When is the right time to launch a startup?

Startups are often hailed as engines of innovation. But for founders, the question of when to launch remains murky. Should they dive in early or accumulate experience first?

A new study from Abhinav Gupta and Franklin Qian, finance professors at UNC Kenan-Flagler Business School, offers a decisive answer: More experience leads to more success.

In a unique experiment, the finance professors show that every extra year of work before starting a company boosts the chances of success — leading to more funding, more patents, faster job growth and a higher likelihood of the business going public.

And the reason is surprisingly simple: Experienced founders build better teams.

“There’s this idea that you can skip work experience and go straight from college to building a company,” says Gupta. “But the question is: Are you leaving money on the table by not working first? This paper says the answer is yes.”

Gupta and Qian conducted the research on entrepreneurs’ work experience and success with Yifan Sun from the University of Pennsylvania.

The researchers took advantage of a quirk in U.S. immigration policy: Highly-skilled immigrants need permanent-resident status — green cards — that allow them to legally start and run their own companies. That delay can stretch from a few months to nearly a decade, depending on the applicant’s country. 

During that time, most budding founders work in other companies, gaining experience while they wait. On average, each additional year stuck in the green card queue translated into nearly a full year of added work experience. And for the startups these founders eventually launched, that experience brought real benefits:

• 13% increase in funding raised
• 12% boost in startup employment growth
• 4% rise in patents filed
• 7 percentage-point increase in the odds of an IPO

Perhaps more revealing is that each extra year of work made founders 1.5 percentage points less likely to see their company’s workforce shrink permanently from its peak — showing that experience helps avoid big setbacks, not just achieve big wins.

“We were surprised that nearly all the impact came from the team. A lot depends on who you start with,” Gupta says.

Some might assume that experienced founders do well because they are experts in a specific technology or industry. But in the study, many started companies in completely different fields from where they had worked before.

And they did not raise their first funding round any faster than less experienced business owners — on average, it still took just over a year.

Building the right team

The real advantage came from how they built their teams.

Founders with more experience brought in the right people early, creating larger teams with a broader range of skills. This gave their startups wider expertise from the outset and filled key roles early, reducing the need for costly hires later on.

Their study found these big and diverse teams were closely linked to a stronger business performance: more funding, more patents, faster employment and higher chances of an IPO.

Many early team members were ex-colleagues of the founder. Each extra year of experience increased the likelihood of hiring former co-workers by 3.1 percentage points, and bringing them on as co-founders by 2.7 percentage points.

This points to a simple takeaway: the time founders spent working builds their networks, and those networks matter when launching a company. That effect was even more pronounced for women and minority entrepreneurs, who often face steeper barriers in business.

Past research has shown these groups often have fewer connections — and their networks are more limited, which makes it harder to tap investors or hire skilled teams.

That might help explain why the gains from added experience were so large.

For example, an extra year in the workforce saw startups founded by women grow their teams by 51% — nearly five times the average increase for those founded by men — plus secure 46% more funding rounds, compared with 10% for male-led ventures.

And for entrepreneurs more broadly, the financial upside is far from trivial.

The researchers estimate that each extra year of experience is worth about $200,000 to a founder. They calculated this by looking at how much an additional year working raises the chance of a company going public — 0.7 percentage points — and multiplying that by the average IPO returns of $186 million and the typical founder ownership share of 15%.

The result is a fifth of a million dollars and, while this figure is only an estimate, it underscores that experience has a measurable cash value.

It also raises questions for policymakers and business incubators about how best to support new founders. The researchers suggest that programs targeting young entrepreneurs like college dropouts should focus more on helping them build professional networks, since their study shows that experience and connections play a major role in whether a startup ultimately succeeds.

“There will always be the Bill Gates and Mark Zuckerbergs of the world, the superstar founders who dropped out of college and skipped work. But they’re the exception,” says Qian. “For most people, experience adds real value.”

While the startup world may still idolize youthful boldness, the data suggests a slower start — with more time in the trenches — can lead to better outcomes.

For most founders, a longer runway before take-off might just be the smarter bet.