Tech Transfer eNews Blog

U Maryland study finds start-ups that mix business and friendship are more successful

By Jesse Schwartz
Published: December 1st, 2021

A recent study from the University of Maryland (UMD) finds that start-up teams that mix business and friendship are more likely to succeed.

According to the study, founders who get along through shared values and experiences, as well as complement each other’s skills and capabilities, can foster better team dynamics and have more success raising funds, being productive and earning profits.

Led by UMD professors Rajshree Agarwal, Gilad Chen and Brent Goldfarb, the research team behind the study examined how start-up founders assemble their teams and how their formation strategies affect their companies.

The study concludes that there are generally two strategies co-founders use to find each other. One is to seek out people based on their skill sets and how well they might fit within the company. The other is to assemble a group of people who have already formed interpersonal bonds through past experiences, such as college friends, former co-workers, or family members.

Every new start-up’s goal, the authors argue, should be to meld both of these strategies together. “To get the team with that perfect combination of having both the resources and the right mindset, and the right level of comfort that you share with each other, that’s hard to do,” says Agarwal. “Creating teams requires intentional thought and attention to these two things. It’s going to be hard, and it’s going to be rare, but if you do it, there are huge performance benefits.”

The authors looked at different start-ups on the crowdfunding platform Kickstarter and coded whether the co-founders selected each other based on interpersonal attraction, complementary skill sets or both.

“We were able to link these strategies to the amount of funding they actually raised,” says Chen. “A minority of those teams — about 10% to 15% — engaged in the hybrid team formation, but there was a huge dollar-value premium for those teams.”

Still, the authors say there’s hope for start-ups who don’t initially take the hybrid approach. As they bring on new team members, they can balance their initial strategy by pivoting to the other one.

“Each member is important not because they are just dividing and conquering all of these tasks, but also because they’re brainstorming and problem-solving on what should be the right solution,” says Agarwal. “For that, team members need complementary skills, but they also need to trust in each other.”

Source:  Cision

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