1
250-387 Entrepreneurship
Lecture 1 [Chap. 1 & 2] 09/04/01
Introduction
The Entrepreneurial Perspective
In the year 2000, people who took collegiate
entrepreneurship courses were:
• 34% more likely to start their own
businesses than people who did not
• 798% more likely to be successful in their
business than those graduates who did not take
entrepreneurship course(s)
Age of entrepreneurial economy (?), in 1998
2
(Wells Fargo/NFIB)
• 5,744,000 start-ups, about 40% are
subsidiaries of existing businesses, this means
about 1% of the U.S. population applied for a
business license
• 1,799,000 businesses purchased
• 1,333,000 businesses closed for various
reasons
• Highest incidence of start-ups is in the
southeast
• About 50% of start-ups were in the service
industries
• About 60% profitable within the first
year
• However, the number of self-employed
persons fell about 10% between 1994 and
1999 while their income increased 35%
Entrepreneurial business vs. Small business
3
Small Business defined - any business that is
independently owned and operated and is not
dominant in its field
(Small Business Act of 1953)
Committee for Economic Development
1. Independent ownership
2. Owner supplied capital
3. Mainly local operation
4. Relatively small size in the industry
Entrepreneurship vs. Intrapreneurship
Entrepreneurship – is a way of thinking,
reasoning, and acting that is opportunity
obsessed, holistic in approach, and leadership
balanced (Timmons)
or
Entrepreneurship – is the process of creating
something new, with value, by devoting the
4
necessary time and effort, assuming the
accompanying financial, psychic, and social
risks, and receiving the resulting rewards of
monetary and personal satisfaction and
independence.
Four basic aspects of entrepreneurship
1. Creating something new of value
2. Organization (devotion of time and effort)
3. Assuming the risks
4. Rewards (growth)
Entrepreneur - French, literally “between
taker” or “go-between”
Entrepreneur defined - a person who takes
responsibility for a business project, organizes
the resources it requires, and assumes the risk it
entails.
Venture Capitalist - a professional money
manager who makes risk investments from a
pool of equity capital to obtain a high rate of
return on the investments.
5
“New Venture Creation” or
“Greenfield Startup”
Creative acts
• a new product or service
• new methods or technology
• new markets
• new sources of raw materials and resources
• new forms of industrial organization
BUSINESSES SELDOM START BIG
Entrepreneurial process - no magic formula
BIG THREE
1. Idea & an opportunity
• 90% of opportunities arise from your
employment
6
• 8-10 years of experience typical
2. Champion – you, and often a team
3. Resources
• Build an organization
• You do need money, but not necessarily
a lot of money, to get started
Factors effecting the entrepreneurial decision
No Go Go
Financial obligations Financial resources
Need for security Self-actualization
Family obligations Family support
Inexperience Relevant experience
What do entrepreneurs “look” like
1. Calculated risk-takers
2. Need for achievement
3. Sense of independence
4. Internal locus of control
5. Tolerance for ambiguity
7
6. Most love what they do
7. Community leaders
Demographic of entrepreneurs in 1998
• 70% of businesses are started by one person
• 36% of businesses are started by women
• 70% attended college or technical school
• 63% were married
• Median household income was $40,000
$60,000
• 77% were employed at time of start-
up/purchase
Reason given for starting a business, 1998
• 26% grow business
• 37% decent living
• 29% supplemental income
• 4% until something better come along
vs.
8
Why “people” go into business
1. Positives
• Want own show, independence (part illusion -
employees, suppliers, govt. & customers)
• Financial security/success, need income
• Need to do it better - job satisfaction
• Being in control/want something to do
2. Negatives
• Long hour, 12+
• Uncertain income & loss of capital
• Family comes second
• Quality of life suffers, no benefits
Business types from an owner’s perspective
1. Job substitutes - a living, hard to realize a
capital gain
2. Lifestyle firm - more than a living,
but basically a family business
3. Foundation company – new business area,
rarely goes public (Gore)
4. High potential venture - new Netscape
9
Most important contribution of entrepreneurs
and small business - offers the opportunities for
success and independence to anyone and
everyone (Horatio Alger, our national heritage)
• >50% of new businesses are started by women
• increasing minority startups
• result of downsizing
• spinoffs
Strong economies need entrepreneurs &
entrepreneurs need a strong economy
• 52% of GNP
• 54% of all private jobs
• >50% of all new high paying jobs
• 65% of all initial jobs are in small business
• >50% of all major inventions in past 30 years
International Entrepreneurship
10
Small business failure Approx. 18% of all
small businesses fail within 8 years (Fortune,
Sept. 6, 1993)
• About 37 % survive more than 6 years
(SBA, 1992)
OR
• 54% survive more than 8 years
(Fortune, Sept. 6, 1993)
YOUR CHOICE, I favor Fortune’s figures
• Think big, the larger the start-up the lower the
failure rate
11
• Far fewer planned small businesses fail (many
reasons for failure are eliminated before hand)
• Substantial $ losses are rare, approx. 1%
(Fortune, Sept. 6, 1993)
• Bankruptcy less than 00.5%
(Fortune, Sept. 6, 1993)
What successful entrepreneurs know/do
1. Competitive threats
2. Identify the opportunities
3. 'See' the customer’s needs (interaction)
4. Shoot at a moving target
5. Leadership
6. Business economics
7. Technologically literate
8. Ethics
9. Business philosophy or students of business
Learned entrepreneurial attributes
12
1. Total commitment, determination &
perseverance (will to make it happen)
2. Drive to achieve & grow
3. Opportunity and goal oriented (focus is on
opportunity, not resources or strategy)
4. Taking initiative & responsibility
5. Persistent problem solving
6. Veridical awareness & sense of humor
(strengths & weaknesses, realistic, optimistic
realism)
7. Seeking & using feedback
8. Internal locus of control - belief in self
9. Tolerance of ambiguity, stress & uncertainty
10. Calculated risk taking and risk sharing
11. Low need for status and power - exert
influence without formal power, adept at
conflict resolution
12. Integrity & reliability
13. Decisiveness, urgency & patience
14. Dealing with failure
15. Team builder & hero maker
Not-so-learnable entrepreneurial attributes
1. High energy, health and emotional stability
13
2. Creativity and innovativeness
3. High intelligence & conceptual ability
4. Vision & capacity to inspire - leadership
