The Four Types of Entrepreneurship

Not all entrepreneurship is the same. Steve Blank clearly describes four different types:

1. Small Business Entrepreneurship
Today, the overwhelming number of entrepreneurs and startups in the United States are still small businesses. There are 5.7 million small businesses in the U.S. They make up 99.7% of all companies and employ 50% of all non-governmental workers.

Small businesses are grocery stores, hairdressers, consultants, travel agents, internet commerce storefronts, carpenters, plumbers, electricians, etc. They are anyone who runs his/her own business. They hire local employees or family. Most are barely profitable. Their definition of success is to feed the family and make a profit, not to take over an industry or build a $100 million business. As they can’t provide the scale to attract venture capital, they fund their businesses via friends/family or small business loans.

2. Scalable Startup Entrepreneurship
Unlike small businesses, scalable startups are what Silicon Valley entrepreneurs and their venture investors do. These entrepreneurs start a company knowing from day one that their vision could change the world. They attract investment from equally crazy financial investors – venture capitalists. They hire the best and the brightest. Their job is to search for a repeatable and scalable business model.  When they find it, their focus on scale requires even more venture capital to fuel rapid expansion.

Scalable startups in innovation clusters (Silicon Valley, Shanghai, New York, Bangalore, Israel, etc.) make up a small percentage of entrepreneurs and startups but because of the outsize returns, attract almost all the risk capital (and press.)

3. Large Company Entrepreneurship
Large companies have finite life cycles. Most grow through sustaining innovation, offering new products that are variants around their core products. Changes in customer tastes, new technologies, legislation, new competitors, etc. can create pressure for more disruptive innovation – requiring large companies to create entirely new products sold into new customers in new markets. Existing companies do this by either acquiring innovative companies or attempting to build a disruptive product inside. Ironically, large company size and culture make disruptive innovation extremely difficult to execute.

4. Social Entrepreneurship
Social entrepreneurs are innovators who focus on creating products and services that solve social needs and problems. But unlike scalable startups their goal is to make the world a better place, not to take market share or to create to wealth for the founders. They may be nonprofit, for-profit, or hybrid.

The happiest entrepreneurs I've met are the small business ones, not the scale / conquer-the-world ones.

18 Responses to The Four Types of Entrepreneurship

  1. Dusc says:

    I like your last sentence. It really hits the key to life. Be happy. Although Social entrepreneurship might lead to it as well if you are not delved under it.

  2. Ben I agree with you. When you and I met (5 years ago!) at Cafe’ Reverie, next to us was sitting a super quiet Craig Newmark. I have been following the guy for a long time and he once pronounced one of my favourite sentences: “We both know some people who own more than a billion (dollars) and they’re not any the happier”

    Personally, running both a small business (bootstrapped software startup) and a social enterprise, I can say they both provide immense sense of accomplishment, happiness and satisfaction.

  3. michael vassar says:

    I suspect that more small business entrepreneurs should consider founding scalable start-ups, and also that few people should consider founding a scalable start-up outside of an investment bubble without first having small entrepreneurship experience.

  4. Greg Linster says:

    I’m curious, which classification do “lifestyle entrepreneurs” fall into?

  5. Ben Casnocha says:

    Lifestyle can mean different things to different people, but probably
    small business entrepreneurship.

  6. JPBulko says:

    Here’s my “meta” view of entrepreneurship and its possibilities:

    I’ve written a proposal that uses entrepreneurship on a massive scale to tackle the ongoing high unemployment problem, which has left millions and millions of Americans grasping at the last vestiges of the American Dream. Long-term unemployment is at record levels and the pace of the tepid “recovery” from the Great Recession will require years to return the country to full employment. In the mean time, government coffers are depleted while straining to address the extreme hardship, and tax revenues are greatly diminished because so many jobless folks cannot pay taxes.

    My proposal describes an entrepreneurial mechanism through which we can fund a massive number of new business ventures (to create a massive number of new jobs) by tapping the financial power of Wall Street. It is a private-sector proactive approach to remedy the high unemployment problem. Titled “A Modest Proposal to Save the American Economy: Entrepreneurial Blitzkrieg as Job Creation Vehicle,” the proposal has been published online at Salem-News.com (and various other places):

    link to salem-news.com

  7. Social Entrepreneurs are great innovative creative since they can try to make a world a better place without making a lot of profit.

  8. vinci says:

    it is very good article and it self a source for motivation….
    good read!!!!!!!!!!

  9. Bromo says:

    I want to steps to start up a social entrepreneurship

  10. warfar says:

    i think social entrepreneurship is the best performing business

  11. Thanks for your helpful article, for my side I dont want to feel those are types are misfortunes or useless
    , all are the best but only thing depends on the invironment of the place and the nature of the business.

  12. Thanks for your helpful article, for my side I dont want to feel those other types are misfortunes or useless
    , all are the best but only thing depends on the invironment of the place and the nature of the business.

  13. Thanks alot for this article but there should steps on how to start up a scalable entrepreneuship.

  14. Thanks for this thought provoking and eye opening article. First of all, I think happiness is a state of mind. Not all small business owners are happy and not all large business owners are worried. Its all about the pursuit of passion.am adventuring for instance and anything that has to do with that is fun.
    Also I thing the scalable business start up has become a great business perspective to focus on. Instead of a life time small business….a focus on a scalable project could result to massive ROI. This is a subject to ponder on for countries fighting poverty, unemployment and economic downturn.

  15. okereke Austine says:

    The above classification of entrepreneurship by mr ben is a nice one and I want to commend him for writing on entrepreneurship. I believe entrepreneurship to remain the only key for effective and adequate eradication of poverty in developing countries because when people can not think, not willing to work but instead waiting for what the government will do for them then there won’t b any qualitative and quantitative improvement in ones’s life and the country at large. The major problem facing entrepreneurship is developing countries remain capital, negligence, and investment. Poverty is a serious economic worm and entrepreneurship is the only feasible solution to it. I see poverty as a continued subjection of an individual or country under a state of nature where life is poor, short, nasty and brutish. State of nature here means living on a subsistent level, inability to think and innovate I.e” poverty of the mind”I hereby stand to advocate for the increased investment on entrepreneurship as it remains the only way out of poverty. AUSTINE OKEREKE

  16. Elia says:

    Thanx and i would like if u can add more thinks about entreprenuership

  17. Do business coaches or mentors belong to Social entrepreneurs category? Or does a social entrepreneur have to open his own enterprise?

  18. Lucy Bieri says:

    Great classification.. I wrote about similar subject .. link to lucybieri.com

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