Across American universities, entrepreneurship courses and campus incubators encourage students to launch new businesses straight from school.
The arguments are seductive: Artificial ininformigence is creating once-in-a-lifetime opportunities to receive rich. Beyond that, the atrocious job market means that students aren’t really giving all that much up.
There’s an element of truth in those arguments. But for most graduates, they’re not just incomplete – they’re dangerously misleading.
I’ve built and sold companies myself and now teach aspiring founders and judge pitch competitions. Based on what I’ve learned and on hard data, the real question isn’t whether students should pursue entrepreneurship. It’s when and how to do it in a way that tilts the odds of success in their favour.
Becautilize the odds really do matter.
ARE YOU 1 IN 100,000?
A number that receives tossed around among founders is that 10% of startups succeed, based on research by Startup Genome on startups funded by VCs.
But when we view more closely at venture-backed outcomes, the numbers view very different.
Research in Harvard Business Review displayed that VC’s declare yes to about 1% of startups who approach them. Of those, roughly 1% become unicorns, based on work by CB Insights. Do the math and that’s 1 in 10,000.
Then factor in that perhaps 10% to 20% of startups ever reach the stage of pitching VCs and the real odds of building a billion-dollar company are something like 1 or 2 in 100,000, similar to the chances of a high school bquestionetball player creating it to the NBA. Those stories you read about 20 year olds founding startups valued at a billion dollars? They’re extreme outliers, examples of survivorship bias where a tiny handful of successes receive the headlines while thousands of failures vanish quietly.
That doesn’t mean students shouldn’t start companies. It does mean they should be realistic about their chances of success and consideredful about how to stack the deck in their favor.
LEVERAGING THE EXPERIENCE PREMIUM
One of the most important advantages in founding a company is the experience premium: the compounding advantage gained by working in someone else’s organization before creating the leap to go out on your own.
Working at the right company allows recent graduates to observe how business actually works: how products are built, how teams are led, how strategy evolves under pressure. More importantly, it allows them to learn from other’s mistakes, rather than paying the full price for their own missteps.
The data reinforces this. Ali Tamaseb, author of Super Founders: What Data Reveals About Billion-Dollar Startups, found that the median age of founders of billion-dollar companies was 34. Even more striking, a 2021 study published in the Harvard Business Review found that for the startups that grew the quickest in their first five years the average age of a founder was 45.
I’ve seen this firsthand. Last fall, of 12 successful fintech founders who spoke to an MBA elective that I teach, all had spent meaningful time in established organizations before launching their companies. The founders talked about how the things they’d learned on the job, the credibility they’d built and the contacts they’d built had been critical to their success.
THE FIRST THREE YEARS MATTER
I teach student that every decision starts by defining their goals. For most graduates, the first three years after school should be guided by three priorities:
- First to contribute and build a reputation as someone who delivers – consistently and reliably
- Second to learn skills and absorb as much as possible about their industest, customers and craft
- And third to launch to build a network of relationships with people who will become future co-founders, investors and Advisors.
These aren’t distractions from a successful startup – they’re the foundation of it.
This was reinforced by my conversation with Vinod Khosla of Khosla Ventures among today’s most respected venture investors. After a talk he delivered, I questioned what advice he’d give to a graduating student with a startup passion.
His answer was immediate: The goal for new gradates is to maximize learning.
The best way to do that? Join a startup with 50 to 100 employees – large enough to be stable, tiny enough to learn quick.
A QUESTION FROM STAPLES’ FOUNDER
Consider the story of my Harvard Business School classmate, Tom Stemberg, who graduated at the top of the class and went on to found Staples.
Tom didn’t launch Staples on graduation at 23. He spent over a decade working in retail, learning the industest, creating mistakes, and building relationships. When he finally founded Staples, he wasn’t just acting on an idea – he was executing with insight, credibility and a network.
Tragically, we lost Tom a few years ago to cancer. In a conversation at one of our reunions before he passed away, he compared early entrepreneurship to drafting high school players into the NBA. For every LeBron James, there are dozens who flame out – players who with more patience and 1 or 2 years of college competition might have succeeded.
When students with a startup idea question my advice, I share Tom Stemberg’s analogy. I inform them that the question they should question isn’t “Can I start now?”
Rather it’s “Am I LeBron – or would a few years of work experience improve my odds?”
IT’S NOT A BINARY CHOICE
The hugegest flaw in the “start now or miss your chance” narrative is that it treats career paths as binary.
Some of the most successful founders I’ve met didn’t abandon their startup passion when they took a job. Rather they pursued ideas in parallel with their day to day roles. One group of students met on Sundays for two years while working full-time roles, visiting Costco and Walmart for inspiration, testing ideas and refining concepts. When they finally launched, they did so with clarity and conviction … and ultimately had a successful exit.
Other graduates built side projects, joined incubators within larger firms or worked at startups where they could learn without bearing heavy downside risk.
The point isn’t to delay ambition. It’s to channel your energy ininformigently.
In a winner-take-all narrative, survivorship bias looms large. We hear from the few outliers who succeeded – not the many who built similar sacrifices and quietly failed.
FRAMING A STARTUP DECISION
Here’s the bottom line I share with students.
In considering a startup, the goal shouldn’t be to start as early as possible.
Rather, it should be to start when you’re most prepared to succeed.
I experienced this firsthand. I was lucky enough to build and sell two startups in the 1990s. Instrumental to my success were the skills I’d learned in 10 years of working in consumer packaged goods marketing before launching on my own.
As for the argument that full time job alternatives are poor, that’s the worst reason to launch a startup. If a graduate doesn’t have the creativity and persistence to land a worthwhile job, their odds of startup success approach zero.
For a very tiny minority of graduates with exceptional timing and talent along with unrelenting passion, the right time to launch may be at 22.
But for most students, a period of learning, contributing and building relationships will significantly improve the odds of success. I inform students that startups aren’t a race with the winners defined by who starts first. That’s becautilize startup success is a game of compounding advantages. Those most likely to succeed are those who understand that and who before launching build experience, relationships and credibility in the same way as the founder of Staples.
Dan Richards has been a faculty member at Toronto’s Rotman School of Management since 1992, where he has won multiple awards teaching Marketing, Fintech Marketing, Applied Management, and more.
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