I had forgotten how much I enjoyed the conversations my blog posts sparked. I find the opportunity to engage in discussion with others very energizing. So much so, that one response inspired this post.
Jeff Schwaber, instigator extraordinaire, asked me the following:
“Have you seen the book The Illusions of Entrepreneurship or Malcolm Gladwell’s article about it? I’d like to read your thoughts on them. Here’s the abstract of the Gladwell article: http://www.facebook.com/l/1a4ce;www.newyorker.com/reporting/2010/01/18/100118fa_fact_gladwell“
I read the article, and it reminded me of the number of times I’ve been told to only take risks with other people’s money. Is this really the secret to success? I decided to dig a little further. I found some interesting answers from 2 recent studies by the Kaufman Foundation. The Anatomy of an Entrepreneur: Family Background and Education and The Anatomy of an Entrepreneur: Making of a Successful Entrepreneur.
But first, a caveat. British Prime Minister Benjamin Disraeli is most often credited for coining the phrase: “Lies, damn lies and statistics.” I am painfully aware how open datasets are to interpretation. This is the bugaboo that sends me down rabbit holes in search of primary data. I came to somewhat different conclusions than the authors after reviewing their summarized data. All of the following commentary is based on my own analysis.
Ninety-eight percent of respondents ranked risk as the biggest barrier to entrepreneurship. When asked the reasons for starting a business, 74.8% responded that they wanted to build wealth and 68.1% wanted to capitalize on a business idea. The greatest risks generally produce the greatest returns. One can extrapolate that entrepreneurs take calculated risks in pursuit of high returns.
Serial entrepreneurs are an interesting population because they repeatedly choose to take risks. A closer look at the data reveals that a serial entrepreneur’s personal risk decreases as he/she starts additional businesses. First companies are overwhelmingly funded through personal savings followed by loans from friends and family. As a serial entrepreneur’s experience grows, so does the ability to secure angel and venture capital.
Even if someone else’s money is on the line, most of us prefer success to failure. Entrepreneurs highly value the lessons learned through both failures and successes. Willy Wonka once said: “Invention, my dear friends, is 93% perspiration, 6% electricity, 4% evaporation, and 2% butterscotch ripple.” Entrepreneurs work incredibly hard, sacrificing free time, friends and family to succeed. But 73% of entrepreneurs understand that luck can make or break a business. A lesson we’ve all learned in this economy.
I have so much more to say on these 2 studies, and with any luck, I will have the opportunity to share them with you all.