“What Would Sir Richard Do?”

Branson: Shooting for the stars

While it may be futile to try to figure out a universal implicit behavioral rule of entrepreneurs that sets them apart from the non-entrepreneurial majority of the population, this Entrepreneur column by “serial entrepreneur” Matthew Toren suggests the importance of role models in entrepreneurship. His choice of role model might be somewhat arbitrary, but considering the achievements of Sir Richard Branson – Toren’s role model – Toren could have made a much, much worse choice. Branson, the founder of the many Virgin enterprises including space tourism and, most recently, entrepreneurial banking, is indeed an amazing entrepreneur.

In many respects, Branson is unmatched as a pioneer and innovator-entrepreneur. He is the market leader that shapes the structure of the future through products and services that revolutionize existing and create new markets. As such, he may be a great role models for those aspiring to entrepreneurial greatness.

But most entrepreneurs are not like Branson; they do not need to completely reshape the market through innovative investments. Instead, most of the very successful entrepreneurs who end up causing fundamental change to the market are revolutionary to much lesser degree. Think Steve Jobs and Bill Gates, who both have contributed greatly to our lives and the market – but who have done so primarily through tweaking and building off of already existing ideas.

Nordic Startup Frenzy

Which way to Copenhagen?

We have noted earlier the great success of the Kauffman Foundation sponsored Startup Weekends, one of which was organized here in Columbia, Mo. (see here and here). It seems the Europeans are emulating this great concept. In Denmark, the very first startup weekend is organized this weekend, as part of the pan-European Startup Bootcamp.

While the people showing up for the startup weekend here in Columbia seemed quite normal (but perhaps energetic and risk-loving), Alex Facet, the co-founder of the European bootcamp, claims the entrepreneurs who show up for these events are different:

The people who take part in Startup Weekends are very special. They’re not normal. For one thing, they pay money to work really hard on the weekend, developing business ideas with strangers

As a Swede, I am not all too surprised about the statement that there are “not normal” people in Copenhagen. Come Monday, we will know if things were different in Copenhagen during the weekend. Or if it was “business as usual,” so to speak.

Entrepreneurial Traits and Personalities

Mike Ryall at StrategyProfs.net shares interesting anecdotal evidence for the drive or motive power of successful entrepreneurs. He concludes with stating that

the bulk of serious research on the personal characteristics of successful entrepreneurs was done in the 80s and 90s. There seems to be little interest in this question today. Is this because it has been answered, because we don’t think it can be answered, or because we don’t think it’s important any more?

The questions are undoubtedly interesting and well taken, but the underlying question is what we mean by entrepreneurship and what we are trying to explain using this phenomenon. Is it economic issues such as market structure, the effects of the pursuit of profit through satisfying consumer wants, or the utility maximizing use of scarce resources? Is it the engineering or planning dimension of formulating the type of policy that best supports a certain social (societal?) goal? Or is it the psychological aspect of entrepreneurship in trying to understand entrepreneurs and possibly to predict who, when or where we are to expect successful entrepreneurship?

If it is the former, then these questions are at best of indirect importance. What matters is instead the function of entrepreneurship and, consequently, what effects entrepreneurship has on the economy. If it is either of the latter two, we would probably need to dig deeper into the psychology of entrepreneurship than entrepreneurial traits or real world entrepreneurs’ characteristics. Here the causal link puts entrepreneurship as the effect, and studies its mental, psychological, and contextual causes.

With this in mind, can we draw any conclusions from the questions Mike Ryall asks and the supposed change in research focus at the turn of the century? To put it more explicitly, is it the case that the community of entrepreneurship scholars has adopted a more “economic” purpose in their overall research agenda? And if this is so, what are the consequences – the potential advantages and/or disadvantages?

Brilliant Mistakes

More for our failures series (1, 2): an interesting interview with Wharton professor Paul Schoemaker on his new book Brilliant Mistakes: Finding Success on the Far Side of Failure. “Schoemaker identifies two ways to take advantage of the opportunities that can flow from mistakes: being open to learning from professional or personal errors to identify new ways forward, and deliberately making mistakes, or challenging conventional wisdom, in order to speed up learning within your organization. He argues that not making mistakes may be the greatest mistake of all.” And don’t miss the Brilliant Mistakes Contest (no, don’t suggest my university’s decision to hire me, please).

Social Networks and Entrepreneurship

No, not the important study by my NHH colleague Arent Greve and Janet Salaff. The WSJ has an interesting feature on the crowdsourcing of venture capital.

The House Financial Services committee last week backed legislation that would make it possible for small businesses to use crowd funding to raise money from investors in exchange for equity stakes.

Under the proposal, investors would be able to buy stakes of up to $10,000 a year, or 10% of their annual income, whichever is less. Companies would be able to sell up to $2 million in equity—but must provide audited financial statements if the total exceeds $1 million.

If it becomes law, the proposal would enable Brian Lamb, co-founder of a Belmont, Calif., start-up, to overcome the longtime “general solicitation” ban on advertising sales of equity without registering with the Securities and Exchange Commission, among other restrictions.

Entrepreneurs are excited about the prospect. Naturally, regulators and other busybodies are deeply worried:

“It’s dangerous,” says Heath Abshure, the commissioner of the Arkansas Securities Department. Successful investors in small businesses tend to be savvy investors with deep knowledge of a business and its market, he says. “Mom and Pop investors on the Internet don’t have the ability to make the right kinds of assessments.”

The idea that entrepreneurship involves experimentation, trial and error, and reshuffling is widely understood. Heaven forbid we should allow small investors to engage in experimentation!

Update: See further discussion here, focusing on the potential for fraud.