Archive for the 'Entrepreneurship' Category

The Coming Chinese Internet Tsunami

I have begun to think and write about China more and more lately; there is such an incredible opportunity across the Pacific that seems largely unobserved by a majority of Americans. The Chinese economy and population base is so large and modernizing so rapidly, and has transformed from 3rd world to 1st world in a matter of decades (that same evolution took us hundreds of years here in America). As you can see in this chart from Google, China’s internet adoption has blown past the United States, both in terms of growth rate and sheer number of users. And they’re still at only 20% internet penetration. Mobile phone penetration is actually higher than internet penetration, approaching 60% depending on what study you read – that’s over 500 million mobile phones. This in itself is an interesting dynamic, as it seems that in China the mobile phone (rather than the PC) is the primary method of internet use and communication. As I understand it, this is a result of the relative difficulty and expense of getting a computer and home internet line installed – particularly in rural China, which does not yet have the widespread and developed communications infrastructure that we enjoy in the United States. Coupled with pervasive and cheap mobile phone service and a proliferation of advanced smart phones, the mobile internet has become the single point of connectivity for millions of Chinese. However you measure China’s growth, it doesn’t take an economist or venture capitalist to see that the pace of technological change, adoption, and transformation in China is unlike anything experienced in America or anywhere else.

I saw a statistic the other day that by the end of 2010 China will have more mobile internet users than there will be people in the United States. That’s staggering. There are countless companies with tons of VC hype and astronomical valuations climbing all over each other to try to capture even a sliver of the ~90mm user U.S. mobile internet market. And yet there is a Chinese market that is orders of magnitude larger and remains relatively unaddressed by America’s top online properties.

For example – Facebook has experienced tremendous user growth outside of the United States, adding almost 10 million global users in March 2010 alone. Below you’ll see a top 10 table of Facebook’s growth by country in March – millions of users were added in Asian countries like Indonesia and the Philippines, and according to Facebook nearly all of those new users access the service exclusively on mobile devices (wow). And yet despite the obvious resonance with Asian consumers, Facebook remains conspicuously absent from China due to a near total blockage by the Chinese government.

Not to say there aren’t very significant and well established Chinese social networking players (including Tencent Inc., which is debatably the largest social network in the world) but I just find the under representation and seeming indifference of so many American Web 2.0 properties to be surprising. So many of today’s startups seem laser focused on attacking the United States mobile market, and are at the same time so haphazard in their Chinese strategy.

I do understand that there are significant regulatory and cultural hurdles to clear when moving a U.S.-based service into the Chinese market. In addition to censorship and restrictions on foreign business ownership, there is no guarantee that a product that has been successful in the United States will resonate with Chinese consumers. Many of today’s social media and self publishing centric products and services simply aren’t workable in a country that does not allow the free flow of information or exchange of ideas that we enjoy here in America.

It seems that the swell of Chinese internet users (on mobile devices especially) are like a tsunami being held back by poor access to broadband and isolated by the dam of government censorship. Though there are millions of users already climbing over and around the dam (with things like proxy servers and other methods of circumventing the “Great Firewall of China”), I expect that the real wave will come over the next several years as the government finds it increasingly difficult to censor its citizens, and increased broadband penetration plugs more and more Chinese into the web. As China comes online in a bigger and bigger way, it’s going to be harder than ever for American startups and social media players to compete without confronting the tsunami head on.

Go East Young Man

In the 19th and early 20th centuries, the American “Wild West” was a place of great opportunity and great adventure – rapid development, gold rushes, land grabs, and a booming population provided an opportunity for enterprising young men and women to strike out on their own and “grow up with the country”, as the famous quote goes. The West took on an almost mythical aura as a place where anything was possible and success was limited only by ambition.

Even after the American West had been developed, the United States has remained the epicenter of the world’s economic growth and a proverbial “land of milk and honey” for immigrants from across the globe. The best and brightest students from countries the world over aspired to one day travel to America to make their fortunes and pursue the “American Dream” – and countless many have done just that. However, while the western world has been the place to be for the past 150 years, I’m beginning to think that the next 150 may see a stark reversal of the compass needle.

Take a look at the picture that accompanies this post (click for a striking full size version). That’s Shenzhen, China – the biggest place you’ve never heard of. With some 14 million residents, it’s far bigger than New York City and remains the fastest growing city in China. Not only is Shenzhen exploding, it’s young, smart, and hungry. It’s estimated that 20% of China’s PhDs work in Shenzhen, and the average age of its citizens is less than 30. Thanks to billions in foreign investment, it’s young and educated population, and its status as the first of China’s Special Economic Zones, Shenzhen is also the #1 export center in China, accounting for 22% of the country’s total. All of this is particularly striking when you realize that less than 30 years ago, Shenzhen was nothing more than a sleepy fishing village with a population of 30,000 (that all of this growth has coincided exactly with the establishment of the special economic zone and a capitalist economy is best left for a separate discussion). Shenzhen has also developed as a manufacturing powerhouse, and is the origin of nearly every shiny consumer gadget you own with “Made in China” stamped on the bottom. And if you’re reading this on a Mac, iPhone, iPad, Thinkpad, Dell, Kindle, or HP (among many others), that includes the hardware your browser is running on right now.

John Biggs from CrunchGear spent several weeks in Shenzhen and wrote an excellent series entitled “CrunchGear in China: Where Tech Sausage is Made”, which explores the massive consumer goods (mostly electronics) manufacturing industry that has catapulted Shenzhen to prosperity and global prominence. CrunchGear paints an incredible portrait of the Chinese culture and the efficiency with which they conduct their manufacturing. If you have some time to read through them, they provide some awesome perspective on the seething, dirty, and ruthlessly effective economic powerhouse that’s growing up in the East. The articles are here: Introduction, China the Factory, Getting from There to Here, The Ex-Pats, Shanzhai.

So for all the reasons laid out above (and even more that I’ll elaborate on in a future post), I see the East as having many of the same characteristics that made the American Wild West so appealing – rapid development, a population boom, and a modernizing economy. And although the modern day Chinese gold rush has already begun, I can’t help but think there is still a vast opportunity in East Asia for those willing to make the leap and “grow up with the world”.

Use your “What” to find your “Why”

Recently, Philip Kaplan (aka “Pud”, founder of Adbrite and FuckedCompany.com) was emailed a question by a single mother looking to get her life back on track. Philip answered the question on his blog, and I found his answer particularly fascinating and relevant. The full text of Philip’s answer is replicated below:

Some people know what their passion is. Unfortunately, you do not. But I’m going to help you find it.

Here’s what you do:

Ask yourself, if you could do ANYTHING in the world, what would it be? What’s the ultimate fantasy that you’ll probably never actually achieve, but would be awesome? Rock star? Movie starlet? Teacher? Birthday party clown? Brad Pitt’s wife? That’s the “WHAT.”

Now ask yourself, “WHY?”

For example, my “WHAT” was “be a rock star heavy metal drummer!” Upon further analysis, my “WHY” was “I want to do something creative. I want freedom. I want to affect lots of people.”

As it turns out, there were about a million different more tangible things I could do, that would satisfy my “WHY.” That’s why I became a freelance web programmer: creativity, freedom, and the opportunity to reach the masses.

What’s your “WHAT?” What’s your “WHY?” You’ll be surprised how easy it is to satisfy your WHY, once you’ve figured out what it is.

I found that, as a college student rapidly approaching graduation, Philip’s advice to identify your “why” instead of focusing on your “what” was especially pertinent as I considered my long term career and happiness goals. I also think that his advice is helpful to entrepreneurs casting about for some direction in life. Many are so focused on becoming the next Web 2.0 darling, that I think they may have lost sight of why they embarked on an entrepreneurial career path in the first place.

Do what you love. Follow your why. The rest will fall into place.

FilmLoop – A Further Caution to Entrepreneurs

I wrote earlier about the costs and benefits of taking venture capital funding (or any outside funding for that matter). It basically boils down to control of your company. Obviously outside investors want to be compensated for their investment in your company, and you satiate them with equity. However, by giving up equity, not only do you give up a portion of the business’s profits, you also give up control. Not only do larger stakeholders control more votes, outside investors may also require you to sign special agreements that give them first rights to the proceeds if your company is ever liquidated or sold. This means that if they invested $10 million, and your startup is liquidated for only $3 million, you don’t get anything, the entire selling price goes to recoup the outside investment.

FilmLoop.com provides a horror story about what can happen if you give up too much control to outside investors…

Over the past year, 3 year old company FilmLoop experienced first hand many of the worst case scenarios an business risks when they sign on the dotted line with a venture firm. FilmLoop raised $12.5 million in funding through two rounds, the first with Guy Kawasaki’s Garage Ventures($5 million), and the second, a $7.5 million round, with ComVentures in May of 2006. Things were going well in August 2006, when the company launched version 2.0 of their web app.

However, in November of 2006, ComVentures received pressure from it’s limited partners to consolidate its portfolio and squeeze cash from non-profitable startups. This seems to have included FilmLoop. ComVentures needed its money out of FilmLoop, and the only way to do that was through a sale. They told FilmLoop they had to sell by the end of the year, leaving the team only 6 weeks to find a buyer, negotiate a deal, go through due diligence, and finalize the sale. Not surprisingly, no buyers stepped forward on such short notice. Except one.

Fabrik, another one of ComVentures portfolio companies, was suggested by the ComVentures partners as a possible acquirer. With FilmLoop unable to find any other interested parties, the venture capitalists on FilmLoop’s board force its sale to Fabrik for just over $3 million – only slightly more than FilmLoop possessed in cash – in December, 2006.

Because of the equity and influence FilmLoop’s external investors received in exchange for their investment, the FilmLoop team was able to do little to prevent the sale. But that’s not the worst of it. Because of a liquidation preference agreement FilmLoop had signed when it took ComVenture’s investment, the founders and employees walked away with nothing. ComVentures took the entire $3 million to recoup its investment, and Fabrik (ComVentures owned) got FilmLoop’s technology.

So what can we as entrepreneurs learn from FilmLoop’s loss?

When you sign on the dotted line, don’t let the venture gold blind you to the fine print. Most term sheets have a number of trapdoors and parachutes to allow the investor to bail early and as safely as possible. Always be sure exactly what you’re getting, and exactly what you’re giving up to get it. When picking an outside investor, don’t just examine their offer’s monetary value. Make sure you know and trust everyone that will have a hand in your business.

Thanks to TechCrunch for the scoop on FilmLoop.

February is Blogtipping Month

Inspired by Ben Yoskovitz mentioning Ready Fire Aim in his blogtipping post, I’ve decided to catch the bug and do one of my own. Blogtipping is a simple concept -

1. Choose 3 blogs (I’ve chosen 4 though)
2. Make a list of 3 things you like about each one
3. Make one tip as to how each blog could be improved

Most of the blogs listed below are entrepreneurship focused, however, I’ve included a web design and technology related blog as well. Hopefully I’ve included one or two you haven’t heard of before…

Blog #1: OnStartups by Dharmesh Shah – Feed

• I love Dharmesh’s writing style, it’s very hands on and direct. I find it easy to immediately apply his tips in my day to day life.
• The “Pithy Insights” posts are brilliant. Often lists like these are generic, but Dharmesh’s are always unique and on point.
• Dharmesh writes regularly, and his post length is long enough to be thorough, but not so long that he drones on.
• Tip: Work a little on your design. The header is excellent looking, but once the reader gets down to the content of the blog, things are a little muddy. The tags and social bookmarking links are kind of jumbled, and it looks like you’re not exactly sure where they should go.

Blog #2: Bokardo by Joshua Porter – Feed

• I like the 3 column layout. Most of the time I think 3 columns is too much for a blog, but Josh’s flow together nicely, and contain relevant information.
• The “Colophon” box in the footer is an excellent touch. It makes me feel like Josh is not only instructing me in design with his content, but also wants to use the design of his blog as a teaching point, and exposing his color and font choices makes it easier for other designs to be inspired by his.
• Josh seems to make an effort to write to promote conversation. Almost all his posts either ask questions of his readers, or express his viewpoint, while leaving the topic open for discussion.
• (Bonus praise) Josh includes a RSS subscription link at the bottom of every post, prompting readers to subscribe if they liked his article. A good way to grab subscribers.
• Tip: I’m not sure I’m a fan of the excerpts on the front page. Some of them aren’t long enough to indicate the subject of the article. I’d suggest reducing the number of posts that appear on the frontpage, but including their full text.

Blog #3: WorkHappy by Carson McComas – Feed

• I love that Carson prominently displays a “submit” link where readers can submit content to his blog.
• The “Happy Quote” feature that is sprinkled throughout the content provides great quotes (I love quotes) amd breaks up the long blocks of text.
• Normally I skip over recommended reading sections, but Carson’s caught my eye. Most of his selections are extremely relevant, and I’m tempted to grab one or two on them from Amazon on his recommendation.
• Tip: I’d like it if your design was centered on the page. To me, it feels as though the whole site is sliding off the bottom-left of the page (especially at higher resolutions). Don’t change your design, just center the whole thing on the page, to distribute the whitespace evenly on either side.

Blog #4: The Entrepreneurial Mind by Jeff Cornwall – Feed

• It’s great to read about entrepreneurship from someone who’s made it his career to study and teach it. Jeff’s posts have an educational quality to them that is really unique, and I feel he’s writing to teach, not just to garner page impressions.
• I enjoy that Jeff occasionally strays from purely entrepreneurial content, sometimes writing on politics, economics, and world events. However, he always brings it back to how it affects the entrepreneur.
• I like the list of the 5 most recent posts at the very top of the homepage. It makes it easy to read the headlines and jump to a post I may have missed, without scrolling.
• Tip: So much great content, and unfortunately not a lot of feedback. Try to make an effort to encourage discussion in the comments section. Leave part of the issue open for debate, or ask a question of your audience. After all, what teacher doesn’t like a little participation!

That’s it for this time, I hope I’ve opened your eyes to some new voices, and been helpful to those blog authors highlighted above. See everyone next time.

Why Net Neutrality is Crucial for Entrepreneurship

If you’re not familiar with net neutrality, read up on Wikipedia.

I wrote before about the defeat of Senate bill HR5252, which would have dealt a major blow to network neutrality and changed the internet as we know it. There is still an uphill battle to be fought, however things are looking rosier. The November elections ousted many of the congressmen and women that were against net neutrality, a bipartisan neutrality bill has been introduced, and Ed Markey, chairman of the senate subcommittee that oversees telecommunication, has promised to keep the net neutrality ball rolling.

So why does this matter for entrepreneurs?

If the internet becomes a privileged medium, accessible only to those with deep pockets, then the traditional and unique equal footing that has been the hallmark of the internet will be lost. New companies will find it much harder to break in and thrive, reminding me of more traditional media outlets that are dominated by a few players, with high barriers to entry (see television, radio, publishing). Many of today’s most successful Internet companies (Amazon.com, eBay) began as small independent start-ups that thrived because of the Internet’s inherent freedom. Without that freedom, America’s small businesses will suffer.

Startups are small, cash strapped entities trying to pick themselves up by the bootstraps and wrest a market segment away from the big boys. Often those big boys have names like “Google”, “Yahoo”, “Facebook”, and “MySpace”. On a non-neutral internet, these big boys would have plenty of cash to play by the telco’s new rules, and ensure that their content continues to get served up at top speed to the web surfing public.

Your startup already has enough trouble hiring developers, creating buzz, drawing users, paying lawyers, and putting food on the table. Now not only do you have to do those things, you need to match Google and Yahoo’s tithe to the telcos to ensure that people can even access your site. And I hope you can pay for the same level of access they can afford, because we know web surfers aren’t going to wait more than 5 seconds for the next great thing, when the same comfortable thing loads instantly.

As the world’s last truly free and equal communication medium, the internet must remain neutral. I’d encourage all entrepreneurs (not just American, it’s not called the world wide web for nothing) to contact your political representatives and encourage them to vote for network neutrality.

Exit Strategies

This article is the fourth in the Entrepreneurship Series.

When starting a company, probably the last thing any entrepreneur thinks about is his exit strategy. The exit strategy, sometimes referred to as a “liquidity event” or “harvest strategy” is basically the entrepreneur’s way of “cashing out” of their company. This is the part where years of hard work come to fruition and turn into profit. Cashing out is often not as simple as it seems. There are numerous ways of converting the non-liquid asset of equity in a private company to the liquid asset of cash, and each is fraught with it’s own unique pitfalls.

The Lifestyle Company
While this isn’t an exit strategy per se, it is certainly a way to extract cash from your business, without giving up any ownership. If you’re running a sole proprietorship, you’re pretty much free to do whatever you want – and that includes setting your own salary or paying yourself bonuses. The Lifestyle Company is one that operates to make profits for itself, but also to support you, the owner’s, lifestyle. This type of company doesn’t strive for explosive growth or high valuations, as it exists to provide you with a stable and sizeable income year in and year out. Of course, the size of that income probably depends on your profits, so growth cannot be totally ignored. You must keep in mind though, that any money you take out of the business as salary and bonuses is money that the company cannot spend to support itself. If your business requires capital to grow, taking too much out now can really hurt your company in the future.

Acquisition
An acquisition is one of the most popular exit strategies, especially among today’s startups. Today, large companies such as Google and Yahoo are recognizing that growth through acquisitions is often easier and cheaper than organic growth. This means that it’s easier for a large company to purchase a small company to gain entrance to a new market, rather than trying to break into that market themselves. This is good news for entrepreneurial companies that can distinguish themselves and attract customers early in their lifetimes. Acquisitions are usually quite profitable for the investors in the acquired company, and depending on the terms, can still leave them with a lot of control over their product. Often, a larger company will choose to keep an acquired company mostly autonomous, especially if it has a very strong brand or management team. An acquisition can often prove the most desirable exit for the startup founder, allowing the conversion of equity to liquid cash, while often retaining a large amount of control over their venture.

Initial Public Offering
An Initial Public Offering, also known as “going public”, is the most profitable and most high profile exit strategy. However, it is also the hardest to successfully execute, and the rarest. Fewer than 100 companies go public every year, and there are only about 7000 public companies out of the millions in operation in the United States. Having a successful IPO is equivalent to going pro in sports – your chances of getting there are almost infinitesimal, but the payoff is huge if you do.

If going public is a feasible option for your company, the first thing you’ll have to do is hire a team of experts who will assist your business in its IPO. You’ll need a law firm, an investment bank, and an accountant. Choose candidates for all three of these positions that are well qualified and experienced with IPOs – they will manage most of what goes on with your IPO.

Another important and time-consuming task facing the IPO team is the development of the prospectus, a business document that basically serves as a brochure for your company. Since the SEC imposes a “quiet period” on companies once they file for an IPO, (which generally lasts about 25 days after a stock starts trading) the prospectus will have to do most of the talking and selling for your company during the most important part of your IPO. The prospectus should include the past five years of financial data for your company, information on the management team, and a description of your target market, competitors, and growth strategy. There are other key components as well, which your IPO team will make sure are included.

Being a public company comes with certain benefits and drawbacks. The more immediate positive is the large amount of cash raised through an IPO, which can enable solid growth. Also, after going public and converting your company’s equity into the currency of stock shares, acquisitions and changes in ownership are made much easier. All you need to do is buy and sell stock. Furthermore, as a public company, you’ll enjoy increased exposure and prestige, which will help you hire and retain the best executives and employees.

However with increased exposure comes increased regulation and scrutiny. A public company is required to regularly file detailed financial statements with the Securities Exchange Commission, and is subject to accounting audits. Your newly public company will also be subject to the scrutiny of market analysts and the public in general. All of your strategic moves will be analyzed, and the market’s opinion of them will affect your stock price. Analysts will regularly make forward-looking statements about your business, and it will be crucial that you meet these expectations, or risk a decrease in stock price.

In summary, there are a few different options for exiting your business, each with a different set of benefits and drawbacks. It’s impossible to say which is the “best”, as each business owner has a unique set of goals, and a unique expectation of what they expect out of their business.

5 Web Design Tips for Startups

This article is the third in the Entrepreneurship Series.

Chances are if you’re starting a company these days, you’ve also thought about what your website will look like. This is especially true for web based startups – your website is your storefront and your public face, probably your most direct and frequent contact with customers. Therefore, you should spend time to ensure that your website is as effective and user friendly as it can be. The best websites clearly and pleasantly convey your company’s message, and make it obvious how the casual browser can become a customer or user. You can take large steps toward these goals by following these guidelines:

1.) Put your most important content “above the fold”
For years, newspapers have put their headlines and biggest stories “above the fold” – meaning the top half of the page that you would see before opening the paper. This same principle applies to web design. Put your most important content at the top of the page, where people can see it without scrolling. Visitors should be able to get a clear picture of your site’s purpose, learn how to navigate around, and hear your call to action (see below) without ever scrolling.

2.) Have a prominent “call to action”
Virtually all web sites have a persuasive purpose – to get someone to register, subscribe, bookmark, or buy something. The success of your business is often measured in terms of the number of users you have, and a loyal user is worth more than you may think. As an example – Google recently bought YouTube for $1.65 billion, or $82 per each of YouTube’s 20 million unique monthly visitors. So how can your business convert a casual visitor into a user? All you have to do is ask, and be sure your visitors hear you. Somewhere above the fold (as discussed above), make sure there is a colorful, prominent, and clickable “call to action”. In marketing speak, a call to action is text that compels a person to take action (typically buy a product). For example – “Register for free today”, “Call us at (704) 555-1212″, or “Buy our widget now”. This conveys to the visitor what you want from them, and what they need to do right now to get involved.

3.) Minimize “hoops”
Web surfers in general have notoriously short attention spans, so if you’ve been lucky enough to hook them with your call to action, you need to make sure you reel them in quickly and successfully. Even if a visitor is interested in registering for your site, an overly long, elaborate, or invasive sign up or order process will quickly send them elsewhere. Minimize the number of hoops they must jump through to become a registered user. When designing your sign up form, consider what information you need right now, and which can wait until after the person is registered (prompt them to fill out their profile). Chances are, all you really need right now is their email address and a password. Unless you’re going to charge them up front, their name, credit card, address, dog’s name, and favorite food can probably wait until later.

4.) Play well with others
One of the hallmarks of “web 2.0″ is open content. Sites like Flickr, Facebook, and YouTube have all made their data available to other applications via APIs. Take advantage of their openness – let your users import their information from these sites and others (assuming it’s relevant) instead of uploading it again themselves. This minimizes “hoops” for the user, as they only have to upload/update/enter their information once, even if it’s on another site. And as we’ve learned before, having fewer hoops is crucial for getting and retaining users.
If you’re going to take advantage of other site’s openness, you should also follow their lead. Make your own content available for your users to view and use anywhere on the internet. Implement an API, offer RSS feeds and email notifications. Let people embed your content in blogs, MySpace pages, and personal homepages. Witness how successful this philosophy has been for YouTube. One of the major reasons YouTube has been so successful is that their typical user never actually visits their site. Most of YouTube’s videos are embedded elsewhere on the web, with only a small YouTube logo in the bottom right to identify them. YouTube’s brand is spread across the entire internet, making it nearly impossible to not see their logo during a browsing session. As a web designer, your first instinct is to try to increase traffic and page views, but remember – by being social and opening your content, you are able to put your content and brand in front of your users, even if they’re not actually browsing your web site.

5.) Be transparent
In the same spirit of openness, also make an effort to make (parts at least) of your company transparent. Today’s internet is all about community, and your company needs to be a part of that. One of the best ways to keep in touch with the community is to keep a company blog. Periodically write a teaser post about an upcoming feature, an update on the direction of the company, or call for feedback. Let your users comment on these posts, and read their comments. Then, next time you’re looking at new features to add, consider what your users asked for. If you end up adding what they asked for (and you should!) write a post announcing the new feature, and credit the original feedback you received that inspired it. This makes your users feel involved and connected, and encourages them to continue participating in your community.

In summary, keep the user in mind when designing every aspect of your startup’s web site. Everything you do should be designed with the user’s experience in mind. Today’s internet is a fast paced place with tons of new startups, and if you want yours to be relevant, you’re going to have to fight for it. Grabbing visitors with a well designed and usable web site is the first step toward success.

What Makes a Successful Entrepreneur?

This article is the second in the Entrepreneurship Series.

Hours of banter, pages of writing, and thousands of dollars of research have been devoted to answering one of the most popular and elusive questions about entrepreneurship: “What Makes a Successful Entrepreneur?”. Is it a personality trait? Can entrepreneurship be learned? Can it be taught? What kind of person does it require? Can anyone become this kind of person, or are certain people born for the entrepreneurial life? These questions can be answered by examining anecdotal evidence, industry trends, and scientific research. And in short the answer is – it depends.

In recent years, the term “entrepreneur” has escaped its stereotype as “your friend who can never hold down a job” and transitioned into “your rich friend with celebrity status”. “Entrepreneur” used to carry roughly the same definition as “inventor”, which conjures images of a mad scientist in a garage. Now, thanks to the wild success of companies like Facebook, Yahoo, Google, and Ebay, entrepreneurship is cool. Kids that used to want to be fireman now aspire to create the “next Facebook”, and colleges are creating entrepreneurship programs to cater to them. So if entrepreneurship is suddenly so hip, why do 99 college graduates out of 100 take solid jobs at established companies with stable incomes? The answer may lie in the personality of that one student that strikes out on his own and starts a venture. Let’s look at the results of some studies performed on the personalities of entrepreneurs, and examine their conclusions –

• Entrepreneurs are non-conformists. Being non-conformists, they are innately driven to differentiate from the status quo. They don’t listen when someone tells them something cannot be done. [1]
• Entrepreneurs are motivated by achievement rather than power or money. They set high goals that they can reach through application of their skills. They are more interested in creating something than getting rich (which ironically, sometimes is the result). [2]
• Entrepreneurs prefer to do new things, or to do familiar things in a different and better way. Entrepreneurs have a preference for innovation. [3]
• Entrepreneurs have high uncertainty tolerance. They are willing to accept that they cannot predict the future, but recognize that they can guide it through their actions. [4]

So what are we to make of these characteristics? Can you teach someone to be a non-conformist? Can you lecture on uncertainty tolerance? It seems the answer is no – entrepreneurs are born, not made. The research suggests that you cannot become an entrepreneur – you ARE an entrepreneur. This is supported by examining children’s early manifestations of entrepreneurial traits, prior to receiving any formal training.

Long before they were starting innovative companies, they were trying their hand at the most time tested entrepreneurial exercise ever conceived – the lemonade stand. Nearly every child has sat on the curb and hawked lemonade on a hot summer afternoon, and most only did it once, determining that the few dollars wasn’t worth the time in the sun. However, a few children realize that by deviating from the basic formula, they can easily turn a few hours of work into a new bike. Perhaps they move out of their front yard to a more desirable location in front of the local pool. Maybe they hire a friend and operate two locations at once. Maybe they expand into cookies as well. This children are entrepreneurs – long before they have had any sort of formal training in entrepreneurship, or even business, they are exhibiting some of the key entrepreneurial characteristics outlined above.

So if entrepreneurs are born and not made, why do so many colleges and universities offer programs in entrepreneurship? These programs exist not to train new entrepreneurs, but to cultivate and enhance the entrepreneurial spirit that may be lying dormant in young college students. In addition the in-born characteristics that drive entrepreneurship, there are important entrepreneurial skills that can be learned – the ability to see and articulate a vision, team leadership and motivation, and opportunity identification, to name a few. There are also many talents needed by today’s entrepreneur that clearly must be learned. Writing a business plan and executive summary, creating pro forma financial statements, and the art of the elevator pitch, to name a few.

We can conclude that successful entrepreneurs are both born and made. It appears that entrepreneurs have a dual composition – a certain set of born-in personality traits that drive them to seek out and succeed in the entrepreneurial life, as well as set of learned skills that enable them to apply their natural gifts most effectively.

Citations

[1] Rosenfeld, R.B., M. Winger-Bearskin, D. Marcie, and C.L. Braun. 1993. Delineating
Entrepreneurs’ Styles: Application of adaptation-innovation subscales.
Psychological Reports, 72(1), 287-298.
[2] Hornaday, R.H. 1982. Research about Living Entrepreneurs. In C.A. Kent, D.L. Sexton,
and K.H Vesper (Eds), Encyclopedia of Entrepreneurship (pp. 20-34). Englewood
Cliffs, NJ: Prentice Hall.
[3] Chen, C., R. Green, and A. Crick. 1998. Drucker, P. 1985. Innovation and Entrepreneurship.
New York: Harper and Row.
[4] Chen, C., R. Green, and A. Crick. 1998. Drucker, P. 1985. Innovation and Entrepreneurship.
New York: Harper and Row.