Profile of Mid-Career Entrepreneurs: Career trade-offs and income appropriation of high human capital individuals

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Critical Path Group and
Sonja Djukic, Small Business Branch, Industry Canada

February 2011

Summary: This report is based on 14 case studies of individuals who have been working for large companies and who have decided to launch their own companies at midpoint in their career. In addition to creating a profile of mid-career entrepreneurs, this report's objective is to identify the corporate practices that either promote or encumber the process of mid-career entrepreneurship and to verify whether prior knowledge is a key determinant of entrepreneurial success. The results are presented in the three following sections: general characteristics of entrepreneurs and firms; skills, knowledge and experience of the entrepreneur; and issues and barriers surrounding mid-career entrepreneurship.

With a large segment of the population now reaching the midpoint of their careers and thus possessing increasing social and economic significance, the option of entrepreneurship as a career path for mid-career employees has become an increasingly popular alternative.

In this study, mid-career entrepreneurs are individuals who have been working for large companies and who have decided to launch their own companies or become a top executive of a small firm at midpoint in their career.

In 2007, 41 percent of all small and medium-sized enterprise (SME) owners were between 30 and 49 years old and at least 5 percent of them could be considered mid-career entrepreneurs as they had less than five years of experience in owning or managing a business.

This study is based on 14 case studies of individuals who left their paid employment to start their own company. They were divided into the three following sectors: professional services, technology and consumer products, and energy and real estate.

Findings

Prior industry knowledge is a major contributing factor to entrepreneurial success: 86 percent of respondents indicate that their former experience was the most significant factor in their success as an entrepreneur.
On average, the respondents had 21 years experience in a field related to their entrepreneurial venture.
The educational achievement of mid-career entrepreneurs is significantly higher than that of all Canadian business owners.
The proportion of mid-career entrepreneurs surveyed who self-funded (including family and friends) their ventures was 43 percent. This compares to 30 percent for all entrepreneurs in the start-up phase who used only their own funding or that of family and friends.^{Footnote 1} Furthermore, mid-career entrepreneurs appear to be more successful in obtaining angel investment — 50 percent of those surveyed had secured angel investment, which is quite higher than the less than 2 percent of all business owners who obtain that type of financing.
The two primary motivators for the decision to engage in an entrepreneurial venture at a midpoint of one's career were potential financial gain and work-life balance.
The average number of years it took mid-career entrepreneurs to attain the same salary level as they had prior to their entrepreneurial venture was approximately 2.75 years, while the time it took to achieve the same level of salary and pension was slightly longer at an average of 3.22 years.
The following characteristics of the former employer of mid-career entrepreneurs were found to encourage entrepreneurship:
- decentralized decision making authority;
- ability to quickly respond to market opportunities; and
- a corporate culture premised on new product development.
Main barriers that mid-career entrepreneurs faced include:
- access to high-quality human capital;
- access to capital; and
- establishing business development procedures (building consumer base, developing potentially lucrative markets, etc.).