Chapter 1 The Foundation of Entrepreneurship All About Entrepreneurship “During a recent one-year period, the largest companies shed 214,000 net jobs; during the same period, small businesses with fewer than 20 employees created 1,625,000 jobs.” -Scarborough

What Is An Entrepreneur? Entrepreneur: ◦ Someone who  Gathers resources  Accepts risk  Exploits opportunities  Creates new value ◦ An easier definition?  Someone who starts a new business Bert and John Jacobs, Life Is Good Co-founders

Who Are the Entrepreneurs? Nearly 1 in 5 people around the world (18.7%) Twice as likely to be a man than a woman More likely to be found in South and Central America than in the U.S.!

Typical Entrepreneurs… Want responsibility and control Enjoy taking educated risks Are confident Have a HUGE amount of energy Are organized and tenacious Value success over money

Entrepreneur of the Day Mark Davis ◦ Founded Insert Therapeutics  Makes a drug, TI-101, that goes through blood stream and attacks cancer cells without producing side effects ◦ Founded the company because of his wife’s breast cancer ◦ Started out as a chemical engineer at Cal Tech ◦ Sold to Arrowhead Research Corp.

What’s So Great About Entrepreneurship? Carving your own path Making a difference Reaching your full potential Creating something where there was nothing (a work of art) Possibly starting something with large returns (more likely to be millionaires than those employed by others) Doing what you love Brendan Synott and Kelly Flatley Bear Naked Granola

What Is Driving Entrepreneurship? Trend toward a service economy Low cost technology Growing access to international markets Degrees in entrepreneurship Societal acceptance of entrepreneurship Latest recession

Who Are the Newest Entrepreneurs? Teens, twenties, and thirties starting to form businesses Elder entrepreneurs (average entrepreneur reports 12 years experience in industry) Women ◦ Forty-one percent (41%) of businesses are owned by women. Minorities ◦ Growing faster than national average ◦ Asian-Americans have high survival rates ◦ African-American groups have struggled ◦ Large Latino entrepreneur population

Other Types of Businesses 53% of businesses are home based ◦ Most have only one employee (owner) Family-owned businesses (90% of all businesses) ◦ Two or more family members with financial control of the company Copreneurs – the new “Mom and Pop’s”

Small Business’s Effect on the Economy 98.9% of all businesses are small businesses A “small business” employs less than 100 people Just 3% of small businesses created 70% of the jobs Create 13 to 14 times the innovations per employee than larger companies Some Stats

Areas of Concern U.S. climate toward entrepreneurship changing (for the worse) ◦ Wishy-washy government stance on policy ◦ Increased cost of health-care to employers ◦ Increased taxation on capital gains (dividends) ◦ Sending educated immigrants home after degree ◦ -Harvard Business Review.org, March 2012

Areas of Concern Decline lately in employer-entrepreneur startups. ◦ No growth orientation; survival orientation instead. Even with 6% drop in startups in 2011, entrepreneurship is at a 16-year high and growing.

Entrepreneurship – The Dark Side You can lose everything you own. You can fail (35% in 2 yrs, 64% in 6 yrs). Little downtime (52 hr per wk workload) High stress levels and little time for relationships Responsibility for everything

The Down Side: Small Business Failure About ½ of small businesses last past 3 years After 10 years, about ¼ are still open Famous failures: ◦ Thomas Edison (1800 ways NOT to make a lightbulb) ◦ Walt Disney (boss said he “lacked imagination and had no good ideas) ◦ Babe Ruth (record number of strikeouts AND home runs) The key to failure is knowing why you failed.

Great Quote from Scarborough on Failure “Failure may mean total financial ruin, and that creates intense levels of stress and anxiety. Sometimes entrepreneurs unnecessarily bear the burden of managing alone because they cannot bring themselves to delegate authority and responsibility to others in the company, even though their employees are capable.” –p. 11

Most Common Mistakes Inability to transition to manager Not enough startup capital or too little cash No financial or strategic plan No point of differentiation Succumbing to doubt