1. STARTING A NEW BUSINESS: MYTHS AND REALITIES A Presentation by Steven E. Phelan Director, UNLV Center for Entrepreneurship

2. WHO AM I?  An aussie  A pracademic Professor & PhD Executive & MBA Consultant  Director, UNLV Center for Entrepreneurship Teaching Research Outreach Stev e

3. WHY AM I HERE?  To dispel the myths about starting a business based on recent data  To obtain a realistic portrait of the life of an entrepreneur  To help you make an informed decision about starting a business  To improve your chances of success Successful entrepreneurs do a lot of things differently than failed entrepreneurs

4. SOURCES  Global Entrepreneurship Monitor (GEM) An annual survey of national entrepreneurial activity in 42 countries  Panel Study of Entrepreneurial Dynamics (PSED) Longitudinal studies of people intending to start a business An initial sample of 64,000 people in 1998 (PSED I) A sample of 34,000 people in 2005-6 (PSED II)  Kauffman Firm Survey (KFS) A longitudinal survey of ~5,000 businesses started in 2004  Scott Shane, Illusions of Entrepreneurship

5. Myth: Reality:  Up to 40% of the US population will be self- employed at some stage in their career  About 1 in 10 are self-employed at any given time  I will never start a business.

6. Myth: Reality:  The proportion of American households owning a business has declined  Self employment is only 58% of what it was in 1948 (the Wal*Mart effect?)  There has been significant growth in startups and small business in the last 50 years

7. Myth: Reality:  Turks and Thais are three times as likely to be self employed  Richer countries have lower self employment  The US is the most entrepreneurial country on the planet!

8. Myth: Reality:  Entrepreneurs select industries with the highest failure rates because they are familiar and easy to enter (e.g. personal services)  Entrepreneurs choose the most profitable industries

9. Myth: Reality:  Ideas are a dime a dozen  Investors will laugh if you want an NDA  Execution is what counts  Build a better mousetrap and the world will beat a path to your door

10. Myth: Reality:  The typical entrepreneur starts a business because he doesn’t like working for someone else  Making a living is more important than striking it rich  Entrepreneurs start businesses to get rich

11. Myth: Reality:  People are statistically more likely to become self employed if they are unemployed, change jobs often, or earn less money  Entrepreneurs have a record of success

12. Myth: Reality:  The typical entrepreneur is married, white, and in his forties  Demographics are more important than psychology  Pretty much anyone can become an entrepreneur

13. Myth: Reality:  92% of owners have prior experience in the industry (10+ years on average)  Certain industries generate more self- employment (think plumber vs. librarian)  Pretty much anyone can become an entrepreneur

14. Myth: Reality:  Most are home-based businesses with a well- known product or service  Most startups don’t have a business plan  Teams are rare (more likely to be mom and pop )  Most startups are innovative hi-tech teams chasing profitable opportunities

15. Myth: Reality:  Only 1/3 of people who initiate the start- up process had positive cash flow after seven years  Starting a business is easy

16. Myth: Reality:  75% of startups do not employ anyone  Only 10% have more than 5 employees  81% of startups have no desire to grow  Startups create employment

17. Myth: Reality:  The median startup required ~$25-$30K  You need a lot of money to start (or buy) a business

18. Myth: Reality:  Half receive no external financing at all  Money tends to come from personal savings and personal debt  Only 1 in 12 startups received equity from family & friends  Entrepreneurs use “other people’s money”

19. Myth: Reality:  VCs funded only 0.03% of all new businesses in a given year  92% in IT and healthcare  Venture capitalists fund new ventures

20. Myth: Reality:  Angels contribute twice as much as VCs  Other informal investors fund seven times as much but are less wealthy, make smaller investments, and expect lower returns  Angel investors fund new ventures

21. Myth: Reality:  Around 25% fail in a year, about 50% in five years, and 70% in ten.  Most businesses fail within a year!

22. Myth: Reality:  One study found entrepreneurs earn 35% less over ten years with more uncertainty and lower benefits (18% if matched)  They also work 13+ more hours a week on average but are more satisfied  You earn more working for yourself and work less

23. Myth: Reality:  On average, business owners have 5x the net worth of non-owners  The wealthiest 10% have 75% of all business wealth  Most founders are over- optimistic about their prospects  Starting a business can make you wealthy

24. Myth: Reality:  An IT firm is 600 times more likely to be in the Inc 500 than a restaurant firm  Survival rates vary by industry too  Work hard and you can be successful

25. SECRETS TO SUCCESS  Get some education  Get experience in your industry  Start marketing early  Work with a team  Get external financing  Form a corporation  Enter an attractive industry  Seek a competitive advantage  Write a plan  Do something  Persevere!