The Halcyon Days of Entrepreneurship

The economy isn’t so hot. The credit crisis has caused mass layoffs across Wall Street and related industries. Mortgage defaults are skyrocketing, causing panic in many communities across the U.S. The geopolitical environment hasn’t been this lousy in a generation. All pretty depressing stuff. But I see a silver lining in all this chaos: the rise of entrepreneurship, a wave that can help spur innovation, solve seemingly intractable problems and help energize the economy both today and tomorrow.

Here are a list of catalysts that I see contributing to the entrepreneurial phenomenon:

• The boredom of big companies. Whether one is talking about Ford, IBM, P&G or even Google, big companies eventually stunt the entrepreneurial growth of many talented people. If you have an idea, a really good idea that you want to own and run with, there precious few companies where you can do this without a whole lot of b.s. that makes the whole experience unsatisfying. So if you are successful, self-confident, have a network of smart people and the drive to do your own thing, leaving the mother ship to pursue your passion is both a rational and a logical thing to do. I can’t tell you how many people I personally know that have left Google, AOL, every major media company and Wall Street firm to do something entrepreneurial, whether it is to become an angel investor or to start their own company. This is a powerful catalyst for change that will drive great ideas and companies for a generation - or more.

• The mass layoffs across Corporate America. Lots of smart, mature professionals are finding themselves without jobs, and without good prospects for finding similar jobs in other companies or industries. This doesn’t mean these people aren’t good, only that they were left standing when the music stopped playing. I personally know several people this has happened to that are - yes - taking some of their capital and all of their creative energies to develop business ideas they’ve had but never had the time to pursue. And these people have lots of practical experience that can be used to either start companies of their own or to take operational roles within young companies that can benefit from their knowledge. Hundreds of thousands of professionals are going to have to re-invent themselves. There is no choice. But these are not the types of people who curl up in a ball and wish things were different. They’ll feel compelled to figure it out. And that can only inure to the benefit of the small, rapidly growing companies in need of such skills and wisdom.

• The asymptotic nature of technology costs. As technology costs approach zero, barriers to starting a company are simply fading away. If the talent and a little operating capital is there, what is stopping anyone from pursuing their idea? Not much, except guts. It has never been cheaper to hack together an alpha prototype and test the market. I’d argue that while costs will continue to fall, they’ve already fallen to such a low level that they really don’t represent much of an obstacle any more. Get started and get to market early and often. Because now you can.

• The availability of both angel and venture capital. Even if the corporate refugees don’t have as much operating capital as they need to completely self-fund a start-up, there is plenty of angel capital around to help bridge the gap between personal monies and an institutional round (if needed). There simply aren’t any excuses. It is hard to walk into a Starbucks in any major city and order your venti skim latte without bumping into someone who does angel investing. We’re everywhere. There is no place to hide. So unless you are living under a rock or so inept that you can’t find a nearby business accelerator, angel group or high net worth individual who likes seed investing, hacking together a little money for a really good idea should not be viewed as a mountain to be scaled. It is doable and it is done ever single day.

• The presence of clear problems that need solutions. There are so many things I see in my own life that could be done better it is truly mind-boggling, whether they are on the macro level (clean fuel technology, water purification) or the micro level (job search, ad targeting, basically all that stuff I invest in). I buy into the Peter Lynch ethos - “Invest in what you know” -  but applied to early-stage investing and entrepreneurship: put money in stuff/start companies that addresses a problem or need you have. So I don’t see a dearth of opportunities for smart, entrepreneurial people to come up with commercially compelling, bankable ideas. You only need look as far as our own life for investment ideas. Not everyone needs to start a nanotech, biotechnology or social networking company. But if you feel like you have an edge, go for it.

New business ideas and experienced management for helping young companies are two clear positives coming out of the current business and economic environment. High-impact start-ups is an area where the U.S. has long excelled. Now we have an opportunity to leverage all those highly knowledgeable, experienced, displaced professionals into both new and young, rapid-growth businesses. Maybe local groups of professionals in transition can be established to brainstorm around new business ideas (see Meetup.com), and to bring in successful entrepreneurs and venture capitalists to provide guidance on how to turn their ideas into real businesses. It could be a win-win by helping entrepreneurs identify possible senior talent for their companies, and helping the venture guys source new business ideas and entrepreneurs to fund. All I know is that we can turn what looks like a negative into a big positive by thinking outside-the-box, providing some education and support and presenting both start-up and small business opportunities to those used to thinking only about big companies. What they may find is a life and a challenge that is different, challenging and possibly even more rewarding than what they’ve gotten accustomed to. Now that is what I call a silver lining.

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COMMENT:

AUTHOR: Ethan Bauley

EMAIL: ethan@spimeco.com

URL: http://www.ethanbauley.com

DATE: 04/25/2008 02:29:14 AM

Very inspiring, thanks for writing this.

Just like you said, it’s an incredible moment in time to be a creative/entrepreneurial thinker; there’s so many opportunities.

- Ethan

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COMMENT:

AUTHOR: Magnus

EMAIL: kjellstrommagnus@gmail.com

URL: 

DATE: 04/25/2008 04:19:42 AM

Thank you, for a highly inspiring perspective. I could not agree with you more, only I didn’t know I agreed with you before you told me.. :)

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COMMENT:

AUTHOR: Dave

EMAIL: frieddave@gmail.com

URL: 

DATE: 04/25/2008 08:42:43 AM

And here I thought you were a liberal in the Fred Wilson mode.  Kudos to you for realizing government will not solve problems.

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COMMENT:

AUTHOR: Tim

EMAIL: tim@ohanacap.com

URL: 

DATE: 04/25/2008 10:15:44 AM

I agree, but I think the argument (and definition of entrepreneurship) carries further.  We’re in the early stages of a huge generational shift with many successful small private business owners looking to sell their companies and retire, or at least step back.  This presents a huge opportunity for new, energized entrepreneurs to take the reins (through acquisition, family succession, etc.) and grow these businesses, preserve jobs, and maintain the strong ties to their local communities.  Entrepreneurship isn’t just about start-ups and high-growth; exciting things go on all the time at “traditional” service, manufacturing, and distribution companies, even if they get less press or aren’t as sexy as the next Google.  

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COMMENT:

AUTHOR: Greg Berry

EMAIL: gberry@businesscatapult.com

URL: http://www.businesscatapult.com

DATE: 05/27/2008 11:12:11 AM

Roger,

Good post (and great blog - just came across it today - I’ve been contemplating information arbitrage for over a decade.  One one hand, I’m glad to see some people slowly coming around.  On the other hand, uh-oh!  ; > )

I’m based in Boulder, CO, and the entrepreneurial activity in Colorado is stronger than it has been in almost a decade.  I wrote on that at my nuance intelligence blog — www.nuanceintelligence.com — just two weeks ago.

To emphasize to the clearly-described indicators you post, we believe that given the social, cultural, political and business transitions happening not just in our country, but worldwide, that corporations and bureaucracies will not be able to make these changes.  And entrepreneurs will thrive by filling in that gap.  

Where I disagree is access to capital. Most entrepreneurs are very good at whatever they are good at, be it geo-analytics or solar part manufacturing, but most (especially first-timers) are not well schooled in the intricacies of raising capital.   And most capital (outside of Wall St., which skews all perspective on the rest of the country) does not understand entrepreneurship very well.

Which is why we launched the Business Catapult — www.businesscatapult.com — a marketplace to connect entrepreneurs and investors using standards-based measurement of business performance.  

I look forward to reading your blog, and learning even more about “inforbitrage”.  

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