Does parental socio-economic status matter for the success of start-ups of first-time founders? Evidence from Germany

Abstract

The aim of this paper is to establish the influence of parental socio-economic status on profitability and growth of first-time founders in Germany. Semi-structured interviews were conducted with 20 first-time founders to establish their socio-economic status, parental influence on their success as founders, and the impact of parental socio-economic status on their financial success. The main findings showed that the majority of participants believed that high socio-economic status of parents had a significant positive effect on the financial success of new start-ups, although those from lower socio-economic backgrounds could also succeed. The characteristics of unequal social status were often expressed and the status of German as a nation with low social mobility confirmed. However, the extent to which financial support and context networks supported founders from high socio-economic status families was difficult to ascertain as founders were often unwilling to admit its actual influence. In contrast, the parental influences on values and positive attributes relating to their success were more freely discussed. Based on the revenues and valuation of the start-up companies, two trends for first time founder success were identified: the most successful founders had parents with high socio-economic status; some very successful founders demonstrated high social mobility, which is contrary to the existing data that social mobility in German is very low.