NC Entrepreneurship On the Move

One of the best sources of information on entrepreneurship is the Ewing Marion Kauffman Foundation. The Kauffman Index of Entrepreneurial Activity looks at demographic trends in start-up activity over a 15 year time period.

Key findings last year:

Age Groups:

Growth was highest among 45- to 54-year-olds, rising from 0.35 percent in 2010 to 0.37 percent in 2011. The youngest group (aged 20 to 34) also showed a slight increase. In contrast, the 35- to 44-year-old and 55- to 64-year-old groups experienced declines in entrepreneurial activity rates from 2010 to 2011. Contrastingly, the share of new 55- to 64-year-old entrepreneurs has risen from 14.3 percent in 1996 to 20.9 percent in 2011 due to an aging U.S. population.

Ethnic Groups:

The Latino share of all new entrepreneurs rose from a little more than 10 percent in 1996 to 22.9 percent in 2011, reflecting longer-term trends of rising entrepreneurship rates and a growing share of the U.S. population. The Asian share of new entrepreneurs also rose substantially from 1996 to 2011, but remains relatively small at 5.3 percent. The white share of new entrepreneurs declined during this time period, while the African American share increased slightly. Both immigrant and native-born entrepreneurial activity declined slightly in 2011; however, immigrants remained more than twice as likely to start new businesses as were the native-born.

Industry Groups:

By industry, construction had the highest entrepreneurial activity rate at 1.68 percent, continuing an upward trend over the past several years, followed by the services industry at 0.42 percent. The manufacturing startup rate was the lowest among all industries, with only 0.11 percent of non-business owners starting businesses per month during 2011.

In North Carolina, while we don’t have pinpoint data to break down the Kauffman numbers on a local basis, we can extrapolate their impact on our entrepreneurial scene. We should anticipate more 45-54 year olds to start businesses, a greater demand among non-Caucasians, and a rebound of construction start-ups to complement the steady flow of services businesses.

The Huffington Post reported last week that North Carolina is one of the top 10 states for startup hiring in 2011, based on the growth in the total number of jobs at start-ups. While there is definitely start-up activity in all regions of the state, outside of North Carolina the start-up scene around the Research Triangle Park area is best known. It seems all of the Triangle research universities are wanting to champion entrepreneurship and its healthy impact on the state and local economy. Duke University recently completed another Startup Challenge. NC State University hosted the Lulu Games competition as a part of its Entrepreneurship Initiative.

Over at UNC, in a massive research project conducted at the Kenan Institute of Private Enterprise, Ted Zoller highlighted the role of the dealmaker in assisting entrepreneurial ventures to reach their funding milestones. While the person who matches the entrepreneur with the funding source is critical for many life science and high technology ventures, not all start-ups are so capital intensive. What is a common need among businesses of all types is mentoring. Whether one is using something similar to the programs developed at MIT or a localized version, mentoring–coupled with community and education–is critical to successful business launches.

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Start-Up Savvy: Taught & Caught

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In an article last month entitled, “Can Entrepreneurship Be Taught?,” two sides of the argument were presented that, while equally valid, were at odds with one another. Noam Wasserman, Harvard Business School professor of Entrepreneurship and author of “The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup,” takes the position that too many founders have to climb the same steep learning curve as others before them, bereft of insights that could help great ideas become great businesses. Victor Hwang, co-author of “The Rainforest: The Secret to Building the Next Silicon Valley” and managing director of T2 Venture Capital in Silicon Valley, posits that only experience can teach an entrepreneur how to successfully launch a business.

Within the Wasserman camp are educators who believe that documented best practices and potential problem areas can be shared with the entrepreneurs. For instance, the idea that the founder must do the three following things has been challenged with research data to instruct otherwise:

  1. Following one’s gut
  2. Having a “glass half full” view about resources and time
  3. Stay in the top executive role as the company matures

Augmenting the classroom instruction with deliberate opportunities to “try out” a principle in a role play seem to yield good results. Additionally, self assessments are helpful in increasing one’s self awareness and ability to lead others. Notably mentoring is recognized as one of the best ways an entrepreneur can learn how to do the right thing in a myriad of scenarios.

What is also being learned is the need to not just offer principles of management (regardless the field of management–finance, operations, marketing, etc), but to also focus on the soft skills requisite to be an effective leader. Whether the entrepreneur is embracing better social skills, motivational techniques for self and others, or other facets of emotional intelligence, there are competencies to be gained that are simply not intuitive for most.

Hwang and the experiential learning community holds steadfastly to the conviction that entrepreneurship is taught rather than caught and is more of  an impartation than an education. Rather than the typical domain of business schools–resource allocation and risk management, it is argued that the necessary skills fall more into the following categories:

  • Comfort with a high degree of uncertainty
  • Willingness to become a generalist rather than a specialist
  • Abilities in inspiring others through storytelling and personal charisma

Since some programs are heading in the direction of trying to advise start-ups on what actions to avoid, Hwang is concerned that the willingness to try something unconventional may become minimalized. He and others believe that such a mindset is critical to entrepreneurial success. The main thesis behind Hwang’s proposed approach is that entrepreneurs would have the greatest chance of success if communities with resources, counsel and mentoring were available for their growth and development.

The common theme, then, is that mentoring and nurture is the best medicine for someone who “suffers” from entrepreneurial dreams. We wholeheartedly concur with this bottom line approach and advocate innovation centers (incubators with assigned mentors, education, and planned activities to build a sense of community) as a best practice!

No Freakin’, Entrepreneur

In a recent blog post Dharmesh Shah cites 8 examples of  things entrepreneurs freak out about. Do any of them sound familiar?

1. Your lead investor in a funding round backs out in the final stages. (By the way, when this happens, you’re almost never going to hear what the real reason is).

2. You get a certified letter in the mail from some big law firm you’ve never heard of (nobody’s heard of law firms, until they they do). The envelope the letter came in is the nice, creamy, heavy-stock kind. It’s more expensive-looking than the one you used for your wedding invitations. The letter uses a lot of words to basically say “you’re being sued”.

3. Your lead developer leaves. This is about half way into a project to rewrite your product in Scala, which he convinced you to do.

4. A very big customer deal you were just about to close falls through. Normally, this wouldn’t be a big deal, except that you spent a bunch of time and money trying to get this deal done. Time and money you couldn’t really afford to waste.

5. You were about to be acquired, and now the acquirer has “gone dark”. Despite your best intentions, the team and you have been making decisions based on the impending acquisition. “It would be silly to do X, Y and Z when we’re going to be acquired next month…”

6. The production system that hosts all your customers came crashing down. And that live backup system you thought you had isn’t all that live.

7. One of your competitors just went and raised a ton of money. They’re blanketing the industry with PR, marketing, fancy new booths at tradeshows, local events involving a winnebago and taking out ads, seemingly all over the Internet. Potential customers, investors, friends and even your mom ask you about this big, bad competitor. You get tired of saying: “But their product sucks!”

8. Co-founder takes a job somewhere. Feels really badly about it. Promises to help out nights and weekends. You don’t have the heart to say: “Yeah, but it’s the emotional support I’m going to miss the most…”

Any one of these events can cause an entrepreneur to overreact. Rash decisions are often made to the detriment of the business and its team. Instead of knee-jerk reactions, try to remain calm and seek the counsel of your mentor(s). For perspective, consider that many others before you have encountered and survived similar challenges.

Better Than Dilution & Debt

One of the most interesting websites we’ve discovered recently about entrepreneurs is called Under30CEO. Today the site featured an interview with Trevor Mauch, founder of AutomizeIt and Mach One Media, serial entrepreneur and founder of a few multimillion dollar businesses. Excerpted from the interview is the quoted section below:

One of the things I see a lot of people I’m coming across, they’re making the funding part (of entrepreneurship) out to be a huge deal [when it’s not.] As a great example…this guy was selling his linen [or garment] business services for hotels or whatnot. He bought his equipment for 500 bucks. And this guy bought this equipment, and then he went to the biggest account in town, which is our local hospital and said “what do I have to do to have your business?” (After he heard the answer,) ..he said “okay, I can’t do all of this capacity right now but if you fund $25,000 to get into a facility and to buy our equipment that can service ..what you need, then will accept this bid.”  …The hospital..it’s like (a) $15,000 – $20,000 dollar a month account! ..The hospital ended up going with this guy and funded the whole growth of his business!

..With two of my different businesses, …we saw what people wanted, and we went out there and pre-sold one of our training programs before it was ever created! We made sure that people wanted it, made sure it’s really quality, and we pre-sold to our customers, and our customers funded that startup.  And same thing with our software company.  We funded that company with our revenues from the publishing company, and same thing we went out there before we were finished. We pre-sold memberships in it and that help us get some cash to start that goal. So yeah definitely don’t look at funding as an obstacle because there’s a lot of different ways to get funding, especially from your customers, and sites like Kickstarter.

(At Kickstarter) anybody can go there and post their project, their business or products whatever their looking at launching. And they raise funds for their business by getting people to “pre-buy” whatever it is. So, I was last week and uhmm there’s this one [business], that was some kind an iPod speaker and so they had a prototype…they sold a prototype and said “that’s what you’re gonna get,” and they had a goal they wanted to raise, I think that one is about $50,000 bucks. And they raised their $50 grand in about 14 days after they started, just from people seeing this idea and jumping pre-buying one of the things from it!! And that’s just a killer model.

So, the moral of the story is…become creative in your approach to funding your business! It’s not necessary to run up exorbitant credit card debt, nor follow the angel-VC-dilution pattern. Mauch started his first business with $600 cash. Stretch your mind–think hard about how you can accomplish your objectives without copying someone else’s success path. You will be so happy you did when it’s your turn to be interviewed.

Bureaucracy: The Entrepreneur’s Kryptonite

As Dan Sullivan says in The Strategic Coach® Program, “The human brain cannot do extraordinary things, only normal things.” “So the trick,” he says, “is to make the extraordinary normal.”

Corporate employees operate based on policy: that’s what keeps them from having to think. Entrepreneurs depend thrive on having the freedom to constantly grow and change, to make new connections, and to ask questions that shake everything up. To an entrepreneur, groupthink (i.e. bureaucracy) is like Kryptonite.

Just because we don’t like being bogged down by over reliance on structure doesn’t mean that we are always creative. Following established patterns and trying to approach every issue with the same solution is a bad habit even for an entrepreneur. Rather than seeing opportunity, we can become fixated on solving a problem.

When Jim Collins wrote about Big Hairy Audacious Goals (“BHAGs”), he was challenging small thinking. Simply considering an aggressive goal causes the mind to see the environment differently. Unable to stop thinking about the “What ifs,” we are empowered to consider new concepts,  linkage and alternative ways of viewing the same issue. Divergent thinking is modeled by the likes of Richard Branson, who tweeted, “My interest in life comes from setting myself huge, apparently unachievable challenges, and trying to rise above them.”

Your definition of “normal” daily experience becomes unique when you think in terms of BHAGs.  Dream for a moment about what life could look like in 5-7 years. Can you imagine performing at 10x today’s level? Earning 10X what you do today?

Bureaucracies are based on keeping everything the same so they can preserve their status. Policy and rules “protect” the structure from the effects of individuals, whose participation is measured in hours on the clock, not in results. In an entrepreneurial organization, by contrast, change is life, because “holding your ground” means stagnating and falling behind. Individuals are sought out and rewarded for their ability to think, create, and make a unique contribution.

Make a habit of  what Sullivan terms the “10x Mindset,” and innovation, risk-taking, and teamwork will all come together for you in a completely new way. Bureaucratic thinking and structures simply won’t survive in your environment because you and the people around you will be entirely focused on building, adapting, and expanding a path toward your “bigger future” vision.

Cultivate a creative mindset that makes growth and progress “normal.”