ENTREPRENEURSHIP

December 20, 2013

Definition of Entrepreneurship
Schumpeter
An entrepreneur is the person who destroys the existing economic
order by introducing new products and services, by introducing new
methods of production, by creating new forms of organization, or
by exploiting new raw materials.

Simpler
An entrepreneur is the person who perceives an opportunity and
creates an organization to pursue it.

Entrepreneurship Activities
Entrepreneur: someone who perceives an opportunity and builds an
organization to pursue that opportunity.
Entrepreneurship involves all the functions, activities, and actions
associated with perceiving opportunities and creating
organizations to pursue them. These include:

Market and customer research

Service and product innovation

Team building

Finding & managing resources

Leadership

Factors Influencing an Entrepreneur

Personal
Attributes

Higher internal locus of control

Desire for financial success
Desire to achieve self-realization
Desire for recognition
Joy of innovation
Risk tolerance

Environmental
Factors

Local, regional, or national attitudes

Social and cultural pressures for or
against risk taking
Access to entrepreneurial role models
Responsibilities to family and
community

Remember: No single type of person is best suited for entrepreneurship.

Entrepreneurs come from all walks of life!

Model of Entrepreneur Process

A model of the entrepreneurial process
PERSONAL

PERSONAL

SOCIOLOGICAL

PERSONAL

ORGANIZATIONAL

Achievement
Locus of Control
Ambiguity Tolerance

Risk Taking

Networks

Entrepreneur

Job Dissatisfaction

Teams
Parents

Leader

Risk Taking
Personal Values
Education

Education
Age
Gender

Family

Commitment

Team
Strategy
Structure
Culture
Products

Role Models

Vision

Experience
Opportunity recognition

INNOVATION

Job Loss

Manager

Advisors

Commitment
Resources

TRIGGERING EVENT

IMPLEMENTATION

GROWTH

ENVIRONMENT

ENVIRONMENT

ENVIRONMENT

Opportunities
Role Models
Creativity

Economy
Competition

Competitors
Customers
Suppliers
Investors
Bankers
Lawyers
Resources
Government policy

Resources
Incubator
Government policy

Economy
Based on Carol Moore's Model (Moore 1986)

Idea-to-Opportunity Transition
Seed of an idea
Passion

Professional experience

Idea
Idea multiplication

Viable opportunity

Progression of Raising Money

Turning to
friends &
family

Approaching
business
angels

Raising VC
funding

Being
acquired

Going public

VC Investments in Internet Companies

$90

eBay IPO
1998

4500

$80

4000
3500
3000
2500
2000

1500

$70

Amazon.com IPO
1997

$60

$50

Yahoo IPO
1996

$40

Netscape IPO
1995

$30

1000

$20

500

$10

Total Invested ($ billion)

Number of Companies

5000

$0

'94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04
Number of Companies

Total Invested
Source: Venture Economics

Entrepreneurship Strikes Gold

Netscape Communications
$6 million of own money + $6 million of VC money = $2.2 billion of
market capitalization on the first day of IPO

eBay
Benchmark Capitals investment of $5 million in eBay multiplied
1500-fold in just two years

Post-Startup Options
Stay With Company
Sell

Start Another Venture

Seek Other Employment
Become a Manager

Startup

Maintain

Exit Day-to-Day Management

Become an Entrepreneurial Leader

Grow

Take Alternate Position in the Firm

Exit Day-to-Day Management

Options for Venture

Options for Founder

10-Year Survival Rates

81 % survive

40 % survive

1 year

5 years

2 years

65 % survive

10 years

25 % survive

Conclusion

Personal and environmental factors affect entrepreneurs

Entrepreneur process consists of four phases: innovation,
triggering event, implementation and growth
Entrepreneur should have passion for the idea and
know the customer
Raising VC funding is an important source of money
Growth depends on leadership, opportunity domain,
and organizational resources