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Ground Zero

An ambitious new study aims to uncover what really happens in the start-up stage.

A business idea crosses your mind that seems to be, dare you say it, inspired. Excitement bubbles, brainstorming ensues, notes are scribbled. Convinced this is exactly what the marketplace has been waiting for, you conclude that you are no less than a genius.

All this self-congratulation, of course, happens before the business is even started. And knowing the ratio of discarded ideas to that of successful businesses, we are left to wonder: What is the difference between people who contemplate becoming entrepreneurs and those who actually start businesses? What occurs in the gestation period before start-up that makes people decide either to toss an idea or to persevere?

The Entrepreneurial Research Consortium has undertaken an ambitious effort to uncover answers to those questions. A temporary international association of 27 academic research centers, foundations and government agencies, the consortium plans to track almost 1,200 start-up entrepreneurs for two to five years, pooling the efforts of more than 100 analysts to analyze information on some 3,000 different variables of these businesses. The goal: to get to the bottom of "the single most important and yet most poorly understood" period of a business's life, says Paul Reynolds, coordinator of the consortium and a professor of entrepreneurial studies at Babson College in Babson Park, Massachusetts.

"We're trying to figure out what these people do, what sequence of events they pursue, how rapidly they complete them, and how this affects whether they get the business started," Reynolds explains. "Then we'll look at how all this start-up activity affects the growth pattern of the business once it gets going."

In pilot studies, Reynolds has found that about 4 percent of American adults are trying to start businesses; however, about half of them never see their start-up come to fruition. Preliminary research also shows:

  • people between the ages of 25 and 34 are more likely to start businesses;

  • women are less likely to make it through the start-up period;

  • while households with annual incomes of $10,000 or less are least likely to start a business, there is little other correlation between wealth and entrepreneurial aspirations; and

  • the more education a person has, the less likely he or she is to make it through the start-up period.

"We're talking about very small samples and very powerful patterns," says Reynolds. "The ideas we've been getting from [preliminary research] are so unexpected, we're not quite sure what to do about them until we get a larger sample. Age, gender, confidence in the economy, where they live, how long they've lived there, household income--each one of these factors is interesting in itself, but the real question is, how do these things in combination have an impact [on whether someone starts a business]?"

Eventually, Reynolds sees the study, which is being mirrored by similar studies in five other countries, as having important policy implications. "If you're in government, should you encourage people to get involved in the entrepreneurial process or spend your resources helping those who are already in it?" he asks.

"No one ever bothered to collect this data before," Reynolds continues. "They didn't think it was important. But clearly, there's been a dramatic shift in the way the economy operates. We're getting smaller businesses that are more focused and more interdependent with other businesses. We need to look at [this segment] much more carefully."

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This article was originally published in the December 1996 print edition of Entrepreneur with the headline: Ground Zero.

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