Entrepreneurship

L.1 Introduction to
entrepreneurship
Steve Blank - Entrepreneurship is a Calling
https://www.youtube.com/channel/UCJ82g-PdaIjVfXD7g6CyHew
Inroduction
There is tremendous interest in entrepreneurship
around the world.

Global Entrepreneurship Monitor is a joint research effort by

Babson College, London Business School, Universidad del
Desarrollo (Santiago, Chile), and Universiti Tun Abdul Razak
(Malaysia), tracks entrepreneurship in 70 countries. Of particular
interest to GEM is early stage entrepreneurial activity, which
consists of businesses that are just being started and businesses
that have been in existence for less than three and a half years.
Rates of early-stage entrepreneurial activity
(ages 18 to 64)
country Percent of
Population While the highest rates of entrepreneurial start-up
Starting a new activities occur in low-income countries, where good
Business jobs are not plentiful, the rates are also impressive in
Argentina 15.9% high-income countries such as Germany (5.0 %), United
Brazil 17.3% Kingdom (7.1 %), and the United States (12.7 %).
Chile 24.3%
What the 12.7 % means for the United States is that
China 14.0%
almost 1 out of every 8 American adults is actively
France 4.6% engaged in starting a business or is the owner/manager
Germany 5.0% of a business that is less than 3,5 years old.
Nigeria 39.9%
Russia 5.8%
United Kingdom 7.1%
United States 12.7%
Determinants to set up a start-up

The GEM study also identifies whether its respondents are starting a
new business to take advantage of an attractive opportunity or
because of necessity to earn an income.

The majority of people in high-income countries are drawn to

entrepreneurship to take advantage of attractive opportunities.

The reverse is true of people in low-income countries, who tend to be

drawn to entrepreneurship primarily because of necessity (resulting
from a lack of career prospects).
A bit of statistics
The often used statistic that 9 out of 10 businesses fail in their first few years is an
exaggeration. It simply isn’t true.
The evidence indicates that the three-year survival rates for entrepreneurial
ventures established in Denmark is 53.5 percent, while it is up to 66.9 percent in
other parts of Europe.
Historically, survival rates of entrepreneurial firms launched in the United States
have been as high as 50 percent after four years.

The percentage of firms that do fail in Europe, the United States, and throughout
the world shows that a motivation to start and run a business isn’t enough; it
must be coupled with a solid business idea, good financial management, and
effective execution to maximize chances for success.
What is Entreprenurship and Why it is important?

The word entrepreneur derives from the French words

entre, meaning “between” + prendre, meaning “to take.”
An inventor creates something new.
An entrepreneur assembles and then integrates all the
resources needed—the money, the people, the business
model, the strategy, and the risk-bearing ability—to
transform the invention into a viable business.
Entreprenurship - definition

- the process by which individuals pursue opportunities

without regard to resources they currently control for
the purpose of exploiting future goods and services.
or
- the art of turning an idea into a business.
- an entrepreneur’s behavior finds him or her trying to
identify opportunities and putting useful ideas into
practice
Entreprenurship - definition

Entrepreneurship is usually defined in the context

of an entrepreneur or team of entrepreneurs
launching a new business.
However, ongoing firms can also behave
entrepreneurially. (e.g. Google)
Established firms with an entrepreneurial
emphasis are proactive, innovative, and risk-
taking.
Corporate entreprenurship - definition

Established firms with an orientation toward

acting entrepreneurially practice
corporate entrepreneurship.
entrepreneurial firms conservative firms
are typically proactive take more of a “wait and see”
innovators and are not averse posture, are less innovative,
to taking calculated risks and are risk averse

regularly look for ways to cut

bureaucracy
Why Do people become entrepreneurs?
The three primary reasons frustrated working
that people become Be Their
in traditional jobs
some entrepreneurs
entrepreneurs and start Own
transition from a
Boss
their own firms are: traditional job to
owning their own
employees choose to leave the
Pursue business more gradually
firm employing them in order to
Their
start their own business as the Own
means to develop their own money is rarely the
Ideas primary motivation behind
ideas
the launch of an
recognize the need for a product entrepreneurial firm
or service that is not available in Pursue
Financial the average entrepreneur does
the marketplace. Rewards not make more money than
someone with a similar amount
of responsibility in a traditional
job.
Characteristics of successful entrepreneurs

Passion for business Product/ customer Focus

Passion is particularly important for both for-profit and While it’s important to think about management,
not-for-profit entrepreneurial organizations because marketing, finance, and the like, none of those functions
although rewarding, the process of starting a firm or makes any difference if a firm does not have good
building a social enterprise is demanding products with the capability to satisfy customers.
Successful entrepreneur

Tenacity despite failure

Entrepreneurs are typically trying something new - the
possibility of failure exists. Developing a new business Execution intelligence
idea may require a certain degree of experimentation
before a success is attained.
Five primary reasons passion is important for the launch
of a successful entrepreneurial organization
Reason Passion is Explanation
important
1. The ability to learn and Founders don’t have all the answers. It takes passion and drive to solicit feedback, make
iterate necessary changes, and move forward. The changes won’t always be obvious. Passion makes the
search for the right answers invigorating and fun.

2. A willingness to work Commonly, entrepreneurs work longer hours than people with traditional jobs. You can only do
hard for an extended that, on a sustained basis, if you’re passionate about what you’re doing.
period of time

3. Ability to overcome It’s rare that an entrepreneur doesn’t experience setbacks and hear many “no’s” from potential
setbacks and “no’s” customers, investors, and others while building an entrepreneurial business or social enterprise.
The energy to continue comes from passion for an idea.

4. The ability to listen to You’ll meet plenty of people along the way—some with good intentions and some without—who
feedback on the will tell you how to improve your organization and how to improve yourself. You have to be willing
limitations of your to listen to the people with good intentions and make changes if it helps. You have to be able to
organization and yourself brush aside feedback from people with bad intentions without letting them get you down.

5. Perseverance and Perseverance and persistence come from passion. As an entrepreneur, you’ll have down days.
persistence when the Building an entrepreneurial organization is fraught with challenges. Passion is what provides an
going gets tough entrepreneur the motivation to get through tough times.
Case 1 - What Went Wrong?
Prim: How a Lack of Passion and Resolve Can Kill a Business
Questions for Critical Thinking
• Why is passion such a critical part of entrepreneurial success? Prim’s founders were apparently passionate
about building a company but not passionate about the laundry business specifically. In what ways is this
combination problematic?
• How could Prim’s co-founders have better anticipted that laundry services would eventaully see Prim as
siphoning off their own business and be reluctant to work with them?
• Rather than employ its own drivers to pick up and deliver laundry for its customers, Prim relied on the use
of third-party delivery services. In what ways do you think this approach could have limited Prim’s growth in
other markets?
• San Francisco, the city in which Prim launched, has several innovative laundry services. These services
include LaundryLocker, where you drop your clothes in a public locker, Sfwash, a delivery service where you
pay by the pound, and Sudzee, which requires special lockable bags. Spend some time studying
LaundryLocker (https://laundrylocker.com), Sfwash (https://sfwash.com), and Sudzee (https://sudzee.
com). Select the service that you think has the most potential and explain the rationale for your selection.
Compare the service to Prim’s approach.
Case 2 - Savvy entrepreneurial
Firm Pandora: What’s Possible When an Entire Company Has
“Tenacity”
Questions for Critical Thinking
• How do you think Westergren was able to perservere through 300 rejections before an
investor finally said yes to Pandora’s attempts to raise additional money?
• If you had been a Pandora employee during the time the firm was essentially broke,
would you have agreed to work for no money? Westergren provided two reasons that
the employees present at the time were willing to work without pay. Would these
reasons have been good enough for you? Explain your answer.
• Think of a time in your life where you showed tenacity and the tenacity produced
positive outcomes. Briefly relate the story and what you learned from the experience to
your classmates.
• What lesson or lessons can other entrepreneurial startups learn from Pandora’s story?
Execution intelligence

An ancient Chinese saying warns,

“To open a business is very easy; to keep it open is
very difficult.”
Execution intelligence means:

- the ability to fashion a solid idea into a viable business

- the factor that determines whether a start-up is
successful or fails
- developing a business model, putting together a new
venture team, raising money, establishing partnerships,
managing finances, leading and motivating employees,
etc.
- to translate thought, creativity, and imagination into
action and measurable results
Execution intelligence - Starbucks
The business idea of Howard Schultz, the entrepreneur behind the success of Starbucks, was his
recognition of the fact that most Americans didn’t have a place to enjoy coffee in a comfortable,
quiet setting. Seeing a great opportunity to satisfy customers’ needs, Schultz attacked the
marketplace aggressively to make Starbucks the industry leader and to establish a national brand.
First, he hired a seasoned management team, constructed a world-class roasting facility to supply
his outlets with premium coffee beans, and focused on building an effective organizational
infrastructure.
Then Schultz recruited a management information systems expert from McDonald’s to design a
point-of-sale system capable of tracking consumer purchases across 300 outlets.
This decision was crucial to the firm’s ability to sustain rapid growth over the next several years.
He was succeeded because: He built a seasoned management team, implemented an effective
strategy, and used information technology wisely to make his business thrive.
Common myths about entrepreneurs

myth 3:
myth 1: myth 2:
Entrepreneurs are
Entrepreneurs are Entrepreneurs are
motivated
Born, not made Gamblers
primarily by money

myth 4:
myth 5:
Entrepreneurs
Entrepreneurs love
should be Young
the Spotlight
and Energetic
Myth 1: Entrepreneurs Are Born, not made

- the mistaken belief that some people are

genetically predisposed to be entrepreneurs
- no one is “born” to be an entrepreneur and that
everyone has the potential to become one
Myth 1: Entrepreneurs Are Born, not made

Common traits and characteristics of entrepreneurs

A moderate risk taker Optimistic disposition
Persuasive A networker
Promoter Achievement motivated
Resource assembler/leverager Alert to opportunities
Creative Self-confident
Self-starter Decisive
Tenacious Energetic
Tolerant of ambiguity A strong work ethic
Visionary Lengthy attention span
Myth 2: Entrepreneurs are Gamblers
• Entrepreneurs are usually moderate risk takers, as are most people.
• This finding is affirmed by The Hartford’s 2013 Small Business Success
Study. The study conducted a survey of 2,600 business owners. A
total of 79 % of the participants rated themselves as conservative
rather than risky.

• Entrepreneurs typically have jobs that are less structured, and so

they face a more uncertain set of possibilities than managers or rank-
and-file employees.
Myth 3: Entrepreneurs are motivated
primarily by money
It is naïve to think that entrepreneurs don’t seek financial rewards.
However, money is rarely the primary reason entrepreneurs start new
firms and persevere.

Some entrepreneurs warn that the pursuit of money can be distracting.

Media mogul Ted Turner said,
“If you think money is a real big deal … you’ll be too scared of losing it
to get it.”
 Myth 4: Entrepreneurs should be Young and
Energetic
the majority of individuals who start companies
are in their 30 and 40 Age distribution of Business
the majority of business owners have work Owners
experience prior to launching a new venture Age % of business
Investors often cite the strength of the Owners
entrepreneur (or team of entrepreneurs) as their 18-29 17,5
most important criterion in the decision to fund
new ventures. Venture capitalists often express 30-39 25
is that they would rather fund a strong
40-49 24
entrepreneur with a mediocre business idea
than fund a strong business idea and a mediocre 50-59 21
entrepreneur. 60+ 12,5
“Strong” in the eyes of an investor is experience in the area of
the proposed business, skills and abilities that will help the
business, a solid reputation, a track record of success, and
passion about the business idea.
Myth 5: Entrepreneurs love the spotlight
Vast majority of entrepreneurs do not attract public attention.

In fact, many entrepreneurs, because they are working on proprietary

products or services, avoid public notice.
Types of start-up firms
Salary-Substitute
Firms
• Firms that basically provide
their owner or owners a
similar level of income to
what they would be able to
earn in a conventional job
Lifestyle
Firms
• Firms that provide their
owner or owners the
opportunity to pursue a
particular lifestyle, and make
a living at it
Entrepreneurial
Firms
• Firms that bring new products
and services to the market by
creating and seizing
opportunities regardless of
the resources they currently
control
• One characteristic of
entrepreneurial firms is that
they partner with other firms
and organizations, often to
obtain the boost they need to
realize their full potential.
Case 3 - Start-up Incubators and Accelerators:
A New Way of Gaining Access to Mentors, Partners,
Investors, and Other Critical Start-up Resources
Questions for Critical Thinking
• If you were starting a new venture, do you think you would benefit from
participating in a business incubator or accelerator program? If so, what do you
think the primary benefits would be?
• Find an example of a start-up incubator or accelerator at the college or university
you are attending or in the town you live in or a nearby city. Describe the
program. Which one of the Austin, Texas, programs does it most resemble?
• If a student has a promising business idea, what can s/he do while in college to
improve his or her chances of being accepted into a well-regarded incubator or
accelerator program?
• Make a list of the types of business partnerships that participants in a business
incubator or accelerator program are likely to fashion.
 Changing demographics of Entrepreneurs
While men are still An important factor
more likely to start facilitating the growth of
businesses than
women, the
Women Minority minority entrepreneurs
is the number of
number of women-
owned businesses
Entrepreneurs Entrepreneurs organizations that
promote and provide
is increasing. assistance.

20% of new A desire to pursue an

businesses were entrepreneurial career is
started by people
between 50 and 59
Senior Young high among young
people.
years old while
another 12.5%
Entrepreneurs Entrepreneurs
were founded by
individuals 60 years
old and older.
The positive effects of entrepreneurship and
entrepreneurial firms
entrepreneurs develop new products and technologies that over time
make current products and technologies obsolete

creative destruction
New products and technologies are typically better than those they replace and
the availability of improved products and technologies increases consumer
demand, creative destruction stimulates economic activity.
The new products and technologies may also increase the productivity of all
elements of a society.
Economic impact of Entrepreneurial Firms
For two reasons, entrepreneurial behavior has a strong impact on an
economy’s strength and stability.

Job
Innovation
Innovation is the process of creating
Creation
something new, which is central to the
entrepreneurial process. small businesses create a
Small innovative firms are 16 times more substantial number of net new
productive than large innovative firms in jobs
terms of patents per employee.
Entrepreneurial Firms’ impact on Society
Entrepreneurial firms’ innovations have a dramatic
impact on a society.
Think of all the new products and services that make
our lives easier, enhance our productivity at work,
improve our health, and entertain us.

Question: provide 5 examples of such firms.

Entrepreneurial Firms’ impact on larger Firms
Entrepreneurial firms positively impact the
effectiveness of larger firms.
For example, some entrepreneurial firms are original
equipment manufacturers, producing parts that go into
products that larger firms manufacture and sell.
Many entrepreneurial firms have built their entire
business models around producing products and
services that increase the efficiency or effectiveness of
larger firms.
The Entrepreneurial Process

Step3 Step 4
Step2
Step1 Deciding Moving from an Managing and
Developing
to become an idea to an growing the
successful
entrepreneur business ideas entrepreneurial entrepreneurial
firm firm

opportunity recognition,
feasibility analysis, the
development of an effective
business model, industry
analysis, and writing a
business plan
Cases
• YOU BE THE VC - COMPANY: WELLO
• YOU BE THE VC - COMPANY: BRAIN SENTRY

-------------------------

• CASE - GOPRO: A CLASSIC ENTREPRENEURIAL TALE

• CASE - PatientsLikeMe: ALLOWING PEOPLE WITH SERIOUS DISEASES
TO CONNECT WITH ONE ANOTHER AND EXCHANGE SUPPORT AND
ADVICE