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Avoiding founder frustration in technology start-ups

14 October 2011 Inderscience

A new study of more than 440 technology entrepreneurs reveals that wealth does not necessarily bring happiness. According to research published in the International Journal of Entrepreneurial Venturing, long-term employment growth in a new technology-based company correlates with the founder's satisfaction with their rising income, but is negatively related to their overall happiness.

Arndt Lautenschlaeger of the University of Applied Sciences Jena in Germany analysed data on 441 entrepreneurs in several fields of high-technology as well as technology-based services. The aim being to empirically analyses the relationship between personal happiness and employment growth in new technology-based firms. Personal happiness is measured by the company founder's satisfaction with life, work, financial situation, and leisure time.

The founder of a business might speak of success in terms of achieving company goals, although these can vary wildly between individuals and companies. Some founders equate success with profits and their becoming rich, while others value self-fulfilment and being their own boss more. From the perspective of the company itself, success can be defined more objectively based on sales, efficiency and profits. Lautenschlaeger suggests that it is unfortunate that personal indicators are all but ignored in economic studies of high-tech start-ups, where development and growth are often considered the only relevant factors.

"I found that in an early firm stage performance and individual satisfaction go hand in hand with a few exceptions," Lautenschlaeger says, but satisfaction with life correlates negatively in the long run with company growth despite rising income. He points out that to some extent this counteracts the aspirations of promoting start-up firms as a panacea for fighting unemployment and the generation of wealth. He adds that, his findings challenge the traditional view that company growth parallels personal success of the founder.

The study has important implications for individual entrepreneurs but for the ongoing success of countless high-tech start-up companies. Founder exit from a business is often neglected in corporate discussions, but it might be necessary to address the issue of how the boss feels as a company grows and so help the management team avoid the potential for company failure in the long term if founders are allowed to continue in their role despite growing personal dissatisfaction.

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