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9 Myths About Entrepreneurs - Presentation Transcript

in Title 9 Myths about Entrepreneurs and Entrepreneurship Professor Laura L. Hollis, JD Clinical Professor of Business Administration November 4, 2008 2. #1. Entrepreneurship is a young persons game; most first-time entrepreneurs are either in college or right out of it FALSE In fact, the average age of a first-time entrepreneur starting a technology business is 39! And since this is an average, that means that just as many start-up founders are older as are younger. Source: Wadhwa, Freeman and Rissing, Education and Tech Entrepreneurship, Report of the Kauffman Foundation, May 2008 3. #2. Successful entrepreneurs are those who come up with the most creative, original ideas for their businesses o FALSE o It depends on what you mean by creative and original. o According to some studies, anywhere from 70% - 90% of the ideas for a new business come from an entrepreneurs previous employment or existing business contacts. o In other words, the more experience you get working for someone else, the more likely you are to come up with an idea for a new business. o Source: Prof. Ikhlaq Sidhu, Center for Entrepreneurship and Technology, University of California, Berkeley 4. #3. Most entrepreneurs are motivated by money or greed o FALSE o And not just false, but way, way off. o Most entrepreneurs are motivated by a desire to work for themselves, and a passion for solving problems particularly difficult, entrenched human problems. o Even the most successful entrepreneurs will tell you that if youre in it for the money, get out now; its much easier to make money working for someone else! o Sources: o Scott Shane, The Illusions of Entrepreneurship, Yale University Press o Guest lectures, Lectures in Entrepreneurship course, University of Illinois, 2001-2008 5. #4. Most successful entrepreneurs especially in high-tech companies have Ph.Ds in science o FALSE o 6% of U.S. born tech company founders have a high school diploma or less o 2% have an associates degree, some college, or a certification o 44% have a bachelors degree o 30% have a masters o 4% have an MD o 4% have a JD o Only 10% of high-tech company founders have a Ph.D! o Source: Wadhwa, Freeman and Rissing, Education and Tech Entrepreneurship, Report of the Kauffman Foundation, May 2008 6. #5. Entrepreneurs are born different o FALSE o In fact, a good number of people who become entrepreneurs never planned to be. o Although there are correlations between certain types of behavior or psychological traits and entrepreneurship, it seems that as many successful entrepreneurs learn these skills and acquire these attributes as are born with them. o And we know that some of the most significant personality traits associated with entrepreneurship such as self-efficacy - CAN be taught o Source: Bill Lucas, MIT and Sarah Cooper, Cambridge University 7. #6. To be successful, an entrepreneur needs a degree in business o FALSE o Although many self-employed people have business degrees, there is a stronger correlation between a degree in the sciences or engineering 1.

According to a recent study, 34% of U.S. founders of high-tech companies held degrees in business, finance or accounting o 47% held degrees in STEM-related fields ( S cience, T echnology, E ngineering, or M athematics o Source: Wadhwa, Freeman and Rissing, Education and Tech Entrepreneurship, Report of the Kauffman Foundation, May 2008 8. #7. Most entrepreneurs are millionaires o FALSE o Most new businesses fail o The average self-employed person earns less than they would working for someone else o Entrepreneurs work more hours, on average, than those working for someone else o Source: Scott Shane, The Illusions of Entrepreneurship, Yale University Press 9. #8. You cant be an entrepreneur without venture capital o FALSE o only .03% of new companies are financed by venture capital o the average amount of money used to start a business is between $15,000 - $20,000 o the most common source of this money is the entrepreneurs savings ; not banks, or even loans from friends and family o 65% of entrepreneurs finance their companies use some form of personal debt o fewer than 1 in 12 start-ups gets investment money (equity financing) from family and friends o Source: Scott Shane, The Illusions of Entrepreneurship, Yale University Press #9: Entrepreneurs are happier than those who work for other people The media has made lots of reports

about entrepreneurs. Some may be true, some are not. Here are te 5 myths about being an entrepreneur.

Myth #1: Entrepreneurs only care about making money Many people think entrepreneurs do what they do strictly for the money, and that taking risks is all about entrepreneur's personal reward. While fear of poverty or use of money as a scorecard may have some relevance - and there are, of course, some entrepreneurs focused primarily on financial profits - generally, money is not the ultimate motivator for the majority of entrepreneurs. Many successful entrepreneurs do not live a lavish lifestyles that reflect their financial success. Their motives are often more about ego and emotion. For most entrepreneurs, money is just a way to keep score. Money is also a way to do bigger and more exciting deals. The thrill of challenge, the motivation of a new idea, and the risks involved have far more power to motivate the entrepreneurial spirit than money.

Myth #2: Winning means somebody else is losing You may have heard of people speak of success in business as being "on the backs of other," suggesting that if an entrepreneur is winning, somebody else must be losing.

This attitude makes it seem like the only possible outcome of a business deal is to have one side win adn the other side lose. The resulting bottom line is zero. This is sometimes referred to as the "zero-sum game." Entrepreneurs are creative and expansionary thinkers. Rather than accepting a zero-sum result, and, contrary to the myth that an entrepreneur's success comes at the expense of others, entrepreneurs often try to figure out ways that both sides can win.

Myth #3: The greater the risk, the greater the reward This myth is always passed on to young entrepreneurs as economic gospel. The theoretical relationship between risk and reward is coincidental at best, and then only in certain situations. Risk is a relative concept. All else being equal, real risks are modified by knowledge, experience, hard work, passion, and unforeseen circumstances. Applying knowledge to any investment can change the risk profile. Equally important in considering risks, perception of risks is often different from reality. What one person considers high risk might be from another's perspective a sure thing. Who then can say what's a greak risk or a great reward?

Myth #4: As an entrepreneur, you can get rich quick Have you heard of those dotcom millionaires? In the internet world, it sure seemed like people got rich overnight. But always remember that things often seem easier than they are. It may seem to you that entrepreneurs made the huge amount of money, but do you know that there are lots of hardwork before he made it. Think twice about becoming an entrepreneur, if you think you can get rich quick.

Myth #5: A good business plan is the entrepreneur's critical roadmap to success Venture capitalists often make business plans the key criteria in deciding whether or not to fund new companies. Business educators often talk about business plans like they are the Holy Bible of business success. The theory is that the better and more complete the business plan, the better the business will go. This is a myth. While having an idea or a goal is critical, believing that you can create a structured, believeing that you can create a structured business plan that will endure time or place is simply naive. In the real world,it rarely happens.

Business plans can be useful initial tools, but they should be used only as guidelines. Trial and error, luck, creativity, flexibility, and adapting to unforeseeable developments ultimately are what make an entrepreneurial venture succeed. Successful entrepreneurs know when to use creative problem solving rather than theoretical business plans.

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TRUE But! It depends upon what measure you are looking at Remember, entrepreneurs work more hours than those working for someone else And, they tend to make less money And, most new businesses fail