyway – and that percentage was the same regardless of which kind of mentor the students had.
The mentor’s background therefore had the biggest effect on students who did not come from entrepreneurial families. Among those who didn’t initially plan to start new companies, having an entrepreneur for a mentor increased their probability of starting or joining a new company from 6% to 16%.
That makes sense, says Eesley. People who come from entrepreneurial families start out with a strong idea of what’s possible and what the process requires. Overall, those students had a 46% likelihood of starting or joining a company. In other words, they didn’t need much extra support to decide on an entrepreneurial career.
By contrast, people who do not come from entrepreneurial families are more likely to worry about a host of issues: the potential stigma of failure; their own capabilities; the social norms involved in everything from raising money to building a brand. For those people, Eesley says, a mentor who knows the ropes may well provide the crucial nudge.
How practical was the advice?
Eesley and Wang also looked for signs that entrepreneur-mentors might be overly enthusiastic, inadvertently overselling the opportunities and understating the risks.
Happily, the answer appears to be no. On average, the students who had entrepreneur-mentors started or joined companies that had significantly better survival rates. At the time the study was completed, the average longevity of companies tied to students who had entrepreneurs for mentors was 49.8 months. By contrast the average longevity was only 32.4 months for companies tied to students whose mentors were not entrepreneurs.
On top of that, students who had entrepreneur-mentors actually appeared to be more cautious about the kinds of startups they joined. Those students joined companies that had a longer track record – 16.7 months, versus 7.7 months for companies joined by students who did not have entrepreneurs as mentors.
In the end, Eesley says, an entrepreneurial family background remains the most powerful factor in determining whether people decide to start their own firms. But for those who don’t have that kind of luck, having an entrepreneur for a mentor makes a valuable difference.