Startup Related Items
When it comes to launching a small business, American entrepreneurs don't go very far. In fact, sixty-nine percent get started at home, according to the latest Global Entrepreneurship Monitor report.
When we think of entrepreneurs, we think of visionaries working with a brilliant team of coders, disrupting an industry for millions of fans.
That may be true of Mark Zuckerberg and Jack Dorsey, but the average American entrepreneur is far less glamorous, says Donna Kelly, a professor of entrepreneurship at Babson College.
Recently, a team of researchers from Babson College and Baruch College interviewed nearly 6,000 U.S. adults as part of the 2012 Global Entreprenurship Monitor report. Most respondents were just starting out, but had taken significant strides, writing business plans and securing financing. Others had been running their businesses for less than three-and-a-half years, notes Kelley.
According to the report, an increasing number of U.S. entrepreneurs (69 percent) start their business at home, and many (59 percent) continue to work from home, even after it's up and running.
Many entrepreneurs choose to go it alone -- with no partners or employees to speak of, says Kelley. Some (23 percent) rely on at least one unpaid family member for help, while another 21 percent count one or more paid relatives among their staff. Only 37 percent expect to hire more than five people in the next five years.
In contrast, many of these entrepreneurs (30 percent) choose to outsource various aspects of their business, such as payroll, taxes, and legal duties, because it's easier thanks to the Internet and other web-based services.
As far as launching a business goes, "it's a lifestyle preference," says Kelley. "They are opportunity-driven. They see an opportunity to improve their income or to pursue independence."
That may explain why the average entrepreneur is wary of accepting venture capital or an angel investment. "Outside investors, as opposed to family members or close friends, have expectations and by imposing them they'd be restricting the entrepreneur's vision," Kelley says. To her point, only 16 percent of funding received by entrepreneurs surveyed came from banks, whereas 82 percent came from personal savings, family, and friends.
This following is a guest post by Jonathan Gebauer. Jonathan is the founder/CEO at exploreB2B, based in Berlin, Germany.
There is a lot of talk about startup hubs world wide – the places where the next Facebook will originate from, the next Instagram, the next Pinterest. I am from one of these places, Berlin, the capital of Germany. There is no lack of technology startups in this city.
But to be a place where new technologies and innovations thrive – well, there are a lot of things missing.
I was born in Berlin, I live here and we founded exploreB2B here. I breathe the air of this city and feel at home. But when we started, the air tasted different – I thought I could feel a vibe in the air that consisted of innovation in the startup scene. Today I know: this taste was more hype than vibe.
A story that got me thinking
Let me start with something that has recently happened to us, and which inspired me to write this article. I received an email from a US based VC which read: “Hey, we love what you are building at exploreB2B, let us know if you would like to talk to us.”
(I am sure Silicon Valley startups receive these every week.)
So far so good – naturally I wrote back. When they found out that we are located in Germany everything turned stone cold. They replied how sorry they were but since we are located in Germany, they would need to inform their European team and they would get in touch.
Their European team never got in touch. So far, not so global.
This is no big deal – it just got me thinking. Why is it that the European arm of a Venture Capital firm seems to think and act so differently from their U.S. counterparts?
This also was not the first time something like this happened to us. The story of our PR failures has already been published. We Berliners often make ourselves believe that Berlin will become the “next Silicon Valley” – but being second does not matter. Silicon Valley is not going away – so: who cares about Berlin?
The exceptions: Berlin startups that reached international fame
There are, of course, exceptions to the general rule. Innovative tech companies that reach international fame and success. Let me list the few that come to my mind: Soundcloud, ResearchGate, Aupeo, Wooga.
The same timespan in the US has brought us: Facebook, Instagram, Pinterest, Dropbox, Zynga, Box, Yammer, Foursquare, Twitter, Quora, Groupon, LinkedIn… The list goes on.
There are a lot of things missing here. And the successful cloning of successful US startups (which happened with Facebook, LinkedIn, Groupon, and many more here in Germany) is not the same as innovation.
Tech is not global – why no startup hub can really prosper without Silicon Valley’s support
At first glance, Berlin seems to have it all. There are startup competitions every other day, meetups, hackathons, conferences, … There is a network of business angels and investors, the city has had a couple of exits recently. A couple of tech blogs write about the city’s tech companies (both in German and English). With Ashton Kutcher’s not-so-recent investments in Amen and Gidsy a slice of Hollywood glamour was introduced. The area in the city center where most startups reside likes to be called “Silicon Allee” now – noting a resemblance to Silicon Valley.
There also is a lot of talent in the city – talent, which startups can hire. Three universities and multiple “Fachhochschulen” offer a supply of well educated developers and marketing minds while the city’s historic background shows a tradition for risk-taking – including the risk to start your own company.
But technology and innovation needs more than just founders and employees.
It needs a community and this community needs to include established tech people and companies as well as access to the traditional economy. Not just people who are new to the industry but also professionals from companies of any size and stage. It needs access to the likes of Apple, Microsoft, Google. You need to be able to see the shining light of Bill Gates talking on stage. You need investors who have a crap-load of money to invest on nothing but a crazy idea and feeling in their gut. You need access to marketing experts that can give advice, to tech companies that provide exit perspectives.
Berlin does not have those things.
Silicon Valley can provide this to other so called startup and tech hubs. It does so in some cases. But other tech hubs currently only exist by way of Silicon Valley’s support. They get as big and as successful as Silicon Valley allows them to be.
We Berliners might not admit that this is a fact, but we do know it in our hearts. A common first prize in our startup competitions is a trip to the valley. Or office space in the valley. Or a trip to attend a tech conference Or… You get the picture.
The consequences for young companies
This situation forces companies in other startup hubs to adjust. In Germany, the Samwer brothers face a lot of criticism for their cloning operations of international and US startups. It is true: they have been involved in cloning Groupon, Facebook, Zappos, Pinterest, Fab, Amazon, and many more. What is also true, is: This is a way to deal with our situation. Cloning companies also means you have access to information on how marketing strategies will perform and how you can achieve growth. When expertise and support is lacking, this is a valid way to replace it.
Another strategy is to prepare for an early exit. Selling your company early for comparatively small sums seems to be quite common in Germany – creating concepts for a global approach is not. The latest example for this is the formerly hyped startup Gidsy (which got famous by the Ashton Kutcher investment) – which just sold out to a competitor in a not so glamorous way.
There is no tech community in Berlin – just a startup community. This makes it hard for companies to break out of the startup hemisphere. Gidsy was criticized for its lack of professionalization, but you have to ask the question: How can a group of crazy founders get professional if there is no community to help with the process?
The few exceptions to these rules are companies and founders that usually readjust their geographic locations sooner rather than later. Soundcloud has offices nearly everywhere, others are moving their operations to San Francisco.
How to bend the rules: A way out for those that still want to think big
I do not like rules that cannot be bent – and I do not like to go small when others hit it big. I like to compete and I do not like failure. I did not invent exploreB2B for a small audience and I do not want to think small. In a world where creative minds are thinking up solutions, there are always options to become more competitive.
Those of us being unlucky enough to have founded our companies in places like Berlin, London, Paris or Sao Paolo still have a lot of options – the whole tech industry was created by people who bent the rules but refused to be bent by them.
In the beginning I told you about a VC not noticing where we are located – well, this sort of thing happens to me all the time. I receive emails, tweets, Facebook messages asking me whether I will be able to come to a meetup in San Francisco, or New York, or London… I always answer: “Hey, I am in Berlin.”
Most of the time the next message is: “Ok, give me a call when you are back.”
The way out for us is to stop worrying about Silicon Valley. In today’s world it is like any other place in the world: a place on the map.
I get emails from London, have Skype calls with bloggers in France, worked with a PR agency in the US (that didn’t go so well…), had articles published on an Australian blog (Big thank you to Jeff Bullas).
The community we need is there – you do not have to see people face to face to be able to get their advice. When you are creating a company on a global scale stop thinking narrow. Never limit yourself to the things you can do in your city.
By doing that we will force Silicon Valley to do the same. The big investments might not yet have reached our startup hubs, but they will come.
We need to stop picturing ourselves in direct competition with Silicon Valley – Berlin will never become “the next Silicon Valley”. But it does have its own strengths. As does London, as does any other city in the world. Each one of those places should play on its own strength – instead of highlighting its shortcomings in comparison to the Bay Area.
For Berlin, I can think of a lot of strengths: the talent supplied from universities, its geographic position and its history of being a place where eastern and western Europe unite, its history of being a place where people take risks.
We need to play our local strengths – and remove our weaknesses by acting globally.
Think less local.
We are entrepreneurs, we are founders, we are innovators. We were born to break the rules.
What's your take? What should entrepreneurs do to make tech innovation truly global?
Looking for other startup fanatics? Request access to the OnStartups LinkedIn Group. 130,000+ members and growing daily.
Oh, and by the way, you should follow me on twitter: @dharmesh.
There are tons of new funding opportunities for undergrad entrepreneurs.
Peter Thiel may be paying students to skip college, but undergrad entrepreneurs need not worry--there's plenty of money out there for them as well.
Several VC firms on the lookout for the next Michael Dell or Mark Zuckerberg have launched investment funds aimed at college entrepreneurs.
First Round Capital created a $2 million fund called the Dorm Room Fund, which targets student-run start-ups at dozens of schools, including the University of Pennsylvania and Cornell.
General Catalyst has launched Rough Draft Ventures, which will back 10 to 20 student entrepreneurs at 60 Boston universities. Meanwhile, three other firms--NEA, Polaris, and Accel Partners--created the Experiment Fund on the Harvard campus, with plans to back four to six companies each year with $50,000 to $500,000 seed rounds.
The Dorm Room Fund and Rough Draft Ventures even rely on student-run investment committees to make the investment decisions. "We've been blown away by their insight," says Phineas Barnes, a partner at First Round. "They have excellent judgment."
Your business may keep you racing like a frantic short order cook, but truly great ideas require a slow simmer, advises the founder of Behance. Save a little time to stir these pots.
You’ve no doubt heard of Google’s famous 20 percent time, and here on Inc.com we recentlly offered another bit of advice for long-term sucess that suggests only working to 80 percent of your capacity on a daily basis.
But these aren’t the only percentage-based rules of thumb out there. Behance’s founder Scott Belsky recently offered another. His magic number: 5 percent.
Like the other tips, Belsky’s suggestion boils down to setting aside some time for less immediate concerns and not burn all your energy on putting out myriad small daily emergencies, but he adds a culinary twist to his advice. “The secret behind many of the greatest dishes is patience and pacing. When you cook something slowly, at lower heat for a longer time, the flavors and textures can yield culinary masterpieces. The process of our own creations isn’t much different,” Belsky begins his post.
Like the best chili sits in the marinating in its own juices all day, some of the best ideas need plenty of time to stew, so make sure you devote a small portion of your schedule to keeping that crock pot of ideas topped up and simmering, he urges readers:
Few of us, except for the most legendary painters and novelists, can “slow cook” for a living. Amidst everyday demands, we are line cooks obsessed with turning out results, and quickly. And this is a good thing--it’s how we keep up with demand and how we keep the lights on.
But we can round out our work by keeping a few slow-cooked projects going in the background of our frenetic day-to-day lives. The secret of slow cooking is to not to forget what you’ve got on the stove, and keep coming back to it. See if you can give these “slow projects” 5 perent of your time as part of your routine.
What sort of projects benefit from this crock pot approach? Belsky suggests that for him writing projects and business ideas have benefited from being given lots and lots of time to mentally slow roast. Check out his complete post for more details.
Whatever particular percentage you choose or exactly how you phrase the insight, all of these rules of thumb share one fundamental idea: putting all of yourself into short-term concerns will leave you no time or energy to prepare and innovate for the longer-term and no capacity to respond when the world changes around you. However you structure your commitment, make sure you’re not short-changing your future self by burning through all your reserves today.
Do you have ideas and projects bubbling away on the mental back burner?
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