For policy makers, the first order of business is to methodically
think through which of these entrepreneurial paths they want to help and
Lifestyle Startups: Work to Live their Passion
On the California coast where I live, we see lifestyle
entrepreneurs like surfers and divers who own small surf or dive shop or
teach surfing and diving lessons to pay the bills so they can surf and
dive some more. A lifestyle entrepreneur is living the life they love,
works for no one but themselves, while pursuing their personal passion.
In Silicon Valley the equivalent is the journeyman coder or web designer
who loves the technology, and takes coding and U/I jobs because it's a
Small Business Startups: Work to Feed the Family
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 work as hard as any Silicon Valley entrepreneur. They hire local
employees or family. Most are barely profitable. Small business
entrepreneurship is not designed for scale, the owners want to own their
own business and "feed the family." The only capital available to them
is their own savings, bank and small business loans
and what they can borrow from relatives. Small business entrepreneurs
don't become billionaires and (not coincidentally) don't make many
appearances on magazine covers. But in sheer numbers, they are
infinitely more representative of "entrepreneurship" than entrepreneurs
in other categories--and their enterprises create local jobs.
Scalable Startups: Born to Be Big
Scalable startups are what Silicon Valley entrepreneurs and
their venture investors aspire to build. Google, Skype, Facebook,
Twitter are just the latest examples. From day one, the founders believe
that their vision can change the world. Unlike small business
entrepreneurs, their interest is not in earning a living but rather in
creating equity in a company that eventually will become publicly traded
or acquired, generating a multi-million-dollar payoff.
Scalable startups require risk capital to fund their search for a
business model, and 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 tend to group together in innovation clusters
(Silicon Valley, Shanghai, New York, Boston, Israel, etc.) They make up
a small percentage of the six types of startups, but because of the
outsize returns, attract all the risk capital (and press.)