MON(FX)

An Introduction to Entrepreneurship

As the unemployment rate continues to rise and is forecasted to increase by the end of the year, many workers are finding it harder and harder to have a sustainable job.  A slowing economy has forced many large corporations to cut down on and restrict resources, and unfortunately it looks like the situation will only get worse before it gets better ¹.  A recent Goldman Sachs survey shows that “CIOs will most likely look to cut their resources first from lower-value augmented [contract] IT staff” in 2009 ².   The increasingly harrowing state of our economy is forcing people to seek out new ways of making money, whether it is online or in the real world.

So what is Entrepreneurship?

In very simple terms, entrepreneurship is the act of starting a new organization or revitalizing one that is already mature, in response to an identified opportunity ³.  The act of entrepreneurship was first recognized as taking an idea or concept and turning it into a successful innovation.  Using a process labeled “creative destruction,” entrepreneurs are able to create new products and business models that often effect one or more markets and industries. Much more after the jump!

Entrepreneurship is much more than just starting a business, however.  Successful entrepreneurs are able to successfully evaluate industry risk and often face true or Knightian uncertainty, meaning it may be nearly impossible to statistically predict the outcome of their venture.  This type of situation occurs with the entry of a novel or game-changing idea.  The best examples of such risk can be seen with the creation of the first internet ventures, such as Yahoo, Amazon, Google, etc.  Prior to the internet, it was impossible to predict the outcome of such a venture as nothing like it had ever existed before.

What does it take to become an Entrepreneur?

Truth be told, not everyone is suited to start their own business; otherwise we would live in a world with constant innovation and intense economical competition.  In reality, the majority of people who attempt to start their own venture will eventually fail due to a number of reasons.  There are many tricks to identifying the multitude of possible reasons for failure, however it may be easier to understand what can help you succeed rather than fail.  This is why investors prefer investing in a founder or team rather than an idea, looking for characteristics of successful entrepreneurs.

One way to find out what it takes to be a successful entrepreneur may be as simple as identifying individuals who have excelled in entrepreneurship and finding similarities between them.  To get things started, let’s take a look at the success stories of three serial entrepreneurs who have changed their industries and the global economy:

Sir Richard Branson (Virgin)

Branson started his first successful venture at the age of 15, when he published and distributed a magazine called Student.  In the early 70s, Branson started selling crates of vinyl records from the trunk of his cars to local retailers and eventually started a mail order business.  His Virgin Records company ultimately led to the opening of a record shop in London, however that would only be the start of his entrepreneurial stint.  Using the money he earned from his record store, Branson purchased a country estate in which he installed a recording studio, immediately leasing it out to several upcoming artists.

His investments proved worthwhile as Virgin Records produced several controversial and highly-demanded artists, such as the Sex Pistols.  Branson eventually sold the Virgin label to EMI for $1 billion, using his career earnings to start a series of other ventures, totaling to over 360 companies.  He is responsible for several radical and industry-shaking businesses, including V2 Records (which sold DRM-free music online much cheaper than competitors) and Virgin Galactic (a space travel agency).  Branson was knighted for his services to entrepreneurship and is hailed as one of the 100 Greatest Britons.  Currently, he ranks as the 236th richest person in the word according to Forbes’ 2008 list of billionaires, with an estimated $7.9 billion USD.

Dean L. Kamen (Segway)

While notorious for his innovative Segway transportation device, Dean Kamen was already a wealthy and successful entrepreneur.  Kamen is inventor of the AutoSyringe, a mobile dialysis system for medical applications, the first insulin pump and the iBOT, an all-terrain, accessible wheelchair using the gyroscopic balancing technologies utilized in the Segway.  While he left college prior to graduating, Kamen has been able to utilize his personal skills and potential to create game-changing medical and transportation devices.

Currently, Kamen is working on a water purification system that would, if successful, drastically improve drinking water conditions in third world countries.  He is also using the same Stirling engine technology to create another unconventional device that would generate power with reduced emissions.  The Defense Advanced Research Projects Agency (DARPA) has recently funded Kamen and his team to build a space-age arm that Kamen appropriately dubbed the “Luke Arm.” (watch a video of it)

Marc Andreessen (Netscape, Ning)

Known as the Silicon Valley ‘Whiz Kid’ and probably one of the most successful internet entrepreneurs, Marc Andreessen is also a serial investor, startup coach, blogger and multimillionaire software engineer ⁴.  His success started while he was still at University of Illinois at Urbana-Champaign, where he and a co-worker developed the Mosaic web browser.  This browser would later become the foundation for the Netscape Communications company’s Navigator (better known as the Netscape Navigator), a product that would launch the company from formation to IPO in the span of a year.  The company later sold to AOL for $4.2 billion, making Andreessen its Chief Technology Officer.

After leaving AOL, Andreessen started Loudcloud, a service-based hosting company that later changed its name to Opsware in 2003.  The company sold to Hewlett-Packard for $1.6 billion.  Andreessen has since invested in several successful ventures such as Digg, Netvibes and Twitter.  He is cofounder of the custom social network provider Ning and is currently very active in the blogging community (read his blog!).

What do they all have in common?

While they come from different economic, geographic and educational backgrounds, all of the above entrepreneurs share some common characteristics.  Each of them were diligent and unrelenting in their initial ventures, overlooking minor short-comings and focusing on their ultimate goal.  They were able to find a market, whether in an existing industry (such as Branson in the record business) or in a completely new one (Kamen and Andreessen), and utilize their skills to make something people wanted.  After their initial success, they continued to pursue other ventures which eventually led to industry-changing corporations.

A lot of hard work, time and persistence mixed with great leadership and social skills helped propel these innovators into the halls of the entrepreneurial greats.  Another similar trait is that they all started at a very young age (typically in their early to mid twenties).  Regardless of the specific industry you choose to enter, if a prospective market exists, the possibility of success is present.  While it’s true that a lot of people have really good ideas, it is the few who act on them that are able to take a chance at success.