People love stories about determined entrepreneurs who work alone until they achieve success. But research from the University of Maryland’s Robert H. Smith School of Business shows that an isolationist mindset is more likely to sink an enterprise than save it in the real world.
“We interviewed dozens of high-technology spinout founders and their partners, and in case after case we observed a striking commitment to collaboration,” says Maryland Smith professor Rajshree Agarwal, co-author of the paper in Strategic Management Journal and director of the Ed Snider Center for Enterprise and Markets.
The study, written with co-authors at the University of Illinois and Northeastern University, examines the motivations and team building processes of employee entrepreneurs through the analysis of 30 founding narratives of disk drive industry spinouts founded between 1977 and 1997.
Toiling alone in a basement or garage can pay off, but the study reveals a better model for aspiring value creators. It also provides guidance for parent companies that want to retain their best talent before it walks out the door.
At least six insights emerge from the research.
1. Start with people: Many entrepreneurs think first about technology, funding and business strategy. Successful spinout founders think first about people, the real source of innovation. Parent companies recognize the threat when star employees quit and start poaching talent. These companies sometimes file lawsuits to protect their intellectual property, but what really irks them is the loss of future ideas when their best people leave. “They weren’t upset at all about the technology,” one founder reported. “We took some key people, and they were pretty upset about that.”
2. Be a ringleader: Many entrepreneurs have confidence in themselves. Successful spinout founders inspire confidence from others. They function as ringleaders, giving people the push they need to quit their day jobs and step into the unknown. One spinout employee in our study described his company’s founder as a “Pied Piper” because so many people from the parent firm wanted to follow him out the door. “They love him,” the employee said. “He was a wonderful leader to them.”
3. Make the right pitch: When poaching talent, many entrepreneurs focus on how people can help the startup enterprise. Successful spinout founders flip the script, showing potential recruits how they can help themselves. The message resonates with high performers, who often suffocate in rigid corporate environments that pander to lower performers. “We had a bookcase full of procedures,” one spinout cofounder told us. “I mean, it was 12 feet long of manuals on how to do anything. And that is just exactly why I left.”
4. Poach with precision: Many entrepreneurs accept help from any source available. Successful spinout founders are more selective. They use their inside knowledge of the parent organization to poach talent with precision. “If you look at a typical high-tech company in Silicon Valley, out of several hundred or a thousand employees, there are only a handful that make it really work,” one founder told us. “Those are the people you target.”
5. Diversify your team: Many entrepreneurs try to do everything themselves. Successful spinout founders know the limits of their knowledge and abilities. They conduct deliberate searches for teammates who complement and challenge them. “When you start a company, it's not just one person,” one spinout founder told us. “It’s a lot of different talents, and you have to have a good combination of these talents to make the thing work.”
6. Build unity: Diversity is important in terms of skills and backgrounds. But successful spinout founders seek sameness in terms of values and goals. “Before we founded the company, we had a homework assignment where we wrote down the most important values to us in working in a company,” one founder told us. “We condensed them and combined them into a core list of values, like a half a dozen of them, maybe more, and those were the values that were on the coffee cup and on the wall.”
The world needs individualists — people who are not afraid to stand alone. But part of the magic of human enterprise is the way in which it brings talented individuals together, allowing them to do what they enjoy while contributing to something bigger than themselves.
When this type of collaboration happens, the whole team comes out ahead.
Read more: Jewels in the Crown: Exploring the Motivations and Team Building Processes of Employee Entrepreneurs, by Sonali K. Shah, University of Illinois; Rajshree Agarwal, University of Maryland; and Raj Echambadi, Northeastern University, is featured in Strategic Management Journal.
Media Relations Manager