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Why Immigrants Are More Likely To Start Companies

By admin_onstartups.com admin_onstartups.com on January 6, 2007



I came across an interesting article from the Seattle Times this week which cites a Duke University study.  The study found that 25% of the technology and engineering companies started from 1995 – 2005 in the U.S. had at least one senior executive (founder, CEO, President or CTO) that was born outside the United States.  The article was particularly timely as I just got back (less than 12 hours ago) from a trip to India.

The original article can be found here: http://seattletimes.nwsource.com/html/businesstechnology/2003508453_immigrant04.html

The article cites a lot of interesting data (including the fact that of the immigrant-backed startups mentioned, 26% have Indian founders/CEOs/Presidents).  It also talks about why these immigrants are important for the
U.S. economy because of the jobs created and value produced.  However, one thing the article doesn’t talk a lot about is why the numbers of immigrants starting technology companies is so high.

Being an immigrant myself (I was born in
India and spent a lot of my “formative” years there), I’ve thought about why it is that those that are foreign-born seem more likely to start companies.  Here are a list of reasons I think this may be the case.  Apologies if some of these thoughts are controversial or border on drawing stereotypes.  My intent is simply to try and seek patterns.

Why Immigrants Are More Likely To Start Companies
 
  1. Entrepreneurial Upbringing:  I think many immigrants in the
U.S. have one or more parents that were entrepreneurs of some sort.  I’m not sure about other countries, but in India, the number of people that had nice, stable jobs in big companies was really small.  In fact, in all the time that I spent there, I knew very few people that had traditional “jobs” in big companies.  Most were doing something more entrepreneurial.  It stands to reason that those growing up in entrepreneurial environments may more naturally lean towards starting companies themselves.
  1. Circumventing Discrimination:  It’s possible that immigrants working in larger companies at one time or another felt discriminated against – or otherwise limited in their career growth.  As such, their “opportunity cost” for leaving a stable career behind may be lower than the average employee.  One of the attractions of startups is that you control your own destiny (to some degree) and the opportunity for being limited by the discrimination of others is lower.

  1. Higher Risk Tolerance:  Many immigrants come over to the
U.S. with very little by way of resources.  As such, they may have less to lose than the average person.  Those with less to lose may be more likely to start companies as their risk tolerance is higher.
  1. Academic Intensity:  Going through high-school in
India, I experienced a relatively rigorous academic environment – particularly when I was preparing for my 12th grade “board” exams.  Since competition for getting into University is fierce (particularly into medical and engineering programs), students take the standardized tests very, very seriously.  I’m guessing this is similar in other countries outside the U.S. as well.  It’s possible that this experience with long, intense hours makes for an easier “transition” to the startup culture which has a similar, grueling work-week.  Not sure about other people, but working on my first startup and spending 80+ hours a week working was not that much harder than my 12th grade board exam preparations.

What do you think?  Are there other factors at play that I missed?  Do you think that in the next 10 years, immigrants will continue to play a disproportionately large role in starting tech companies in the
U.S.?  Would love to hear your thoughts in the comments.
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Startup Success: The Phenomenal Force Of Focus

By admin_onstartups.com admin_onstartups.com on November 22, 2006


If you’ve been doing any amount of reading about startups (or for that matter, business strategy in general), you’ve probably heard at least a few times how important it is to focus.  I find it interesting that though there is general consensus among successful entrepreneurs on this topic (i.e. focus=good, lack of focus=bad), the advice to focus continues to be hard to follow.  I’ve struggled with this challenge myself, even though I know how important it is to focus.

This past week, the topic of focus came up again in discussions with a startup team that I’m involved with.  Brian Harrington and Josh Lesnick are the co-founders of a cool new startup here in the Boston:  I’m In (disclosure:  I’m an advisor to the company).  After months of development, the I’m In team launched their consumer product last week.  I encourage you to check it out.  Their offering allows for the creation and coordination of gender-based trips.  For example, you and a group of your guy buddies from grad school want to coordinate a ski outing.  Or, you and the gals want to coordinate a New Years party in Vegas.  The idea is interesting and the user experience is pretty slick.  Create your own group and try it out. 

But, this article is not about I’m In the company, or its product.  It’s about focus.  I asked the co-founders what big lesson they have learned now that they have a product out there.  Their response can be paraphrased as follows:  “Focus!”.  But, if it stopped there, it wouldn’t be particularly interesting.  So, let’s take a look at why focus is important andwhy it’s just so hard sometimes to focus.

The Phenomenal Force Of Focus
 
  1. The Temptation Of The Big Market:  Because software is so malleable and we’re all so smart, we tend to think that our product can (and should) have a nice, big market to address.  For example:  In the case of I’m In, they could have easily tried to argue that the product is could be easily “reused” for organizing trips for small businesses.  Just a tweak hear and a tweak there and instead of limiting its market to gender-based social trips, it could expand the market considerably.  The same can be said for many software products.  There’s no technical reason to limit your software to a niche market.  Why not “go broad”?

  1. Figuring Out What The Customer Wants:  One of the biggest reasons not to “go broad” is that it becomes very difficult to figure out what to build.  For example, in the case of I’m In, small business group travel and social group travel have lots of overlap – but vary in some key ways. Businesses might care about things like rules and policies for travel – social travelers care more about fun, bonding and memories (like photos of the trip).  By trying to address the needs of two different customers (despite the fact that there are some needs they have in common), you end up compromising one or the other. 

  1. The True Cost Of Broad Products:  Lets stipulate for a moment that you and your team are smarter than average (just like all founding teams believe they are).  Despite your brilliance and the unquestioned ability of the team to create an exceptionally cool product that can address the needs of millions of users, the harsh truth is that broad, flexible, products that can address the needs of many types of users are almost always more expensive to build and maintain than products that only address the needs of a small group of people.  The larger the divergent needs of a group of users, the more complexity that has to be baked into the software to address the needs of these disparate users.  Even with our brilliant ability to deal in high-order abstractions, the very fact that we have to have lots of high-order abstractions makes the product harder to build and get right.  If you ever run into someone that tells you that they can build a really flexible product that can do lots of things (add an option here, set a configuration there…) at the same cost or lower than one that doesn’t have that much flexibility, run.  Certainly don’t send them my way and make me expend the effort to resist the temptation to smack them upside the head.

  1. It’s Not Always About The Product:  Lots of software people fall into the trap of believing that the primary cost factor is product development.  This is not always true.  The primary cost is often not building the right product, but getting it into the hands of the right customers.  This is where focus really starts to play a big role.  By focusing on the needs of a small subset of the potential market, lots of things become much, much easier.  A direct quote from Josh at I’m In:  “By focusing on a tight customer segment (gender-based travel), it has been much easier to write copy for the site, select photography, create tonality, and develop a list of targeted fulfillment partners.”  Though I don’t know what the heck tonality is, what I do know is that it is much easier to figure out what you’re going to say (your message) and get the word out there when you have a smaller, more focused audience that you’re trying to reach.  It’s really hard to believe how much of an impact this has until you actually experience it.  Literally overnight (the day you make your decision to tighten your focus), your discussions become clearer, your meetings more productive, your product roadmap more defined and you become immensely more attractive to members of the opposite sex.

  1. Restrictions Are Not Permanent:  Just because you start with a narrow niche and focused strategy does not mean you have to remain there for all eternity.  It’s simply a better way to start a company because it makes the early stuff so much easier.    As the company evolves and you learn more and more about the market, you can decide whether you want to go broad (i.e. tweak the product to meet the needs of another segment of customers) or go deep (build more products/features that serve the needs of the customers you already know).  The point is, don’t convince yourself that you have to widen your potential market now – because you don’t.  In most cases, you’re better off starting narrow and broadening later.


If you’re interested in this topic, I’d strongly recommend “Crossing The Chasm”.  It’s on my permanent list of recommended reading for entrepreneurs.  

I’ve had several startups in the past that I’ve been involved with that could have benefited from more focus.  What do you think?  Are there situations where an early-stage startup shouldn’t focus?  Would love to hear your thoughts.

Finally, my best wishes to my friends at I’m In.  Look forward to watching your progress.  If any of you end up setting up an entrepreneurial group trip to
Las Vegas, I’m In!
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