ENTREPRENEURSHIP

December 20, 2013

Definition of Entrepreneurship

An entrepreneur is the person who destroys the existing economic

order by introducing new products and services, by introducing new

methods of production, by creating new forms of organization, or

by exploiting new raw materials.

Schumpeter

An entrepreneur is the person who perceives an opportunity and

creates an organization to pursue it.

Simpler

Entrepreneurship Activities

Entrepreneur: someone who perceives an opportunity and builds an

organization to pursue that opportunity.

Entrepreneurship involves all the functions, activities, and actions

associated with perceiving opportunities and creating

organizations to pursue them. These include:

Market and customer research

Service and product innovation

Team building

Finding & managing resources

Leadership

Factors Influencing an Entrepreneur

Higher internal locus of control

Desire for financial success

Desire to achieve self-realization

Desire for recognition

Joy of innovation

Risk tolerance

Personal

Attributes

Environmental

Factors

Local, regional, or national attitudes

Social and cultural pressures for or

against risk taking

Access to entrepreneurial role models

Responsibilities to family and

community

Remember: No single type of person is best suited for entrepreneurship.

Entrepreneurs come from all walks of life!

PERSONAL PERSONAL SOCIOLOGICAL PERSONAL ORGANIZATIONAL

Achievement

Locus of Control

Risk Taking

Personal Values

Education

Experience

INNOVATION TRIGGERING EVENT IMPLEMENTATION GROWTH

ENVIRONMENTENVIRONMENTENVIRONMENT

Opportunities

Role Models

Creativity

Competition

Resources

Incubator

Government policy

Competitors

Customers

Suppliers

Investors

Bankers

Lawyers

Resources

Government policy

Risk Taking

Job Dissatisfaction

Job Loss

Education

Age

Commitment

Networks

Teams

Parents

Family

Role Models

Entrepreneur

Leader

Manager

Commitment

Vision

Team

Strategy

Structure

Culture

Products

A model of the entrepreneurial process

Ambiguity Tolerance

Based on Carol Moore's Model (Moore 1986)

Opportunity recognition

Gender

Resources

Economy

Advisors

Economy

Model of Entrepreneur Process

Idea-to-Opportunity Transition

Viable opportunity

Idea

Idea multiplication

Seed of an idea

Passion Professional experience

Progression of Raising Money

Turning to friends &

family

Approaching business angels

Raising VC funding

Going publicBeing

acquired

VC Investments in Internet Companies

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

'94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04

Nu

mb

er

of

Co

mp

an

ies

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

To

tal In

ve

ste

d (

$ b

illio

n)

Number of Companies Total Invested

Source: Venture Economics

Netscape IPO

1995

Amazon.com IPO

1997

Yahoo IPO

1996

eBay IPO

1998

Entrepreneurship Strikes Gold

$6 million of own money + $6 million of VC money = $2.2 billion of

market capitalization on the first day of IPO

Benchmark Capital’s investment of $5 million in eBay multiplied

1500-fold in just two years

Netscape Communications

eBay

Post-Startup Options

Startup

Sell

Maintain

Grow

Options for Venture Options for Founder

Start Another Venture

Seek Other Employment

Become a Manager

Become an Entrepreneurial Leader

Take Alternate Position in the Firm

Exit Day-to-Day Management

Exit Day-to-Day Management

Stay With Company

10-Year Survival Rates

2 years 10 years1 year

81 % survive

5 years

40 % survive

65 % survive 25 % survive

Conclusion

Personal and environmental factors affect entrepreneurs

Entrepreneur process consists of four phases: innovation,

triggering event, implementation and growth

Entrepreneur should have passion for the idea and

know the customer

Raising VC funding is an important source of money

Growth depends on leadership, opportunity domain,

and organizational resources