Breaking Out or Breaking Through Wealth Building through Entrepreneurship Jeffrey Robinson, Ph.D. NYU-Stern School of Business 2005 NSBE National Convention Boston, Massachusetts March, 2005

Agenda Opportunities in Entrepreneurship Becoming an Entrepreneur 3 Myths 1 Truth Supporting Entrepreneurs The Rest of the Story

Opportunities for Entrepreneurship Traditional Entrepreneurship Social Entrepreneurship Community and Economic Development Franchises Corporate Venture Capital Private Equities Venture Capital

Traditional Entrepreneurship Earl G. Graves, Black Enterprise Unlimited Robert Johnson, BET Oprah Winfrey, Harpo Cheryl Mayberry McKissack, Nia Enterprises Randal Pinkett, Ph.D. BCT Partners Melanie Mosley, Light Dynamics Winslow Sargent, Ph.D., XCelis

Types of Ventures Life Style Business: less than $1 M in revenues (forged out of your passion) Growth Business: between $1 M and $20 M +

Social Entrepreneurship Community & Economic Development Charter/Contract/New Schools –Edison Schools Social Service/ Social Action –One Economy –Poverty Solutions Underserved/Underrepresented –CitySoft –CityFresh Foods Economic Development –Greyston Foundation (Greyston Bakery)

Capital Side Corporate Venture Capital Private Equities Venture Capital –Carthage Ventures

Becoming an Entrepreneur Demystifying the Myths

Myth #1: “I need lots of money.”

How Much Money They Had (A) Less than $1,000(E) $50,001 to $100,000 In terms of start-up capital, including personal assets, Inc. 500 companies started with little.* (B) $1,000 to $10,000(F) $100,001 to $300,000 (C) $10,001 to $20,000(G) More than $300,000 (D) $20,001 to $50,000 *”Start-up capital” refers to funds raised before any product or service was delivered. “Personal assets” includes savings, mortgage or other personal loans, credit cards, 401(k), etc. 13% (A) 23% (B) 12% (C) 13% (D) 12% (E) 13% (F) 14% (G)

Where the Money Came From The following sources of funds provided Inc. 500 start-up capital. (C) Assets of family or friends (other than co-founders) (A) Personal assets (B) Other founders’ personal assets (D) Commercial bank loan or line of credit (E) Private equity investment (F) Financing from a supplier, customer, or other business entity (G) SBA loan or funds from other government program (H) Formal venture capital 53% (A) 2% (H) 2% (G) 4% (F) 4% (E) 8% (D) 10% (C) 17% (B) SOURCE OF FUNDS

Executive Compensation CEOs taking home only five figures are in the small minority. Here’s a salary guide. (A)More than $500,000 (B)$100,001 to $250,000 (C)$250,001 to $500,000 (D) Less than $100,000 40% (A) 9% (D) 22% (C) 28% (B) SALARY

Since Start-up 12% of companies have raised venture capital. of companies have raised private equity. 17%

Myth #2: “I am destined to fail.” (a.k.a “The Odds Are Against Me!”

Survivor

Myth #3: “All the good ideas are gone.”

The Opportunities are Here Untapped Markets Underserved Markets Underdeveloped Markets Unique Perspectives

Examples Dogloo Dell TV One BCT Partners Ashley Stewart Altitunes/Laptop Lane/WayPort ZipCar FUBU/Sean Jean/Phat Farm Nia Enterprises

3 Myths, 1 Truth Myths –I have to have lots of money. –I am destined to failed. –All the good ideas are gone. Truth –I can build wealth through entrepreneurship!

Truth #1: “I can build wealth through entrepreneurship.” Wealth Building –Fortune Magazine - 40 under 40 –7 out of 10 millionaires are self employed –Fortune Study 69% of top 1% of wealth are entrepreneurs (1998)

What can you do now to prepare? 1.Write a business plan 2.Enter business plan competitions 3.Make contacts while you are in school or with local business schools 4.Volunteer to work with minority small business owners and entrepreneurs 5.Don’t give up on your dream!

Breaking Through or Breaking Out to …. Entrepreneurship What are my options?

Become a Second Job Entrepreneur Become an advisor or consultant to some entrepreneurs Become an investor Become a full-time entrepreneur 4 Options

Second Job Entrepreneurs 2 – 3 million people are doing this Pro: Low risk, low or no capital required Con: Can you do two things well at the same time

Investing in Small Business Private Equity Markets –Angel Investor Groups –Bridge capital –Venture Capital Consider investing in industries and ideas you understand or know a significant amount about

Support Strategies Patronize and encourage the use of small minority owned business Sit on advisory boards and boards of directors of social ventures and start-ups Consult with minority entrepreneurs (leverage your MBA and your experience).

Contact information Jeffrey A. Robinson, Ph.D. –African American Women Entrepreneurs Research Project –The Ph.D. Project – Ph.D. in Business School –Venture Plan Document