Entrepreneurship Today

As we dive into the study of entrepreneurship, let’s define what we mean by the word entrepreneur. There are many definitions, but for this course, we’ll think of entrepreneur as someone who identifies and acts on an idea or problem that no one else has identified or acted on. This combination of recognizing an opportunity to bring something new to the world and acting on that opportunity is what distinguishes an entrepreneur from a small business owner. A small business owner is someone who owns or starts a business that already has an existing model, such as a restaurant, whereas an entrepreneur is someone who creates something new. For example, this new creation can be a new process or product, a business that identifies a new or unique target market, or a combination of ideas that creates a new approach or method.

Large organizations can try to replicate this by fostering “intrapreneurship.” Intrapreneurship encourages employees to think like entrepreneurs and develop fresh perspectives that can lead to new ideas for the company. These workers may have more freedom, but the organization still has control over the project and takes on any associated risks. We’ll discuss intrapreneurship in more detail in the next chapter.

Entrepreneurs bring advantages to all sectors, whether it’s big corporations or small businesses.

In a broader sense, what people consider an entrepreneur can vary. Some scholars strictly differentiate between entrepreneurs and small business owners. Others acknowledge that a small business owner may also be an entrepreneur—they are not mutually exclusive. Someone may start a venture that is not a completely new idea but introduces a product or service to a new region or market.

Where does a franchise fall in this discussion? Again, there is not complete agreement, with some claiming that a franchisee and entrepreneur cannot be the same, and others arguing that a franchise is, indeed, an entrepreneurial venture. Small business owners and franchisees can be considered entrepreneurs. For the purposes of this course, we’ll learn the key principles of entrepreneurship alongside the concepts, strategies, and tools needed to succeed as a small business owner or franchisee.

Entrepreneurs have many different talents and focus on a variety of different areas, taking advantage of many opportunities for entrepreneurial ventures. An entrepreneurial venture is the creation of any business, organization, project, or operation of interest that includes a level of risk in acting on an opportunity that has not previously been established. For some entrepreneurs, this could be a for-profit venture; for other entrepreneurs, this could be a venture focused on social needs and take the form of a nonprofit endeavor. Entrepreneurs might take a variety of approaches to their entrepreneurial venture, such as those shown in Table 1.1.

Types of Entrepreneurs

Understanding the different types of entrepreneurs as shown in Table 1.1 is important because it helps provide the right support and resources for their specific needs. This knowledge also highlights how each type of entrepreneur uniquely contributes to the economy and society, which will be discussed in later chapters.

Table 1.1: Types of Entrepreneurs

Types of Business Ownership

Before we continue, it’s important to understand the different types of business ownership structures that exist. See Table 1.2 for a description of commonly found business ownership structures and liability information. Structures are often chosen because of their tax implications and personal liability to the owners.

Table 1.2: Business Ownership Structure Types

Personal liability refers to an individual’s legal responsibility for the debts and obligations of their business. If a business incurs debts, is sued, or faces other financial obligations, the owner’s personal assets (such as their home, car, and savings) can be used to satisfy these obligations. This concept is critical in determining the extent to which a business owner is financially exposed to risks associated with their business operations.

While there can be much to consider, the Small Business Administration has guidance on how to structure a business, along with other resources entrepreneurs find valuable.

Social Entrepreneurship

A social entrepreneur has an interest in solving a social, environmental, or economic problem. A social entrepreneur identifies a problem with a social or community focus, a concern for quality of life, or concern for our entire planet’s health.

One such person is Angad Daryani, a young serial inventor. Daryani left school in the ninth grade to join the Media Lab at the Massachusetts Institute of Technology (MIT), where he worked on an industrial-scale air filter to clean pollutants and carcinogens out of our planet’s air. Daryani’s home country of India is the world’s third largest emitter of carbon dioxide, according to Global Carbon Atlas, behind China and the United States (Figure 1.1).

Daryani is interested in not only solutions for air pollution, but his product will also provide financial gains and add to his personal credibility as a serial entrepreneur, or someone who starts and harvests multiple entrepreneurial ventures. Daryani describes himself as an inventor and social entrepreneur, combining his interest in improving lives through a variety of entrepreneurial ventures, including products like Sharkits (a do-it-yourself-kit company that teaches children how to build technology), the SharkBot 3D printer (an attractive, low-cost, and reliable 3D printer), and several other projects that combine technology and human needs. As each of these products advances to commercialization, the products and technology are becoming more applicable for other uses as well. For more examples of projects that Daryani is working on, take a look at his Abgadmakes website, which includes videos and articles and also highlights the international recognition he has received for his innovative work.

Entrepreneurial Lifestyle and Career

Being an entrepreneur has become synonymous with being an innovator, a change agent, or a risk taker. Regardless of job titles or descriptive characteristics, entrepreneurship has a universal appeal for how people think and engage with the world.

Choosing the path of entrepreneurship requires a willingness to take on calculated risks. The difference between risk and calculated risk is conducting the necessary research and investigation to make informed decisions that minimize risk. There can be personal financial risk when starting a new venture. Some startup entrepreneurs continue with their current employment while working on the side to develop their idea into a venture that eventually will generate an income. Until the venture requires near full-time work and generates income, maintaining an outside income works well for many entrepreneurial teams.

Industry Example

Consider the eyeglass startup Warby Parker (Figure 1.2). Dave Gilboa and Neil Blumenthal, lead entrepreneurs for Warby Parker, were still working their day jobs when they approached an angel investor with their idea. The angel investor asked a few questions and wasn’t impressed. This investor believed that Gilboa and Blumenthal should demonstrate their solid commitment to the venture by quitting their day jobs to dedicate more time and energy to Warby Parker. Instead of following that advice, Gilboa and Blumenthal kept their day jobs while they continued to work toward building their venture, and Warby Parker eventually became highly successful. There are many paths to becoming an entrepreneur, and many paths to creating a successful venture. In their life and for their venture, it is crucial to identify the path that works best. This path should support their goals, unique situation, and visions.

 

The Entrepreneur as a Problem Solver

What are some challenges you face in your life? Have you ever actively thought about how you could solve those problems? Or have you actively identified exactly what the problem is from an analytical perspective? We often rush from recognizing a problem to choosing a solution without fully understanding whether we have correctly identified the issue. Properly defining the problem and assessing the potential, innovation, and practicality of your solution are crucial for effective problem-solving. Often, when we start to explore the problem, we find that it has multiple causes, such as the following:

• The need for something to be better, faster, or easier
• The effects of changes in the world on your industry, product, or service
• Market trends based on geography, demographics, or the psychology of the customers

One characteristic of a savvy entrepreneur is recognizing the ability to identify a problem from an opportunity-identification perspective. We might identify feeling hungry as a problem, but an entrepreneur would identify the problem using an opportunity-identifying perspective by determining how the problem could be translated into an opportunity to create a new venture—perhaps combining the problem of feeling hungry between meals into a street kiosk or a vending machine with food choices or creating a new snack that is nutritious, satisfying, and portable. When people have a busy day with no time or easy access to food, they often end up hungry. Rephrasing the problem, or need, from an opportunity viewpoint opens the search for a sustainable solution beyond the simple awareness of feeling hungry. We might solve this problem by opening a snack bar with offerings containing essential vitamins and proteins and is easy to transport with a long shelf life. Understanding the problem from the perspective of how to solve it for one person into how to solve it for multiple people rephrases the problem into an opportunity-identification perspective.

You might also have an interest in solving food-related problems on a larger scale. People trapped in a war-torn region may not be able to leave the safety of their shelters to find, grow, barter, or buy food. They may not have the money to buy food. How could you reach your target market within a war-torn area? Red Cross emergency response teams provided more than 4.5 million meals and snacks with their partners to communities affected by disasters in 2023. Could your idea of creating a snack bar fit into a partnership with the Red Cross?

Although this might seem like a simple problem with a simple solution, recognizing a problem, finding a realistic solution, and creating a successful venture requires an entrepreneurial mindset. Every day, people become entrepreneurs as they identify and solve problems, or face new challenges or frustrations, and resolve them in creating products or services to address these issues.

The Entrepreneurial Personality

Studies of the entrepreneurial personality find that entrepreneurs share certain key traits. Most entrepreneurs have the following characteristics:

• Ambitious: They are competitive and have a high need for achievement.
• Independent: They are individualists and self-starters who prefer to lead rather than follow.
• Self-confident: They understand the challenges of starting and operating a business and are decisive and confident in their ability to solve problems.
• Calculated Risk-takers: Although they are not averse to risk, most successful entrepreneurs favor business opportunities that carry a moderate degree of risk where they can better control the outcome over highly risky ventures where luck plays a large role.
• Visionary: Their ability to spot trends and act on them sets entrepreneurs apart from small-business owners and managers.
• Creative: To compete with larger firms, entrepreneurs need to have creative product designs, bold marketing strategies, and innovative solutions to managerial problems.
• Energetic: Starting and operating a business takes long hours. Even so, some entrepreneurs start their companies while still employed full-time elsewhere.
• Passionate: Entrepreneurs love their work.
• Committed: Because they are so committed to their companies, entrepreneurs are willing to make personal sacrifices to achieve their goals.

This is not an exhaustive list of traits. What other traits would you add to the list above?