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Why is it that even when smart, educated, well-networked people launch new companies, a few strike gold, but most others eventually falter? What sets successful founders apart from those whose new ventures fail?

Starting in 2008, I set out to interview hundreds of highly successful entrepreneurs in depth, hoping to reverse engineer what had led to their outsized outcomes. As a writer, I also searched for some kind of narrative glue — a common experience that might bind the entrepreneurs I wrote about and give the reader some focus. Serendipitously, I came across an article from Fortune, written in 1999 at the height of the Internet bubble.

“For new MBAs at Harvard Business School,” the article began, “an offer from a top consulting firm used to be as good as it gets: a six-figure starting salary, a $30,000 signing bonus, a pledge to pay some or all of their B-school tuition — which amounts to more than $50,000.” But, times had changed. Students were turning down blue-chip offers at top firms to launch Internet start-ups.

What had happened to all those young MBA entrepreneurs, I wondered. We think we know how things turned out for most Internet entrepreneurs, but what was it like for people who went into entrepreneurial battle armed with a freshly earned Harvard MBA? I realized I’d found my glue.

The roughly 150 people interviewed for my book, The Intelligent Entrepreneur, primarily included HBS alumni entrepreneurs, HBS professors, cofounders, and key employees. I talked with alumni who had enjoyed great success and with many who hadn’t.

In the end, I focused in greatest detail on three alumni entrepreneurs from the MBA Class of 1998: Marc Cenedella, founder of the Internet job search site TheLadders; Marla Malcolm Beck, cofounder of national cosmetics retailer bluemercury; and Chris Michel, cofounder of early professional social networks Military.com and Affinity Labs.

From their stories and many others, I found that the founders with the most enviable outcomes had usually followed basic principles of entrepreneurship. Most encouraging, I discovered, is that those principles can be learned. Howard Stevenson, the Sarofim-Rock Baker Foundation Professor of Business Administration, drove this home to me in our first meeting.

“There are skills, attitudes, and a fundamental base of knowledge that education and experience can provide,” he said. “You won’t turn me into a world-class athlete by sending me out to practice with a coach, but I will certainly play a better game. Entrepreneurship is no different.”

Have the Right Mindset

From talking with HBS alumni, I learned about many cases in which people seemed to rush headlong into start-ups, hoping primarily to make a lot of money fast. That could lead them to ignore what seemed to be the most important rule of successful entrepreneurship: Commit deeply to the ideal of entrepreneurship first, and only then to a particular business model or product. That combination of commitment and flexibility can help founders react nimbly to market feedback, abandoning products and business models that aren’t working.

I saw this repeatedly. Cenedella tried several other ideas for job-industry companies before he came up with the idea for TheLadders. Michel spent years searching for the right business idea — even helping to start a pharmaceutical industry computer firm — before dreaming up Military.com. Beck went through many ideas — founding a company that would offer “certified e-mail” was one — before coming up with bluemercury.

Still, many other alumni didn’t start companies immediately. They went to work for other start-ups, or went into venture capital, or followed more traditional careers before deciding to become entrepreneurs.

“We plant these time bombs,” Stevenson told me during another conversation. “We say go to Goldman. Go to McKinsey. But when you find that’s not what you really want, think about launching a new company as a legitimate use of your talents.”

Find the Right Opportunity

Where do you find entrepreneurial opportunities? The most successful entrepreneurs I interviewed demonstrated that the key is to focus on finding customer problems first, and only then on searching for solutions that can help.

“The real dividing line is simple,” explained HBS associate professor Noam Wasserman, a 1999 Harvard MBA alumnus who went on to earn his doctoral degree and to teach entrepreneurship at HBS. “Distinguish between ideas that only rise to the level of ‘nice to have,’ versus things that people really need or greatly want.”

Especially in the cases of younger or first-time entrepreneurs, I found that opportunity often lay in the problems that they and their peers faced in their personal lives. Take Michel, for example. A naval flight officer prior to attending HBS, Michel joined a Navy reserve unit in California after graduation. Watching his fellow reservists mingle before a meeting, he thought about how military members wanted to connect with one another. At the time, there was no central place on the Internet for them to do so. Military.com was born.

For Beck, the opportunity she saw stemmed from both her professional and her personal experiences. She loved business strategy and was always thinking about how to improve processes. On a personal level, though, she was a devotee of certain high-end brands of cosmetics that were often difficult to find. That led her to launch an early Web site for cosmetics in 1999 — and then, within months, to change her entire business model; buy two small, struggling retail stores; and turn them into a national chain.

Cenedella worked as a senior vice president at HotJobs after graduation and became fascinated by a difficult problem in the job-matching industry. Job ads garnered hundreds or thousands of replies, but only a small portion of them were worthy of consideration. He wondered, What if an Internet job site could sort through applicants ahead of time and somehow prequalify people before they applied? That simple question led to the business model behind TheLadders.

“Part of what we try to teach students is the importance of knowing the economic model of the business, and understanding whether there is a compelling need,” Stevenson told me. “We try to point out — gently — that actually knowing something really helps.”

Pick Great Teams

We hear businesspeople say this almost to the point of cliché: Our people are our most important asset. However, building great teams is utterly essential for entrepreneurs, and it all starts by picking the right founders.

Attending HBS gives students access to an unparalleled alumni business network, but I didn’t initially understand the power of HBS students networking with each other. Many of the successful founding teams I interviewed were made up of classmates, sectionmates, and even study groups from HBS.

Michel and his Military.com cofounder, classmate Anne Dwane (MBA ’98), met on their first day at HBS and had been in a study group together. “There is no way that Military.com would be what it is today without Anne,” Michel said. “She was the execution powerhouse.... Remember five other people had the same friggin’ idea. And competitor ArmyTimes was definitely better positioned than anyone. So I think it’s all about the people and their ability to execute.”

Alternatively, the best cofounders usually had worked together before. When Cenedella decided to launch TheLadders, specializing in positions that pay more than $100,000, he reached out to two of the best people he’d worked with at HotJobs. Beck was so close to her cofounder at bluemercury that she eventually married him. They still run the company, and they also manage a household that includes their three children.

Execution Is Critical

Entrepreneurship is difficult even when the idea is great, the teams are complementary, and conditions seem ideal. I heard tales of weight gain and strained marriages, and stories of playing shell games with credit cards, using one to pay off another when the money wasn’t coming in.

Where successful entrepreneurs were able to execute, though, it seemed to include a combination of two things: first, balancing confidence in their big goals with the ability to take many small steps; and second, continually learning to lead people.

“Leadership is without question a huge issue,” Wasser-man explained. “The most successful entrepreneurs can work alone and be a team player; they can make a critical individual contribution to their venture and make that transition to leading others.”

Cenedella recalled the first day he walked into his company and was greeted by an employee he was certain he’d never seen before. Recognizing that leading a company of 200 or 300 people would be a different challenge than leading one with 15 or 20, he started seeing an executive coach and redoubled his professional reading.

Beck learned to trust her instincts, even when they flew in the face of convention. Rather than follow industry practice and hire part-time employees, she insisted on full-time workers who were serious about building a career in the beauty industry. Instead of paying her salespeople on commission, she offered generous wages and team-based bonuses. Moreover, her salespeople were instructed to encourage customers to test products and to help them find the best products for their skin types, not the ones with the highest margins.

Michel faced a near-death experience for Military.com after the tech bubble burst. He eventually had to lay off most of his staff, but he insists that the experience turned him into a much better leader.

He and Dwane turned Military.com around and sold it to Monster Worldwide in 2004 for $39.5 million. Then, Michel took what he’d learned and cofounded another company, Affinity Labs. He sold that as well, for $61 million.

“My advantage was that I experienced real adversity,” he explained. “That was the greatest management gift that I’ve ever been given. If I had not walked through the fires of adversity, I would never have developed the kind of confidence — and a sort of visceral sense for the right way to do things — that I do today.”

Do Work with Impact

It really doesn’t seem to be about the money. I heard about and met many successful entrepreneurs who lived for years in the same small apartments or houses they’d wound up in right after school. Michel didn’t even own a car until after his second entrepreneurial windfall.

For the successful entrepreneurs I got to know, money was important, but I think two things were more important: teaching others to seize the kinds of opportunities they’d enjoyed, and doing work that had real impact on people’s lives.

Entrepreneurship education is a recurring theme. Beck serves on the advisory board of the Rock Center for Entrepreneurship at HBS, where Michel this year is an Entrepreneur-in-Residence. And Cenedella hardly misses a chance to give talks on his experience to aspiring entrepreneurs at business schools and elsewhere.

Cenedella had told me many times that he feels as if he’s found his calling with TheLadders, and a few days before this article was due, I had a chance to see him in action. He and a colleague wrote a book called You’re Better Than Your Job Search, and eighty people turned out for a signing at a bookstore in the Washington, D.C., suburbs.

During the Q&A part of his talk, we heard stories that can break your heart. One man said he’d been out of work for a year; another had been without a job for eighteen months. Turning to Cenedella, the job seekers wanted advice, but just as importantly, they needed reassurance.

Cenedella talked about the data that TheLadders compiles on job searching and came to a cautiously optimistic conclusion. It will take time, he said. The process might be frustrating and painful, but then he added seven words that seemed to leak some of the stress right out of the room: “Everything is going to be all right.”

In that moment, I realized that following his entrepreneurial dreams had led Cenedella exactly to the place he needed to be.

Courtesy Bill Murphy Jr.

Bill Murphy Jr. is the author of The Intelligent Entrepreneur: How Three Harvard Business School Graduates Learned the 10 Rules of Successful Entrepreneurship (Henry Holt & Co.) and is working with Jon Burgstone (MBA ’99) on another book, Ignition, about how to envision, launch, and build successful new ventures. Murphy is editor of the IntelligentEntrepreneur.net.

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