What the heck is an entrepreneur?
Unless you’ve been in a cave, you hear a whole lot of talk about “entrepreneurship” and the people who foster entrepreneurship, the “entrepreneurs.” The Today Show even had a piece about women entrepreneurs on the show this morning. And it got me thinking: just what is an entrepreneur? After watching the piece I thought to myself, “Hmm. I’ve started three companies this year, and I really don’t feel like I have anything in common with a lady that runs a hair salon.” And I really don’t. But no one is really sure just want an entrpreneur is. Here are some definitions of ‘entrepreneur’ from the web:
Definitions of entrepreneur on the Web:
*Innovator. One who recognizes opportunities and organizes resources to take advantage of the opportunity.
*One who assumes the financial risk of the initiation, operation, and management of a given business or undertaking.
*Individual who starts a new business. Venture capital is often used to finance the startup costs in return for an equity share. Once the business is established, an entrepreneur may choose to raise additional capital by selling equity shares to the public through an initial public offering.
*A person who takes the risk of organizing and operating a new business venture. (This is an attitude that can be of value in more traditional employment as well.)
*Someone who attempts to profit by risk and initiative.
*A person who organises and manages a business, but usually only applied to people who have shown exceptional ability and imagination in launching and succeeding with new business ventures.
*A person who starts a business.
(list created using by using the following Google search - define: entrepreneur)
Risk taker? Manager? Someone who starts a business? Someone who manages a business? Innovator? An entrepreneur is ALL of these things?
I think there are actually several different categories here, some of them mutually exclusive, others of them occurring simultaneously in some cases. Here is what I think exists out there:
*Entrepreneurs
*Small Business owners
*The self-employed
*Innovators
*Inventors
And I think these are all distinct - with only moderate amounts of overlapping.
An “Entrepreneur,” in my mind anyway, is someone who creates a capital based business, intends to turn the business over to professional management, sells the business at a profit, then repeats the cycle.
A “small business owner” is someone that owns a retail or service based business like a lawn mower repair shop, a sandwich store, a beauty salon, or a retail tax return preparation business.
Someone who is “self-employed” works out of their home, doing medical billing, transcription, customer service, travel booking, or bookkeeping. If you work for yourself in the sandwich shop you own, you are a small business owner.
An “innovator” creates new ways of doing things by making improvements to existing products or processes and the results are tanglbie to a consumer based end-user. The guys over at Banshee River Boards are innovators. The guys at Micron are not. They are inventors.
An “inventor” for all intents and purposes, is a legal term for someone who gets his/her name listed on a patent application, which is goverment protection of a unique product or process. A new way of routing circuitry on a wafer is an invention, not an innovation. When your kid buys a new iPod, she doesn’t care about the 1,000 patents that Micron filed on the DRAM inside the device. The George Foreman grill is an innovation - a new way of cooking food between two slabs of hot metal - not an invention though he probably has patents too.
Let’s look at some LGM companies. With Pronetos, we are entrepreneurs, and innovators. We started a company that we want to sell to Google or Amazon for a billion dollars, and the products/service Pronetos provides are based upon improvements to an existing processes. We’re not self-employed. We’re not small-business owners. We’re not inventors.
We’ve also started Unhampered. That’s not an invention, an innovation, self-employment, or entrepreneurship in my mind. That is a small business. We are selling a product (t-shirts) over the Internet.
But both experts and the media tend to lump all of us - self-employed, small business owners, entrepreneurs, innovators, and inventors - together. And really, all of us have very, very, different needs from those who are out there trying to help us (banks, lawyers, VCs/Angels, consultants, the educational system . . .). We also reach customers in different ways, have different capital and legal requirements, different technology requirements, etc. But again, in reading Inc. Magazine’s Inc. 500 issue this month, I see really very little similarity or kinship between the companies on that list (except that they are all fast growing).
So, what? Am I totally off base? Do you find these distinctions helpful? Harmful? Just seemed to me that lots of confusion exists out there when Matt Lauer and Inc. Magazine call any business owner an entrepreneur.
Wyatt said:
I dig it. We’ve had this conversation a number of times.
I would say that there are those who fit your definition of entrepreneur, but who decide to keep that business as their own. See Virgin Group, Ltd. Branson has built many business. He has sold many of them, but he’s kept a good lot of them, too. He fits no other definition you provide, but I would certainly call him a serial entrepreneur. That guy forges new business opportunities all the time. He built his own business empire with many entrepreneurial efforts.
All that to say, you don’t have to have an exit strategy to be an entrepreneur. I agree, though, that you have to keep creating new enterprises to be an entrepreneur, or at least keep adapting your previous enterprises to keep them fresh and relevant. Otherwise you’re simply a business owner/operator/officer. That’s my take.
Norris, you out there? Weigh in.
Norris Krueger said:
In my world, we smile at you, pat you on the head and say “Go work on your business.” This is a silly debate, one that both journalists and academics go ’round & ’round on. There is no “legal” definition & probably shouldn’t be.
The easy answer: When you use a term, especially an emotionally-loaded term, define it. “I mean ‘entrepreneur’ to mean ____” This is how I measure it, etc.
However, there is significant consensus about the key characteristics that distinguish “entrepreneurial” efforts. Entrepreneurs are the humans that initiate them.
Growth: An entrepreneurial firm is proactive, innovative and risk-tolerant and intends to grow. Otherwise it’s a small business. Idaho has lots of small businesses, painfully few entrepreneurial organizations [need not be for-profit, btw]
Emergence/Creation: Entrepreneurship refers to the processes by which new economic [or supraeconomic] activity emerges that provides significant value from the perspective of its critical stakeholders. [Being really good at bureaucratic maneuvering thus need not count, LOL] Schumpeter would say that you’re an entrepreneur while creating your business activity, then you become a manager.
Entrepreneurial Mindset: Some would argue that entrepreneurial activity cannot occur without a human possessing the entrepreneurial mindset (deep beliefs -see Pronetos.com for more!- attitudes, scripts/maps). Howie Stevenson summarized this as seeing & pursuing opportunities without regard to resources currently controlled. (Again with “opportunity” being defined as perceived by customers or other critical stakeholders. Personally, I think this is the toughest hurdle to clear - very few entrepreneurs are able to honestly say “when I see a great opportunity, I see the value to the customer.. not to me.”)
btw - the entrepreneurial mindset also looks a lot like the firm-level mindset — proactive, innovative [in Kirtonian sense] and ambiguity-tolerant. [n.b. interestingly, entrepreneurs are risk-averse like everyone else; nascent entrepreneurs are more risk-averse, LOL. “Risk taking” is an illusion. See Taleb for more on that.]
Shall I core dump some more? (Not that anyone outside of LGM will read this, LOL)
Chris said:
Yeah - I’m just trying to create a distinction, where the Today Show, Inc. Magazine, and lots of people in this area (and probably all across the country), don’t.
Lots of us can be in several categories, but there’s just such a disparity in terms of what the guy that owns a TCBY stand needs, and what I need, that it doesn’t seem helpful, or practical for a magazine, a TV show, a networking organization, or a consulting firm to say “we’re about entrepreneurs” and then not define what that term means.
Is Kickstand for entrpreneurs, business owners, the self-employed, innovators, or inventors? (it would probably say, “yes.”) Which ones of those does the SBA help? What about the SBDC, or TechConnect?
Then there’s the ‘ol distinction of being a “start-up.” And that really doesn’t mean too much to me either. When Fisher’s Document Systems was a “start-up” did their needs even remotely resemble Pronetos’? Nope.
So even the Sloan Brothers’ “Start-up Nation” seems to me to be a bit broad as well. “We help start-ups.” Really? You’d have the expertiese to show me how to buy office machines on favorable terms, set up a direct sales force, and lease those machines to a geographically defined area AND help me select the proper platform for my software company, manage the creation of an on-line community, and use new media tools to reach a worldwide customer base? Not likely.
So - start-up? Entrepreneurship? Useful identifying terms? Probably not.
Norris Krueger said:
This is a discussion that is, frankly, tiresome for me. The word “entrepreneur” is a meme, a hot buzzword that people like to speak. Even rolls off the tongue. However, Kilby wrote long ago that we are like Pooh, et a;. Hunting the Heffalump [whatever we study or want to to call a heffalump… IS a heffalump, to the point of self-fulfilling prophecies.]
From a public policy/economic development/whatever perspective, it makes sense, yes, to make distinctions. Let’s start with a simple one:
1) Do you create jobs (or net new economic wealth) or not? (E vs. SB)
2) Are you growing or not? (E vs. SB)
Communities (& organizations) must help #1. OK to help #2, but not at the expense of helping #1.
There are other typologies - one that Chris will hate is: Lifecycle stage, LOL. (Can you be “seed stage” with revenues? If you define it that way… KL does.. so what? As long as he’s clear about it. If they aren’t, then quibble away. I thought he was.)
The real life cycle is a bit different:
1) Ideation - I’m interested in entrep
2) Nascency - I’ve moved from interest to a committed intent
3) Launched - I’m going!
Obviously, the transitions are fuzzy as hell. Those are turning out to be the most fascinating things to study. What gets you over the tipping point. If I could add a graph here, I would - but we can see 2 clear inflection points that evince those tipping points. “Entrepreneurs” think differently in these three regimes. Getting across the tipping point requires a shift in deep beliefs that, in turn, require a developmental crisis and resolution (think “the terrible twos” in human terms)
Anyway, what we mean by “entrepreneur” is very different in each regime - how we help them, etc. Policy makers can do a bit here, as our assistance programs do kinda map onto this - TechConnect for nascents, SBA & SBDC for the ideators, TechHelp & Commerce for the launched. The problem that cities & states have is that everyone wants the sexy stuff, often at the expense of their natural constituencies - the nascents, especially high-growth, tech firms. If you ask every service provider on the planet who should help high-tech, high-growth firms… everyone raises their hands, LOL. Hence the need for “alignment” - for example, see my IQ Idaho article. Which you probably didn’t read, LOL.
Another typology of public interest is:
1) Productive - creates net new supraeconomic rents for stakeholders
2) Unproductive - often imitative [e.g., me-too], a new business emerges, but it isn’t innovating in the Kirtonian sense]
3) Destructive - yes, you’ve create something new, but you’ve caused damage along the way [not just crime, btw, but moving assets/resources toward lesser productivity]
Again, this can be fuzzy -and destructive entrepreneurs tend to get mad when you mention it, LOL
However, communities & organizations can be judged by which activities get supported or opposed. Bureaucracies generate a ton of destructive entrepreneurship within their boundaries. So, look to see if the truly “productive” entrepreneurs are getting the support.
And I have one more….
Norris Krueger said:
Not very open source on here, LOL - or just really slooooooooooooow on the moderating? LOL