How Much is the Experience of Female Founders Worth?

We have all read stories about corporate recruiters desperately searching for “self-starters” and “innovative thinkers” who could help organizations find their “entrepreneurial edge.” What better candidate than someone who founded their own company and is now interested in returning to corporate life? Slam dunk.

Researchers probably thought so when they decided to test just how attractive former entrepreneurs would be to recruiters. They devised a sneaky field study in which they sent out 2,400 applications to employers across the U.S. for software engineering positions. They created three different candidate profiles: a technical co-founder of a failed startup, a technical co-founder of a successful startup and an individual employed at a tech startup. In all other ways, the three profiles had similar skills and experience.

The researchers were in for a surprise. They found that former founders — seemingly prime candidates — were 43 per cent less likely to receive a callback for a first-round interview than non-founders. Founders whose ventures had succeeded were 33 per cent less likely to receive an interview than those who had failed in their enterprise.

One could take away from these findings that organizations championing innovation really want the status quo. But the likelier answer has more to do with culture: ideal candidates are those who fit well with existing team members and who are likely to stick around for a while. In former entrepreneurs, recruiters may see candidates who are head strong and flight risks. Apparently, such fears trump all the real-world experience that entrepreneurs bring to the table.

Post-entrepreneur career trajectory

For organizations, this perception may lead to missed opportunities. But for entrepreneurs looking to re-enter the workforce, the bias against former founders can be a significant speed bump on a career path. Consider that 20 per cent of new enterprises fail within the first year and 50 per cent fail by year five, and that plenty of founders sell their successful businesses and leave entrepreneurship altogether. For them, unfortunately, corporate life may not be the soft landing they expect. 

Women entrepreneurs, in particular, pay a steep penalty when returning to the traditional workforce, according to a new study. This shouldn’t be a surprise: Plenty of evidence shows how women’s experience is evaluated more harshly than men’s experience. The stereotype seems to extend to women who are former entrepreneurs.

“We show that entrepreneurship does not eliminate the likely reliance on gender stereotypes in the evaluation of competence,” says Milan Miric of USC Marshall. “Instead, founder experience is a pathway to increase the disparity between men and women.”

Speaking to a research workshop at Smith School of Business, Miric discussed the findings of a study on the career progression of former founders. Conducted with Tristan Botelho (Yale School of Management) and Daniel Fehder (USC Marshall), the study was based on data from LinkedIn’s Economic Graph Research Program that provides a representative sample of U.S. workers. For each person in the study, the researchers noted work history before and after entrepreneurship and compared the subjects’ position in the corporate hierarchy when they re-entered the labour market to their position before they became an entrepreneur. 

They found that when women and men re-entered traditional employment after founding a firm, the experience gained by female entrepreneurs was valued a lot less than male entrepreneurs. Miric says male entrepreneurs were up to 23 per cent more likely to advance to a higher level of the organizational hierarchy when re-entering traditional employment after entrepreneurship compared to similar female entrepreneurs. And they were 17 per cent less likely than female entrepreneurs to regress to a lower level of the organizational hierarchy in their career.

Two factors add nuance to this finding. One, the study found that male entrepreneurs were substantially more likely to advance in their career relative to similar female entrepreneurs when their startup showed significant growth. And two, female entrepreneurs hired by established firms with a greater number of female leaders were more likely to advance in their career relative to men; the opposite was true for firms with fewer female leaders.

Emphasizing fit and commitment

Miric says this phenomenon could partly explain why fewer women choose the entrepreneurial path. He says past research has shown significant workplace peer effects that stimulate entrepreneurial entry. If female employees observe leaders undervaluing female peers with start-up experience, it could dampen their aspirations to strike out on their own. 

Regardless, he says, entrepreneurship for many people “is not a destination point in their career but a step along their career path.” Women should not be discouraged from taking that step. They can, however, be strategic when they present themselves for post-start-up employment at established organizations. The key is to focus on fit and commitment — emphasizing their ability to blend in with existing teams and allaying concerns that they are less committed to the firm than future entrepreneurship. 

“Founder experience carries a complex signal from the perspective of hiring firms, in particular recruiters,” says Miric. “So former founders must update their labour market strategy accordingly.”