Did you guess Russia, with a Gross Domestic Product of $1.86 trillion? You’re right! – sort of. It’s a trick question, because really, I want to talk to you about entrepreneurship.
With nearly $2 trillion in annual revenues, the impact of companies founded by living MIT alumni is roughly equivalent to the GDP of the world’s 10th largest economy. Wow! Even working day-to-day in the Martin Trust Center for MIT Entrepreneurship, I still find these numbers staggering.
In a recent report, MIT unveiled that the university’s alums have founded 30,200 active companies that generate annual revenues of $1.9 trillion and employ approximately 4.6 million people. This is quite impressive, especially given the fact that the researchers excluded companies that are no longer active, as well as many large companies whose co-founders are deceased, such as Hewlett-Packard, Intel, Raytheon, and Texas Instruments.
In a first-of-its-kind initiative in 2003, Professor Edward Roberts along with then PhD student Charles Eesley developed a survey to explore the entrepreneurial activities of MIT alumni. In 2014, Professor Roberts and Associate Dean Fiona Murray updated the data, assisted by PhD candidate J. Daniel Kim.
The report shows a shift in entrepreneurial activity over the past decade. On one hand, fund raising and capital access became more challenging as the US economy entered a recession in 2007, resulting in declining venture capital assets and investments. On the other hand, entrepreneurship may be seen as a more appealing career choice than working for a large corporation. The proportion of MIT undergrads selecting employment in venture capital–backed start-ups upon graduation increased from less than 2% in 2006 to 15% in 2014.
The average age of MIT entrepreneurs has also decreased. The age dropped from 39 for alumni who graduated in the 1940s, to 30 years old for those graduating in the 2000s, to today’s median age of 27. The factors contributing to this are not entirely known, but it could be tied to the rise in service-based businesses which are less capital intensive, today’s tools such as cloud computing and application program interface (API) tools that can reduce IT costs, and enhanced access to alternative forms of capital, such as crowdfunding campaigns.
Here are a few more stats about MIT entrepreneurs and their businesses:
- 25% of MIT alumni have founded companies, with 40% of those considered serial entrepreneurs, founding two or more companies.
- While roughly only 8% of MIT undergraduates were admitted from Massachusetts, 31% of alumni-founded companies in the US are based here, followed by 21% in California and 7% in New York.
- The rate of startup foundation by gender is 12% for women versus 29% for men—a more than two-fold difference. This finding is consistent with the fact that roughly only 30% of U.S. businesses are women-owned.
- MIT alumni-founded companies have a better track record than startups as a whole. 80% of MIT startups survived five or more years and 70% have survived 10 years. Compare this to the U.S. average of roughly 50% of startups last five years and only 35% last 10 years.
- Overall, 2% of MIT alumni companies in the survey experienced an IPO while 8% were bought out through acquisition as an exit strategy. The majority remain privately held.
Why so many successful MIT entrepreneurs? MIT’s ambitious entrepreneurship educational program rests upon three principles: 1) “Mens et Manus” (Mind and Hand), 2) teams, not individuals, and 3) cross-disciplinary collaboration. These principles are reinforced by the support offered by the Martin Trust Center and by other centers and programs committed to the innovation inherent at MIT. Together we work across campus to go beyond the classroom and engage all MIT students in co-curricular activities that strengthen the entrepreneurial practice and skills.