Former entrepreneurs face hiring bias at companies, study

Being a working stiff can be anathema to those with the founder gene, who find the uncertainty of entrepreneurship equal parts freeing and exhilarating. But sometimes the lack of stability can become too much to bear, either financially or emotionally. Life is a bit easier with a steady paycheck and without the constant fear your startup might go bust. But when ex-entrepreneurs want to return to the workforce, they often face undue stigmas. Recruiters balk at their unusual resumes, unsure how to evaluate a candidate with unorthodox work experiences. That’s to say nothing of the stereotype they face for being impetuous and egotistical. 

“It’s really critical for them to be able to explain the elephant in the room,” says Debi Creasman, CEO of recruiting firm Raven Road Project. “Because the vibe is that someone who’s done an entrepreneurial thing for a good long while is a bit of a maverick and doesn’t really want to fit into a confined structure or be a small piece of the puzzle.”

Former entrepreneurs are 35% less likely to get a job interview, according to research from the London Business School. This trend is usually referred to as the “entrepreneurship penalty.” 

A separate study from Rutgers University’s School of Management and Labor Relations recently sought to understand if former entrepreneurs were less likely to get hired because founders are bad job candidates or because they face bias throughout the hiring process. The researchers asked recruiters to evaluate mock resumes with comparable levels of education and experience for candidates who had worked in traditional companies, startups, or both. The study found that 60% of recruiters responded less favorably to the mock resume of a former entrepreneur. 

So while the stereotype of a mercurial, borderline antisocial founder in the mold of Steve Jobs or Elon Musk might exist (and perhaps be slightly true) the study points to the fact that companies tend to penalize entrepreneurs unfairly. One of the reasons why could be because they simply aren’t set up to evaluate candidates with unconventional backgrounds. 

From a recruiter’s perspective, it’s hard to validate an entrepreneur’s experience, says Rutgers professor Jasmine Feng, one of the researchers. 

“You are basically relying on information that is mostly self reported,” she adds. “So it’s really challenging for recruiters to understand whether their qualifications, experience, or job responsibilities are comparable to a conventional applicant’s.”

Nistha Dube, an aspiring content creator who left behind her entrepreneurial dreams in favor of a more traditional career path in education, says she regularly had to explain parts of her resume to skeptical recruiters. “I didn’t know which part of my experiences would be relevant and which wouldn’t,” she says. “I also had to explain why I’m leaving all that behind to get a job.”

Even having run a successful startup may not insulate candidates from the struggles of the entrepreneurship penalty. Research from the Harvard Business Review found that software engineering candidates with founder experience whose startups had been successful were 33% less likely to get offered a job interview than those whose companies had failed. Much of that could be because recruiters have concerns that formerly successful founders can be set in their ways because their methods already brought them to great success once. 

“If their mindset is arrogant, potentially inflexible, or just sort of dogmatic in their approach, then that might not be as appealing to a recruiter in general,” Creasman says.

More often than not, the most successful founders are best suited for executive level roles, she adds. They can parlay those experiences into the C-suite, as former Everfi cofounder and CEO Jon Chapman did. There is “no doubt” that the success of Everfi, which he sold in 2022 for $750 million, played a role in him landing his current job as CEO of the esports company PlayVS, according to Chapman. “Had I not had that type of success it wouldn’t have played out that way for me necessarily,” he says. 

Companies are eager for an ‘entrepreneurial’ culture

Meanwhile, entrepreneurs can still make valuable additions to traditional workplaces among the rank-and-file. In recent years, many companies have tried to reshape their cultures to foster more innovation. To do so, companies actively look to hire employees with some of the qualities founders tend to bring: out-of-the-box thinking, innovation, and an embrace of uncertainty. That’s especially relevant in the current business landscape where things are so volatile. The rise of AI, a murky interest rate environment, and a looming presidential election all make for particular turbulent times for companies—the exact sort of thing former entrepreneurs are suited to navigating.

Companies “are really struggling to grasp the concept of the new and the next,” Creasman says. “So when you hire somebody from an entrepreneurial background, they bring a sense of calm because they’ve lived in chaos for a long time.”

Chapman remembers his own experiences starting Everfi as being characterized by some seat-of-the-pants moments. “When you’re in a startup phase, you are constantly having to figure things out on the fly,” he said. “And make decisions quickly, without really knowing if you’re going to be right or wrong.”

To weed out the entrepreneurs that would be good hires from those who would ultimately chafe at being a cog in a bigger machine, Creasman suggests putting candidates through different scenarios during the interview. She suggests giving them an example of the sort of red tape they might encounter and asking them how they’d approach getting the proper approvals. 

Creasman also advises recruiters to try and gauge whether someone is in it for the long haul. Research shows that ex-entrepreneurs do have a higher turnover rate compared to other employees. “Certainly skill sets are important, but mindset sometimes trumps that,” she said. 

The Rutgers study also found that certain types of recruiters are less prone to a bias against entrepreneurs. Perhaps not very surprisingly, recruiters with their own entrepreneurial experiences are the most open to hiring former founders. The research also found that recruiters with a short tenure at the company and women responded more favorably to candidates who were ex-entrepreneurs. According to Feng, recruiters who had just joined the company didn’t have as much of its institutional thinking ingrained in them, while women were less likely to stereotype founders in general and instead just evaluated them using the qualifications on the mock resumes. 

Addressing the reality that entrepreneurs may have a harder time than others landing a job is just another example of the adversity those who choose that career path face, Feng says. “Those who want to be entrepreneurs need to be aware this may not always be rosy,” she says. “This could be a very bumpy road. It may lead you back to the traditional workforce, and you need to be aware of some of the career risks related to this reality.”

For Dube, it was how bumpy that road turned out to be that ultimately led her to opt for a more stable, if traditional, career option. “Every part of that experience felt like I was scraping by and trying to make ends meet.”