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.

The Best Books on Start-Ups for General Reader

Tyler C., a loyal reader of many years, asks in an email:

What is the best book on start-ups?  Not a how-to book, but a fun book for the general reader.

Another way of putting the question: What is a good book that conveys the fun spirit of start-ups that’s not an explicit how-to?

I replied:

1. Founders at Work by Jessica Livingston is a collection of transcripts with start-up founders from companies like Flickr and PayPal and Google. No editorializing, no analysis, no conclusion. Just long Q&As with founders that give a surprisingly good glimpse of what it’s like to build world-changing technology companies. The lack of narrative spine may make it hard for non-insiders to get into it, though. And there’s no sugarcoating the long, hard slog.

2. Startup by Jerry Kaplan was the classic book of this genre for a long time. It tells his story of developing a pen-based computer. Written in 1994, it’s a bit dated (pre-internet), but still good. I remember reading this several years ago and feeling inspired by the journey.

3. The MouseDriver Chronicles is very fun. Two young Penn grads start a company that develops a computer mouse in the shape of a golf club / driver. Company ends up failing but super entertaining.

4. eBoys by Randall Strouss is a fun book about venture capitalists. It follows Benchmark Capital as they invest in Webvan and eBay during the dot-com boom. Gives a sense of the era.

I think the best how-to book on entrepreneurship, by the way, is Richard White’s The Entrepreneur’s Manual. Amazingly, it’s out of print. Amazon has used copies.

Opportunities in Old, Stodgy Industries

My friend Josh Newman is shifting his film production company to be a venture capital firm that will focus on growth opportunities in unsexy industries:

Cyanmatrix

I think he's right about the gap in attention and money to that quadrant.

There are many opportunities in stodgy industries that go unexploited because it's not mobile / real time / social / insert-buzzword-of-the-day-here. I always enjoy Marty Nemko's blog, and he often champions unsexy business ideas. In his entrepreneurial ideas tag, you can read about his business ideas for organic perfume, food carts, velcro shirts, and more. His entrepreneurship tag has even more.

One more random thought on generating business ideas: look at segments where most of the businesses feel scammy — and then do the exact same business but in a buttoned-up way. Google "mystery shopping" to see what I mean by "feels scammy." Anytime dozens of weird AdWords pop up, you know there's real money being made, but often by scammy entrepreneurs.

#

Alex Mann awhile back had good tips for how to get into the entrepreneurial swing of things even if you're in college.

Tim O’Reilly: A Splendid Life

Tim O'Reilly:

  • Runs a $100 million dollar book publishing and conference business
  • Runs a venture capital fund that invests in tech entrepreneurs
  • Owns a pair of white Icelandic horses that he enjoys taking care of
  • Bakes scones and serves them with a strawberry jam that he makes himself
  • Happily married for 35 years
  • Lives on a 14-acre apple orchard in beautiful Sebastopol, CA

More from the profile of him:

O'Reilly says he has tried to use his company to demonstrate that being an entrepreneur can represent a means of exploring the world, one that is just as profound as religious inquiry or Greek philosophy or New Age introspection. "Business doesn't have to be separated from the rest of life," he says.

Andreessen: Smart = Curiosity + Drive

In a video interview with Fortune magazine (embed below), Marc Andreessen says that in the context of early stage entrepreneurship, smart = curiosity + drive. He says an entrepreneur should be curious their whole life (presumably about the world in general) and then when starting the company be curious about the company, industry, etc.

This is kind of surprising to me. I take ‘curious their whole life’ to mean they’re curious about many different things. I take ‘curious about the company’ to mean curious about the company in a monogamous, all-consuming, obsessive way.

What’s the likelihood that someone who’s generally curious can turn off that radar for 5-10 years and focus the curiosity on one thing? Do “curious” and “obsessive” go together in one human package with any frequency?

Or if not, is Marc saying that an entrepreneur can be intensely curious about the company at the same as being curious (at a noted level) about the world in general? If this is the case, is the entrepreneur requirement of crazy focus a myth?

#

Here is my old post asking whether you’d rather hang out with business people or academics if you wanted to maximize interestingness. The comments section is outstanding. As of now, my ideal life is working with entrepreneurs (broadly defined) all day, but having breakfast, lunch, and dinner with journalists and academics. With entrepreneurs you get driven people who want to change the world. With public intellectuals you get big thinkers who are relentlessly curious.

Of my icons list of nine people, three are entrepreneurs, two are academics, two are political thinkers, one writer, one comedian. This analysis of Where’s Waldo makes me want to add Werner Herzog to the list.