Kinda Disproved: the myth of the startup garage

Going back to revisit my old post The Myth of the Startup Garage, I wanted to verify my statements quantitatively. In that post, I argue against garages as this magic place where entrepreneurship starts.
Vivint Solar - Solar Panels on small home with driveway from street.
Photographer: Vivint Solar | Source: Unsplash
Well, turns out I was wrong and right. It’s true that the majority of new businesses do start in the founders’ home. Scott Shane cites that a residence, such as the home or garage is the most common place a new business is started (48% of new businesses start there). However, when measured over a 5 year period, less than 5 percent of home-based businesses move out of the founders’ home. So while the garage is a common starting place, it’s sadly a common resting place for new businesses. Also, I argued against the idea that founders are these young whiz kids, as portrayed in the startup glossies. Depending on the actual study, the average age of successful tech startup founders is 35-42 according to the Startup Compass report, not the typical college dropout narrative in the media. If you look outside tech startups, the picture is even more stark. Founders in their 50s are 3x more likely to start a successful business. As for coming up with the idea, reality is also a bit nuanced; startups start with what and how they know, but are open to searching for opportunities:
  • The National Federation of Independent Business (NFIB) showed that 61% of new businesses serve the same or similar customers as their founders’ previous employers
  • 66% were in a similar product line. (source: also NFIB)
  • 70.9% indicated that the identification of their business opportunities wasn’t a “one-time thing” but instead unfolded over time. (source: Hills and Singh)
  • 46.9 % of new firm founders indicated their business ideas changed between the time they first identified them and the time when they were surveyed about them. (source: Panel Study of Entrepreneurial Dynamics)
Looking at the actual data is the basis for getting a good grip on what is actually happening. So there is your weekly dose of reality.

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