Entrepreneur is a person who is willing to put his career and financial security on line with risk in name of new idea and spending time as well as money in new venture. Entrepreneurs have managerial skills, team building skills, problem solving skills, skills related to creativity and change management skills for managing change in business norms resulting from implementing new ideas. Extroversion and risk taking are traits of entrepreneurs. Characteristically they are innovative; increase efficiency, markets and productivity, also find and exploit opportunities.
Social Entrepreneurs: They are driven by the desire to improve the economic, social, educational and environmental conditions in country. They want to solve big problems related to social or economic conditions and run their venture as nonprofit.
Serial entrepreneurs: Serial entrepreneurs come again and again with innovative ideas and businesses. They are more risk takers and overcome their failure soon. They experience more successes and achievements in their field.
Lifestyle Entrepreneurs: They place their passion before profit and combine their personal interest and talent with ability of earning living. They want to establish, maintain a long term living by doing something which they love and in which they have their interest, skill, knowledge or expertise. They put more emphasis on self-employment, work/life balance and doing things ambitiously. Younger lifestyle entrepreneurs with having age between 20 to 60 years old are called “Treps”.
Entrepreneurship Key Terms: * Entrepreneurship * Creative destruction * Uncertainty * Entrepreneurial thinking * Financial bootstrapping
Entrepreneurship is an act of undertaking innovation, finance and business acumen for transforming innovation into economic goods. It may result in new organization or in revitalization of matured organization. In scale it ranges from solo projects to wide range of undertakings creating job opportunities. It includes creative destruction in which inferior innovations are replaced by modern high capable innovations. It also includes a factor of true uncertainty related to acceptance of innovative ideas in market.
Entrepreneurship is considered as a source of accelerating economic growth of country. It formulates capital and creates wealth that leads to reduction in unemployment and elimination of poverty also. It is a process of planning and organizing opportunities. Entrepreneur finds opportunities and arranges resources to exploit them for earning living and adding into the productivity of country, ultimately. To enhance growth of the country government should make the policy of establishing a culture of entrepreneurial thinking into the country. It can be done by integrating entrepreneurship with education, legislating for encouragement to take risk and national campaigns. For example: “United kingdom’s enterprise week”.
Financial Bootstrapping: This term is used to cover all the methods that use to minimize the act of obtaining debt from external investors equity finance needed from banks. Private credit cards are source of financial bootstrapping. Although it increases the personal risk of founder but it decreases external interference and increases the freedom to develop the company in owns way.
Types of bootstrapping: * Sweat equity * Delaying payments * Decreasing account receivables
Traditional Financing: External debt is not necessarily out of the realm of entrepreneur. If finance is insufficient in start it can kill the startup. In this case external debt is beneficial. Types of traditional financing: * Venture capital * Crowd funding * Hedge funding
Company Startup Key Terms: * High tech Startup * Death valley * Breakeven * IPO * Venture capitalist * Angel Investors
A company which has limited history, generally newly created is called company startup especially the high growth technology oriented company.
Startup financing Cycle: Startups have financing cycle. It has four stages: At 1st stage company is earning no profit because it is spending on research and development, it is called stage of Death Valley. At this stage startup gets finance from angel investors, who meet entrepreneurs incidentally and invest in their idea by being inspired by their innovative thinking, on some conditions. Seed capital is another way which includes finance obtained from relatives or friends. At the 2nd stage breakeven occurs where earnings are equal to expenses after which company starts earning profit.
At this stage startup can obtain finance from venture capitalists who are professional investors. Entrepreneurs convince them and on condition of giving partnership obtain finance. Startup can also purchase supplier or distributers to get more tight control (acquisition) or can get merged with related or unrelated company for increasing financial strength. Strategic alliances also occur at this stage between companies to obtain mutual goals. At 3rd stage, startups become eligible to get access to initial public office (IPO) where any company’s share are issued first time. At this point company get listed and it enhances its capital by issuing shares. At 4th stage, startups get success in establishing its financial image and become able to get loans from banks or other such investors which are called secondary offerings.
Startupers: Startupers are those persons who are involved in cultivation of high tech startups companies. These include: * Hackers * Venture capitalists * Web designers * Web developers * Entrepreneurs
Key Terms: * Economic development * Cross culturally valid characteristics * Gap fillers * Opportunity exploitation * Intrapreneurs
Paraphrasing Entrepreneurial economics is the study of entrepreneurship and entrepreneurship within the economy. Only factors of production do not tell the overall economy growth they should be combined with innovative entrepreneurship and entrepreneur to measure the long term economic development. But entrepreneurship cannot be analyzed by using traditional principles of economics because they do not consider it. For example: General equilibrium model which is mainstream of economics, do not consider entrepreneurship as entrepreneurship is all about disturbing equilibrium and focusing on rapid innovations. The characteristic of entrepreneurial economy is that high level of innovation is combined with entrepreneurial activity which results in creation of new ventures, products and services that leads to economic growth. Characteristics of entrepreneurs from different perspectives:
* According to 1st, 2nd ,3rd and 4th group of thoughts:
Entrepreneurs should have identification and perception of economic opportunities, organizational skills, technical skills, behavioral skills, managerial skills, operational skills to run a new business and motivation to achieve desired results. Some characteristic are cross cultural. Entrepreneurs are risk bearers which differentiate them from others but it is not only differentiating factor.
* According to Schumpeter:
He says that entrepreneurs have 3 qualities: they are innovators, risk bearers and coordinator cum manager. It means they will help their staff to achieve the goals as well as leading them and getting work from them. Entrepreneurs are those who disrupt the equilibrium and bring innovation. Entrepreneurs are gap fillers. They provide those products and services which are not being supplied in particular markets and in this way they exploit opportunities. They have special ability to makeup for market deficiencies.
* According to Drucker:
Entrepreneurs are those who lookout for changes, respond to them and exploit opportunity generated by change. They may create new business, new markets or new industry, Resources become economic resource only when they are found and exploited by entrepreneurs. Another innovator type is intrapreneur, who innovates while being part of existing organization because of which their risk and uncertainty level is low.