Common Myths About Entrepreneurs

Common Myths About Entrepreneurs
There are many misconceptions about who entrepreneurs are and what
motivates them to launch firms to develop their ideas. Some misconceptions
are because of the media covering atypical entrepreneurs, such as a couple
of college students who obtain venture capital to fund a small business
that they grow into a multimillion-dollar company. Such articles rarely state
that these entrepreneurs are the exception rather than the norm and that their success is a result of carefully executing an appropriate plan to commercialize what inherently is a solid business idea. Indeed, the success
of many of the entrepreneurs we study in each chapter’s Opening Profile is a
result of carefully executing the different aspects of the entrepreneurial process. Let’s look at the most common myths and the realities about
entrepreneurs.
Myth 1: Entrepreneurs are born, not made. This myth is based on the
mistaken belief that some people are genetically predisposed to be
entrepreneurs. The consensus of many hundreds of studies on the
psychological and sociological makeup of entrepreneurs is that
entrepreneurs are not genetically different from other people. This evidence
can be interpreted as meaning that no one is “born” to be an entrepreneur
and that everyone has the potential to become one. Whether someone does
or doesn’t is a function of environment, life experiences, and personal
choices.32 However, there are personality traits and characteristics
commonly associated with entrepreneurs; these are listed in Table 1.3.
These traits are developed over time and evolve from an individual’s social
context. For example, studies show that people with parents who were
self-employed are more likely to become entrepreneurs.33 After witnessing
a father’s or mother’s independence in the workplace, an individual is
more likely to find independence appealing.34 Similarly, people who
personally know an entrepreneur are more than twice as likely to be
involved in starting a new firm as those with no entrepreneur acquaintances
or role models.35 The positive impact of knowing an entrepreneur
is explained by the fact that direct observation of other entrepreneurs
reduces the ambiguity and uncertainty associated with the entrepreneurial
process.
Myth 2: Entrepreneurs are gamblers. A second myth about
entrepreneurs is that they are gamblers and take big risks. The truth
is, entrepreneurs are usually moderate risk takers, as are most
people.36 The idea that entrepreneurs are gamblers originates from
two sources. First, entrepreneurs typically have jobs that are less
structured, and so they face a more uncertain set of possibilities than
managers or rank-and-file employees.37 For example, an entrepreneur
who starts a social network consulting service has a less stable job
than one working for a state governmental agency. Second, many
entrepreneurs have a strong need to achieve and often set challenging
goals, a behavior that is sometimes equated with risk taking.
Myth 3: Entrepreneurs are motivated primarily by money. It is naïve
to think that entrepreneurs don’t seek financial rewards. As discussed
previously, however, money is rarely the primary reason entrepreneurs
start new firms and persevere. The importance and role of money in a
start-up is put in perspective by Colin Angle, the founder and CEO of
iRobot, the maker of the popular Roomba robotic vacuum cleaner.
Commenting on his company’s mission statement Angle said:
Our, “Build Cool Stuff, Deliver Great Products, Have Fun, Make Money,
Change the World” (mission statement) kept us (in the early days of the
Company) unified with a common purpose while gut-wrenching change surrounded
us. It reminded us that our goal was to have fun and make money.
Most importantly, it reminded us that our mission was not only to make
money, but to change the world in the process.38
Some entrepreneurs warn that the pursuit of money can be distracting.
Media mogul Ted Turner said, “If you think money is a real big deal
you’ll be too scared of losing it to get it.”39 Similarly, Sam Walton,
commenting on all the media attention that surrounded him after
he was named the richest man in America by Forbes magazine in
1985, said:
Here’s the thing: money never has meant that much to me, not even in the sense
of keeping score. . . . We’re not ashamed of having money, but I just don’t believe
a big showy lifestyle is appropriate for anywhere, least of all here in Bentonville
where folks work hard for their money. We all know that everyone puts on their
trousers one leg at a time. . . . I still can’t believe it was news that I get my hair
cut at the barbershop. Where else would I get it cut? Why do I drive a pickup
truck? What am I supposed to haul my dogs around in, a Rolls-Royce?40
Myth 4: Entrepreneurs should be young and energetic. Entrepreneurial
activity is fairly evenly spread out over age ranges. According to an Index
of Entrepreneurial Activity maintained by the Kauffman Foundation,
26 percent of entrepreneurs are ages 20 to 34, 25 percent are ages 35 to 44,
25 percent are ages 45 to 54, and 23 percent are ages 55 to 64. The biggest
jump, by far, from 1996 to 2010, which is the period the Kauffman date
covers, is the 55 to 64 age bracket. A total of 14 percent of entrepreneurs
were 55 to 64 years old in 1996, compared to 23 percent in 2010. The increasing
number of older-aged entrepreneurs is a big change in the entrepreneurial
landscape in the United States.41
Although it is important to be energetic, investors often cite the
strength of the entrepreneur (or team of entrepreneurs) as their most
important criterion in the decision to fund new ventures.42 In fact, a
sentiment that venture capitalists often express is that they would rather
fund a strong entrepreneur with a mediocre business idea than fund a
strong business idea and a mediocre entrepreneur. What makes an
entrepreneur “strong” in the eyes of an investor is experience in the area of
the proposed business, skills and abilities that will help the business, a
solid reputation, a track record of success, and passion about the business
idea. The first four of these five qualities favor older rather than younger
entrepreneurs.
Myth 5: Entrepreneurs love the spotlight. Indeed, some entrepreneurs
are flamboyant; however, the vast majority of them do not attract public
attention. In fact, many entrepreneurs, because they are working on
proprietary products or services, avoid public notice. Consider that
entrepreneurs are the source of the launch of many of the 2,850 companies
listed on the NASDAQ, and many of these entrepreneurs are still actively
involved with their firms. But how many of these entrepreneurs can you
name? Perhaps a half dozen? Most of us could come up with Bill Gates of
Microsoft, Jeff Bezos of Amazon.com, Steve Jobs of Apple Inc., Mark
Zuckerberg of Facebook and maybe Larry Page and Sergey Brin of Google.
Whether or not they sought attention, these are the entrepreneurs who are
often in the news. But few of us could name the founders of Netflix, Twitter,
or GAP even though we frequently use these firms’ products and services.
These entrepreneurs, like most, have either avoided attention or been
passed over by the popular press. They defy the myth that entrepreneurs,
more so than other groups in our society, love the spotlight.