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SUMMARY ENTREPRENEURSHIP: MODELS & INGREDIENTS
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Summary of 53 pages for the course Entrepreneurship: Models and Ingredients at KU Leuven (18/20)
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Entrepreneurship - models andingredients
Chapter 1: Entrepreneurship, idea generation
Increased interest in entrepreneurship
There is tremendous interest in entrepreneurship everywhere in the world
According to the GEM study, 5.8% of the French are actively engaged in starting a business or are the
owner of a business that is less than 3 years old
French education:
o New ‘entrepreneur student’ status which allows students that create a business straight after
graduation to maintain certain advantages associated with being an student
What is entrepreneurship?
Insane perseverance in the face of total rejection
Entrepreneurship is the art of turning an idea into a business
Entrepreneurship is the process by which individuals pursue opportunities without regard to resources
they currently control => not true anymore, because it can also not involve individuals
Entrepreneurship is about entrepreneurial agents (1), whose aim is to create new value (2) by means of
a creating process (3) that capitalizes on unilaterally imposed environmental factors (4) and
environmental possibilities that can be strategically selected (5)
This definition covers different types of entrepreneurship
o ‘Corporate entrepreneurship’ or ‘intrapreneurship’ refers to the conceptualization of
entrepreneurship at the firm level which affects many individuals
Occurs when employees undertake entrepreneurial activities in association with one
or more organizations
o ‘Social entrepreneurship’ is the process of pursuing suitable solutions to create and sustain
social value and innovations (good for the triple bottom line: people planet profit)
1
, Can a social entrepreneur make millions? YES (e.g.: the restaurant in the dark)
o ‘Nascent entrepreneurship’ is when you are at the beginning of entrepreneurship => nascent
until you have created an entity that has generated more money than you have put into it
(seeding money)
Nascent entrepreneurs with higher education are more successful => WHY? The
network that I build, the entrepreneur classes that I take, selection bias …
… => a lot of different definitions, there is not 1 that is ‘the’ definition (don’t memorize these)
Why become an entrepreneur?
There are 3 primary reasons:
o To be your own boss
o Financial rewards
o Desire to pursue own ideas
Invest in your own business => makes it look like you would go the extra mile!
Characteristics of successful entrepreneurs
A vision-driven individual who assumes significant personal and financial risk to start and/or expand a
business
Those in the right place, at the right time, who recognize this and act upon it, appropriately and
passionately
Core characteristics: 3 things you HAVE TO HAVE
1. Passion for the business
The number one characteristic shared by successful entrepreneurs is a passion for the business
2. Product/customer focus
A second defining characteristic of successful entrepreneurs is a product/customer focus
Use the word KNOW instead of THINK
Often forgotten, but very important
3. Tenacity despite failure
Because entrepreneurs are typically trying something new, the failure rate is naturally high
A defining characteristic for successful entrepreneurs is their ability to persevere through
setbacks and failures
Failure seen differently according to your location
o Western Europe: failure is stigmatizing
o US: Failure is expected and sometimes required
o Canada: In between but tending towards the US
Failure should be a learning process!!
o Morn … then start again
o Stay optimistic … at least in public
o Agonize over what went wrong in private
Secondary characteristics: ‘nice to haves’
Cognitive factors
o Some people believe that entrepreneurs have a ‘sixth sense’ that allows them to see
opportunities
2
, o This is called entrepreneurial alertness which is the ability to notice things without engaging
in deliberate search
Higher education and creativity
o The most important thing is CREATIVITY => makes you see solutions where others see
problems
o Evidence seems to suggest that important entrepreneurial skills are enhanced through higher
education
o Not so much theory related, but linked to the ability to adequality link different pieces of info
Prior industry experience
o If you know who (not) to talk to
o Helps an entrepreneur recognize business opportunities
o There is such a thing as too much industry experience, because creativity crumbles => rule of
thumb: often 6-8 years, depends whether the industry is volatile
o By working in an industry an individual
May spot a market niche that is underserved
Builds a network of social contacts who provide insights that lead to recognizing new
opportunities
Prior entrepreneurial experience
o Founders familiar with the entrepreneurial process are more likely to avoid costly mistakes
o Is there a thing as too much entrepreneurial experience? NO
Social networks
o Research result suggest that 40% and 50% of people who start a business got their idea via a
social contact
o The extent and depth of an individual’s social network affects entrepreneurial success
o Strong ties (Bounding => e.g.: family, friends) vs. weak ties (breaching)
Strong ties: support the entrepreneurial decision the most
Weak ties: most beneficial to nascent entrepreneurs
Difference between bounding and breaching = TRUST
!! equity is most important thing as an entrepreneur => don’t just give it away
=> different way: allow this person equity in the future, after they deliver
Common myths about entrepreneurs
Myth 1: Entrepreneurs are born, not made => NO
o Assume that the answer is somewhere in between => both talent and education are required
o Whether someone does or doesn’t become an entrepreneur is partially function of their
environment, life experiences, and personal choices
Myth 2: Entrepreneurs are gamblers => NO
o Most entrepreneurs are moderate risk takers
90%: risk general and risk lovers, you don’t want to be a lover in entrepreneurship
10% is risk averse
o The idea that entrepreneurs are gamblers originates from 2 sources:
Entrepreneurs typically have jobs that are less structured, and so they face a more
uncertain set of possibilities than people in traditional jobs
Many entrepreneurs have a strong need to achieve and set challenging goals, a
behavior that is often equated with risk taking
3
, o Seek optimum level of risk taking
Myth 3: Entrepreneurs are motivated primarily by money => NO
o Rarely the reason why people start new firms
o You won’t do short term investments because they think they will lose the money
o The pursuit of money can be distracting
Myth 4: Entrepreneurs should be young and energetic => NO
o Entrepreneurial activity is fairly easily spread out over age
ranges
o Combo of human, financial and social capital =
Entrepreneurial substance = something I am better than you
E.g.: 40 y/o is richer, more experience
o Risk taking behavior goes down with age because they have
much more to lose
o What makes an entrepreneur “strong” in the eyes of an
investor is experience, maturity, a solid reputation, and a
track record of success
These criteria favor older rather than younger entrepreneurs
o In Belgium: 38 - 42 => because stigmatized part of the world => people wait
o In Silicon Valley: around 20 y/o
Quick questions:
Which is the definition of entrepreneurship? => none of the above, because after over 50 years of
research academics still don’t agree on what exactly the definition of entrepreneurship is
Arrange the following core entrepreneurial characteristics in order of importance, starting with the
most important and ending with the least important:
o 1) Passion
o 2) Product/customer focus
o 3) Tenacity despite failure
4
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