Chapter 1 – The Nature and Importance of Entrepreneurs
Types of Start-Ups
Cottage Company: A small venture that generally employs fewer than 10 people and has revenues of less than $1million
Lifestyle Firm: A small venture that supports the owners and usually does not grow. This type of firm may grow after several years to 30-40 employees and have annual revenues of about 2million
Foundation Company: A type of company formed from research and development that usually does not go public. Can grow in 5-10 years from 40 to 400 employees and from 10m to 20m in yearly revenues. Rarely goes public, and therefore only draws interest from private investors, not venture capitals
High-Potential Venture: A venture that has high growth potential and therefore receives great investor interest. After 5-10 years, the company could employ 500+ employees, with 20-30m revenue
Gazelle: Very high growth venture
Intrapreneurship: Entrepreneurship within an existing business structure. This is one method of stimulating, and then capitalizing on individuals in an organization who think that something can be done differently and better
Corporate Culture: The environment of a particular organization
Intrapreneurial Culture: The environment of an entrepreneurial-oriented organization
The corporate culture is about adhering to the instructions given, no mistakes, do not fail, do not take initiative but wait for instructions, stay within your turf, and protect your backside. Not conductive to creativity, flexibility, independence, risk taking
Intrapreneurial culture is different. Develop visions, goals, and actions plans; to be rewarded from actions taken; to suggest, try, and experiment; to create and develop, regardless of the area; and to take responsibility and ownership
Primary mode of activity of intrapreneurs falls between the delegation activity of managers and the direct involvement of entrepreneurs
The trait approach:
This model assumes that entrepreneurs posses certain personality traits that drive them to become an entrepreneur
1. High need for achievement
2. Risk taking propensity
3. Tolerance for ambiguity
6. High need for autonomy
7. Internal locus of control
8. Low need for conformity
The environmental approach:
This approach argues that the choice of entrepreneurship is related to external factors beyond the individuals control.
1. The cultural approach: Some entrepreneurs are product of their culture, some cultural groups see entrepreneurship as a more desirable career compared to others.
2. Push-Pull approach: An individual is pulled into an entrepreneurship career by positive elements such as new ideas or opportunities. Or they are push into entrepreneurship by negative forces such as job dissatisfaction or getting laid off.
3. The marginal approach: Entrepreneurs are mis fits and are unable to accept authority.
4. Family background: Birth order, role model and early childhood rejection
5. Education and experience: The typical entrepreneur nowadays is more educated than the regular employed person, most have university education. The entrepreneurs past experience increases the likelihood of him starting a new venture. They start businesses in the industries they are familiar with.
The behavioral approach:
The entrepreneur is viewed as a person who can effectively marshal resources, pursue an appropriate strategy, structure, reward and control systems to exploit a window of opportunity.
The contingency approach:
Entrepreneurship is a complex phenomenon in which involves two critical elements, sensing and exploiting an opportunity.
Sense an opportunity= entrepreneurship traits
Exploit an opportunity= management skills (education & experience)
Management skills and competencies
These skills and competencies are critical to the venture creation and development stages. These skills include developing appropriate strategy and structure for the new