The Seven Traits of Successful Entrepreneurs

The Seven Traits of Successful Entrepreneurs

The University of Maryland’s Dingman Center for Entrepreneurship examined the very traits dominating entrepreneurship and the entrepreneurial spirit in an analysis of 23 research studies. It was shown that in contrast to general opinion, the workaholic, perfectly organized socalled “straight A” type of personalities prone to overachievement were not necessarily suited to establish a successful business venture. According to Elana Fine, the managing director of the University of Maryland’s Dingman Center for Entrepreneurship, Type A’s often do not take the necessary risks to become entrepreneurs, and often the Type C’s, i.e. less good students, will become entrepreneurs. The series of studies demonstrates that successful entrepreneurs have all the necessary traits (the ability to tolerate risks, openness to new things, the innovation capacities, curiosity, conscientiousness, motivation, self-discipline and stress tolerance) for what it takes to become one. The research, in contrast to earlier studies, focused on practical and  cognitive characteristics (the capacity for acquiring new knowledge) that help entrepreneurs in risk-taking and risk management, not the traditional characteristics such as risk appetite, performance-oriented nature and other, often innate traits. The research mainly aimed to identify the traits that are necessary for managing the constantly and radically uncertain situations, limited resources and rapid changes, and that contribute to transforming ideas and ambition into a genuine business.

Tenacity

Businesses need to face a multitude of uncertainties and hurdles over the years, and they have to get over their inevitable mistakes, starting anew after every failure. Je McCandless was a partner in a fast-growing logistics organization, where rapid expansion caused frequent mistakes, and an invoicing error practically left the company without cash reserves, therefore a portion of the rm had to be sold for a fraction of its real value. McCandless did not agree with the decision, so he quit, liquidated his personal wealth, and had to start from square one. He did not accept the o ers from large enterprises, and started his own business (moving away from the traditional basic activities of freight forwarding and logistics), offering advisory, marketing and sales services to logistics companies. In two years, the company recorded revenues of 53 million USD.

Flexibility

Swift adaptation to market conditions is vital for the survival of businesses. In addition, entrepreneurs need to realize and honestly admit if something does not work, and then they need to change it.

Passion

It is commonly assumed that entrepreneurs are materialistic, yet most of them are passionate about their product or service and solving the arising problems, i.e. to make life easier, better or cheaper. Studies have shown that enthusiasm and faith help businesses even during hard times. John Rou lac, a dedicated organic farmer, started growing hemp without herbicide, launched a business and opened a food bar (Hemp Food Bar). Not long after going into business, the authorities intervened, since hemp is part of the cannabis family, and according to law, hemp products are illegal, just like heroin. Roulac did not give up, and initiated litigation. In the end, he won the lawsuit with the help of a soap producer using natural products. Since then, Roulac’s business has marketed several natural products from hemp protein shakes to virgin coconut oil. As a moral, Roulac others the following: “If things get tough, dig deeper.”

Tolerating Ambiguous, Uncertain Situations

This classic trait determines the capacity for risk-taking and rising above fears and uncertainties. According to Michael Sherrod, a sta member at the School of Business at Texas Christian University, it all comes down to managing the sense of fear. The article demonstrates the role of fear through the example of Jill Blashack Strahan (the CEO of Tastefully Simple), who vividly remembered the times when the bank reminded her of her mortgage three months overdue. During these hard times, her husband died, then not long after her brother passed away too. Hence, Jill pondered giving up her business and nding work as an employee, but in the end she managed to overcome her fears. “We have the power to control our thoughts. When we commit mentally, our action follows,” says Strahan. Her business shortly became pro table, recording revenues of 98 million USD in 2012.

Vision

One of the crucial factors of entrepreneurship is the ability to recognize good opportunities and having visions that others do not have. Curiosity puts entrepreneurs in the forefront of innovation, since their vision projects a di erent world, which they describe effectively to investors, their customers and employees. On account of their often peculiar ideas about the future, they may encounter many detractors who do not believe in the success of their innovation. Eldad Matityahu established two successful stores trading in yoghurt products in Silicon Valley. Later, he worked in a completely di erent eld, in the area of beoptic technologies and networks, and then he started his own business. He claims that the doubters do not see the opportunities entrepreneurs do. Matityahu believes that the key to success is staying several steps ahead of the market.

Self-con dence

Self-con dence and entrepreneurs’ faith in themselves, their products and services are crucial traits. Proving that the world needs their products and services is essential to convince detractors. Researchers call this essential factor task-speci c con dence, which helps in risk management by assisting the entrepreneur in making others believe that enough prior research, resources and expertise are available to get the job done.

Rule-breaking

A study by Ross Levine (University of California, Berkeley) and Yona Rubinstein (London School of Economics) conducted among incorporated entrepreneurs identi ed a mixture of smart, aggressive, illicit and risktaking activities and traits. Doing something that the majority does not do is in the nature of entrepreneurship.

Start-Ups and the National Strategy

The signi cance and value of businesses and the business climate and entrepreneurial spirit characteristic of a given economy are often highlighted during times of crisis. Not only because in most modern economies the majority of jobs are created by entrepreneurs, especially small businesses, but also because the entrepreneurial spirit, a good business climate and efficient businesses provide the stamina and the vitality to viable economies recovering easily from the crisis. From the perspective of recovery and the capacity to adapt, one of the chief factors is the willingness and capacity to start new businesses, and from the perspective of economic policy, the establishment and maintenance of a conducive environment. After stabilizing the Hungarian budget – which had been in an especially critical condition in 2010 – and the public sector, the Hungarian economic policy nally had a chance to turn its a ention from the stabilization of the country to starting growth. One of the instruments for this is fostering the establishment of new businesses – in addition to bolstering those that already exist – which is not only important because it directly creates jobs but also because it helps restore faith in the future, which stimulates innovation and investments. Therefore, we will now examine two successful, promising strategies and programs for fostering the establishment of businesses.

Israel, the Start-Up Nation

Israel has always been in the vanguard of technological innovation, but only recently has it become one of the most dynamic cradles for new businesses. It is called a start-up nation for two reasons. One of them is the book by Dan Senor and Saul Singer published in 2009, and the other is the economic policy that turned Israel from a country distrustful of capitalism and leaning toward socialism into a paradise for new business. Senor and Singer seek to establish how Israel, a country of merely 7.1 million founded 60 years ago, surrounded by enemies and constantly forced to wage wars, and lacking natural resources was able to become home to more new businesses than such large, peaceful and stable countries as Japan, China, India, Korea, Canada or the United Kingdom. The authors use the examples of the country’s leading inventors and investors to demonstrate how Israel’s adversity-driven culture fosters the emergence of the unrivaled combination of innovation and entrepreneurial intensity. The authors argue that Israel is not merely a country but also a mentality, in contrast to the careful planning characteristic of Americans, in Israel venturesome business is rather common. At the geopolitical level, the authors show how the country’s immigration, R&D and military service policy contributed to its rise, and why are more Israeli companies listed on NASDAQ than European, Korean, Japanese, Singaporean, Chinese and Indian rms combined. The book also demonstrates that Israel’s example contains lessons that can be used by other countries, or even individuals seeking to establish thriving organizations. Therefore the Israeli example may also help Hungary in nding the tools for jumpstarting growth inheritent in new businesses. Israel has always paid special attention to technological innovation. Data from the OECD shows that the country’s R&D spending relative to GDP was twice the OECD average in 2008, surpassing Sweden, Japan, Korea and even the United States. The country’s commitment to innovation is shown by the fact that as early as 1969, it created the role of chief scientist within the Ministry of Industry, Trade and Labor. However, at the time when the chief scientist’s o ce was created, socialist views dominated the Israeli economy, with extensive public ownership and limited foreign trade. After the 1973 Yom Kippur War, this resulted in the lost decade, by the end of which government debt almost reached 300% of GDP. Israel only managed to get back on its feet after reining in hyperin ation in 1985 and managing the government debt. Nevertheless, the economy was truly straightened out only after the rise of the export-based high-tech sector in the 1990s, exhibiting annual GDP growth rates of at least 4%. Accord- ing to Peter Cohan, Forbes magazine’s author who writes about start-ups, Israel made ve key economic policy decisions that turned the country’s economy based on state job creation into a thriving start-up nation.

Choosing Self-suf ciency – According to Peter Cohan

At the time of the country’s founding in 1948, Israelis believed in big government, and their values were fundamentally determined by Kibbu im. This economic system satis ed the most basic needs, but did not provide incentives to those who would have worked harder than others. After the Six-Day War in 1967, this socialist approach started to erode. France formed new alliances with the Arab countries that lost the war, and there- fore stopped supplying Israel with weapons, and in the 1970s, the country aimed to become self-su cient in the areas of defense, food production and intelligence. But the former socialist system did not provide the necessary economic footing for this.

The Creation of a Talent Pool Desperate for Work

This was the time when the Israeli government started a huge project, the development of their own ghter jet. However, in the early 1980s Israel was ravaged by a banking crisis, which forced the government to spend 7 billion USD (at 1980’s prices) on bailing out the banks, placing a heavy burden on the budget. The development of the Lavi fighter jet was continued for a few years, until the Israelis realized that using the American F-16s was cheaper. The Lavi project was cancelled, and as a result, 10 thousand employees and 50 thousand contractors involved in the project lost their job. Israelis had already become distrustful of foreign governments, but this decision made them realize that when it comes to economic security, they cannot trust their own economic policy decision-makers either.

Utilizing the Demonstration Effect

With their back against the wall in an economic sense, the workers started establishing companies utilizing military technology in commercial products, and a few of them swiftly became successful. The failure of the government and these entrepreneurial successes brought about a cultural change in Israel. The Israelis grasped that they had been wrong to expect state assistance for their economic survival, but start-ups can make the world better, while individual wealth also accumulates considerably.

Establishing a Stable Investment Environment

The 1977 Likud Party introduced several measures in Milton Friedman’s vein, which led to smaller state interventions in business life. But as they did not halt government spending, in ation spiraled out of control (in 1984 it stood at 400%). In 1985, Israel implemented important measures for stabilizing the entrepreneurial investment environment: government debt was reduced, spending was cut, privatization was stepped up and the role of the government on the capital markets was changed.

Making an Offer to Investors They Could Not Refuse

The 1990s brought another change. After the collapse of the Soviet Union, millions of Russian immigrants entered the country, many of whom were highly skilled mathematicians, physicists and engineers who needed jobs. Israel spent 3 billion USD on building textile factories and similar investments to create jobs for the masses of immigrants, but the breakthrough came from a small project of the 2 million USD, Yozma. The fund nanced by Israel and ten foreign venture capital investors, now worth 100 million USD, gives two dollars of additional capital to every dollar provided by American venture capital investors on the condition that when investors sell their share in the established company, these two dollars have to be paid back. Therefore the majority of the pro ts are pocketed by venture capital investors. In addition, together with large enterprises such as Intel, Israel supported incubators that bought shares in start-ups to pay entrepreneurs for their R&D activities. These programs and the demonstration e ect based on the example of the successful companies boosted investments into Israeli start- ups, which generated handsome returns. In 2011–2012, 56 Israeli start-ups were bought by ten leading American companies such as IBM, Cisco, HP and Apple for a total of 15.2 billion USD, undoubtedly earning many times more with these deals. The author believes that it is impossible to copy what Israel did, but the ve steps leading from socialism to the start-up paradise provide many lessons to the economies that strive to achieve similar results. The author’s claim is de nitely true in the sense that Israel’s geopolitical situation has always been unique. The strategy employed in connection with new businesses is a natural response to the large masses of highly skilled immigrants with foreign language skills and often international connections too. From the perspective of the emergence of a start-up culture that is able to adapt to global markets neither Hungary, nor any other country has similar resources. The case of the experts cut loose from military technology R&D is just as important. They possessed not only technical expertise, but most probably also the organizational and project management skills necessary for successful R&D activities, or the capacity to routinely use information technology that supports teamwork. This is why Hungarian talents are surprisingly successful abroad after a couple of failures at home: this environ- ment is provided to them by their foreign employer, while in Hungary the employers and the professionals – lacking experience and knowledge in these elds – are unable to do so. The most important lesson from Israel’s example is that we cannot con- sider the above-mentioned ve steps an intentional strategy. The Israeli government was reluctant to do what eventually led to success in all cases, the shift toward the more e cient solution was always caused by the adverse circumstances. The country would not have abandoned the socialist, state-driven economic system, had the unfavorable change in the geopo- litical environment not demanded be er economic performance and self- suffciency from it. Even then, the country choose costly public investments, which had to be cancelled in the wake of the banking crisis. The resulting unemployment was not solved by the government, but by the market, i.e. the people affected. Then Israel entered on a path of liberal reforms, but only half-heartedly, without curtailing government spending and reducing the size of the state, which led to in ation. In the end, this and its mounting debt forced Israel to complete the reforms aimed at introducing the free market. The immigration wave of the 1990’s was again re exively a empted to be handled through building factories, even though once again a market friendly project initiated from a fraction of the amount spent on this led to the eventual solution. The main lesson from the Israeli example is that if the government spearheads the necessary changes instead of hindering them, the process of growth and job creation can be even more rapid.

Chile’s Start-Up Program

Chile was the rst country that turned toward the free market in the mid- 1970’s to tackle its economic problems, even before Reagan’s and Thatcher’s conservative economic revolution. In the end, this decision led to sustained growth, and it also helped the country in the transition from a military dictatorship to a parliamentary democracy.

Chile launched its start-up program in 2010, with a different attitude from Israel’s and much more consciously. In the rst phase of the originally small pilot project, 22 new businesses were a racted to Chile from 14 countries with an initial capital of 40 thousand USD without acquiring shares and with a one-year visa, to develop their projects in the country for six months. The participants were chosen from the applicants by Silicon Valley experts under the auspices of a Chilean innovation council, and the most important requirement was that applicants should think on a global scale, and that they should prefer openness to isolation on the road toward success. The pilot project carried out in the first year ended in an application process started in 2011, which aimed to a ract 300 new businesses to the country in that year, and to have a total of 1,000 new start-ups in the program by 2014. In the first application process, out of the 330 applicants 87 were accepted in the program from 30 countries, and in the second call for applications in July 2011, more than 650 applicants competed for 100 places.

The performance of the rms in the program is measured continuously using several indicators, and the Startup Chile program has garnered great international acclaim. Several papers reported on it, including Forbes, The Economist, Business Week and TechCrunch, and similar programs following the Chilean example were launched in the US, the UK, Greece and Italy. The program is conducted under the aegis of the Chilean Economic Development Agency, CORFO.The program aims to make Chile Latin America’s innovation and entrepreneurial hub, globalize the Chilean entrepreneurial culture and establish a company worth 1 billion USD.

Chile’s examples hold many lessons, but before we start copying its solutions, let us not forget its individual situation. Chile is a Spanish-speaking country located on a continent that is dominated by Spanish speakers and Brazil, a country of Portuguese speakers close to the Spanish speakers both linguistically and culturally, and its economy is one of the most de- veloped.138 This provides a perfect opportunity for a racting companies from abroad.

Hungary may have a similar opportunity with the Hungarian minorities in other countries, but we also have to consider the impact this could exert on the Hungarian communities abroad. However, with a solution tailored specifically to Hungary’s needs and using the advantages provided by the European Union’s framework, a similar program could perhaps be applied to Hungarian companies abroad, and it may thus contribute to the economicties between Hungary and its neighbors and increase the economic weight of the whole region. In both examples, an important goal was to promote start-ups in order to join the global economic structure. During this, the companies were not encouraged to punch above their weight, but to come up with technological and business solutions and develop them into marketable products that enable them for a symbiotic relationship with the leading global corporations. It is no coincidence that American venture capital investors took part in the selection of the applicants in the Chilean program, and that in the case of Israel the new rms swiftly developed strong ties with the leading global enterprises of the given technologies. In the start-up culture, most of the small rms established to realize a special idea achieve success after the company enters the market with its product and it is acquired by a global corporation. The implementation of a successful start-up program has to take this into account as well, as it is very rare that the small rm itself becomes a dominant player later on, because this requires not only creativity and innovation but also another type of knowledge and culture necessary for managing a large enterprise. Nevertheless, the investment into the companies that are later acquired by larger corporations is not lost to the economy of the given country.