How long will the entrepreneur fad last?

In the last ten years, entrepreneurs have become extraordinarily popular. Politicians, journalists and business people all want to be associated with the idea of entrepreneurship. Official programs have been created to help entrepreneurs and the weekend newspaper invariably contains a special supplement on entrepreneurship. All universities and business associations organize events so that entrepreneurs can raise awareness about their projects and many venture capital companies have been created to invest in entrepreneurial projects.

Garage of Steve Jobs' parents on Crist Drive in Los Altos, California, by Mathieu Thouvenin

What is it like to be an entrepreneur?

To begin with, it is becoming more and more common for two or three people to start up a new company. Speed, technology and international exposure are becoming increasingly important. Information flows quickly and it is important to remember that a good opportunity is only a good opportunity if everyone doesn’t know about it. As a result of this growing complexity, what is known as the entrepreneurial team very often takes the place of the lone entrepreneur: one partner is an expert in technology, another is in charge of sales and a third is good with finances. In other cases, all the partners dabble in these three areas. There’s no such thing as an entrepreneur gene.

What makes an entrepreneurial team successful?

Business-plan-entrepreneurshipAfter studying many cases of entrepreneurs over the course of my career, I have concluded that a successful entrepreneur or entrepreneurial team with a new company should have the following characteristics:

  • Good technological and business training.
  • A certain amount of experience (which helps save time when learning about the reality of the project).
  • A well-designed project, i.e., what is known as a business plan, which situates all relevant aspects of the project in a financial context and a time frame. This context and time frame determine the amount of funding required to start up the project.

It is highly probable that a good entrepreneurial team with a good business plan will find the other key item required in the entrepreneurial process: capital.

How much money is needed to be an entrepreneur?

Naturally, it is impossible to mention a specific amount, but analysis of a large group of successful cases indicates that it would be difficult to start up a company with less than several hundred thousand euros. And if we are talking about a capital-intensive company (machines, facilities, installations), the amount could be more than a million euros.

Various Euro banknotes
Various Euro banknotes, by Lionel Allorge

And yet there are financial aid programs for entrepreneurs that only provide grants of a few thousand euros. In terms of policy, if the government earmarks a total of €5 million for entrepreneurship, it prefers to offer 1,000 grants of €5,000 instead of 20 grants of €250,000. But those 1,000 grants will probably not be successful because a large team of analysts will be necessary to assess each proposal. However, 20 grants invested in carefully analyzed and well-selected projects could be recouped and a considerable profit could even be made.

The policy of providing small grants to entrepreneurs can be dangerous because it can mislead young university students. They might consider developing a website to sell a specific product. With a lot of enthusiasm and a small grant, they might think that becoming an entrepreneur is better than finishing their university studies and getting right in the unemployment line. But once their website is up and running, these entrepreneurs may discover that there are countless others like it that have much more to offer.

That’s why it is important to stress ideas like training, experience, the business plan and suitable financing.

Are entrepreneurs good for society?

A subsidized entrepreneur is no different from someone on unemployment. But an entrepreneur with a real business project, a plan for implementing it and the funds required to do so will create good quality jobs with a future, will generate wealth and enthusiasm, and will be a good role model.

Training as many people as possible about the basics of entrepreneurship is crucial so that people who encounter an opportunity at a specific point in their career can identify it and transform it into a company. If they also do it based on sound values such as hard work, sacrifice, honesty, flexibility and humility, they will help create a better society.

Entrepreneurship is a process that can and should be studied.

About Pedro Nueno

Pedro Nueno is Professor in the Department of Entrepreneurship, IESE and Professor and President, CEIBS (Shanghai, Beijing). His areas of specialization include entrepreneurship; intrapreneurship and starting new ventures; management of technology and innovation: management of privatization and turnaround processes; industrial alliances; joint-ventures and acquisitions; industrial procurement, and supply-chain management. He holds the Bertran Foundation Chair of Entrepreneurship at IESE and the Chengwei Ventures Chair on Entrepreneurship at CEIBS.