The term “entrepreneur” gets thrown around a lot these days. I think it’s important to clarify what the term means. Merriam-Webster defines “entrepreneur” as:
one who organizes, manages, and assumes the risks of a business or enterprise
The dictionary definition is helpful but I think the types of entrepreneurs as defined by entrepreneur and Stanford professor Steve Blank are much more useful for practical purposes.
- Small Business Entrepreneur
- Scalable Startup Entrepreneur
- Large Company Entrepreneur
- Social Entrepreneur
The Small Business Entrepreneur is looking to start a business that will provide for a comfortable living for his or her family. The business is funded from personal savings, loans from friends or family and bank loans. This business, if successful, will experience steady growth over a long period of time. This type of business can grow quite large but the majority don’t. The business transitions from a startup to a small business. This is the category that 95% of people who are starting a business fall into.
The Scaleable Startup Entrepreneur is trying to launch the next Google or Amgen. The business is funded by investments from angel investors, venture capitalists, private equity and potentually, public markets. The business, if successful, will experience a period of exponential growth before becoming a mature company. Successful companies of this type grow to Fortune 500 scale. This type of business goes from a scaleable startup trying to establish a business model, to a transitional business focused on growth, to a mature business with stable cash flows and profits. Only about 5% or fewer of entrepreneurs are trying to start this kind of business.
The Large Company Entrepreneur takes a team from a large company and starts a new division of the company, focused around a new product. This is usually done because the parent company is too bound by bureaucracy and culture to innovate under its existing structure. Funding comes from the parent company and the goal is to grow the new product into a large business. This happens quite rarely.
The Social Entrepreneur is looking for a new an innovative way to solve a societal problem. Funding comes from governments and donations. Profits aren’t the main motive, but the entrepreneur is focused on achieving results and using capital as efficiently as possible. Goals are set and outcomes are measured in an effort to continually improve performance.
So, what’s the point of all this? Don’t get distracted by the issues of other types of businesses. The strategy and execution needed to be a successful Small Business Entrepreneur are different than that of a Scalable Startup Entrepreneur. Much of what is written in blogs and websites is addressed towards the Scalable Startup Entrepreneur. It’s big money, high growth and it pulls in readers.
If you are starting a small business, much of this isn’t appropriate for what you are doing. For example, venture capital is not in the cards for you and it makes no sense to spend time worrying about it. Learn from blogs and other entrepreneurs in your space and focus on building your business.