Chapter 1 The Power of Entrepreneurship Bygrave & Zacharakis, 2007. Entrepreneurship, New York: Wiley. ©
Definition of entrepreneurship Schumpeter An entrepreneur is the person who destroys the existing economic order by introducing new products and services, by introducing new methods of production, by creating new forms of organization, or by exploiting new raw materials. Simpler An entrepreneur is the person who perceives an opportunity and creates an organization to pursue it. Bygrave & Zacharakis, 2007. Entrepreneurship, New York: Wiley. ©
Business in the US Part-time employees 24 million businesses 99. 5% are small businesses (with 500 or fewer employees) Full-time employees Bygrave & Zacharakis, 2007. Entrepreneurship, New York: Wiley. © Have only 1 employee
10 -year survival rates of business establishments 81 % survive 40 % survive 1 year 5 years 2 years 65 % survive Bygrave & Zacharakis, 2007. Entrepreneurship, New York: Wiley. © 10 years 25 % survive
Entrepreneurship Revolution Strikes Gold Netscape Communications: $6 million of own money + $6 million of VC money = $2. 2 billion of market capitalization on the first day of IPO 182% ROI e. Bay: Benchmark Capital’s investment of $5 million in e. Bay multiplied 1500 -fold in just two years Bygrave & Zacharakis, 2007. Entrepreneurship, New York: Wiley. ©
Venture Capital Investments in Internet-related companies 4500 4000 3000 1000 $70 $60 $50 Yahoo IPO 1996 2500 1500 $80 Amazon. com IPO 1997 3500 2000 $90 e. Bay IPO 1998 $40 Netscape IPO 1995 $30 $20 $10 500 0 $0 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 Number of Companies Source: Venture Economics Total Invested Bygrave & Zacharakis, 2007. Entrepreneurship, New York: Wiley. © Total Invested ($ billion) Number of Companies 5000
Rackspace • Founded in 2000 • Provides hosting and “cloud computing” services • IPO on August 8 • 1 st venture-backed IPO since March 18 Bygrave & Zacharakis, 2007. Entrepreneurship, New York: Wiley. ©
Rackspace since IPO http: //finance. yahoo. com/echarts? s=RAX+Interactive#symbol=RAX; range=5 y Bygrave & Zacharakis, 2007. Entrepreneurship, New York: Wiley. ©
Changes in the Entrepreneurial Framework Conditions Education, Professionalization Training Cultural and Social Financial Norms Human Government Infrastructure Physical Infrastructure R&D transfer Bygrave & Zacharakis, 2007. Entrepreneurship, New York: Wiley. ©
R&D observations • Innovations don’t travel well within university communities without a significant investment in developing networks and marketing concepts • Innovators are rarely entrepreneurs – No one wants to run a business – No one uses the word “opportunity” – they solve problems Bygrave & Zacharakis, 2007. Entrepreneurship, New York: Wiley. ©
Informal investment and classic venture capital as percent of GDP 2. 50 2. 00 0. 00 Hungary Finland Norway Portugal Slovenia France Ireland UK Japan Italy Belgium Sweden Australia South Africa Hong Kong Spain USA Germany Netherlands Denmark Canada Israel Switzerland Singapore Poland Greece New Zealand Informal Investment and Classic Venture Capital Percent of GDP 3. 00 Classic venture capital Informal investment 1. 50 1. 00 0. 50 Bygrave & Zacharakis, 2007. Entrepreneurship, New York: Wiley. ©
Recent developments • Venture Capital Firms Just Had The Lowest Fund Raising Quarter Since 2003 • Facebook, arguably the most famous VC-backed company nowadays • The venture capital industry is getting hit hard by the domino-effect of the turbulent economy and unpredictable market. • A total of 52 venture capital firms raised a combined $1. 72 billion in the third quarter • The total is the lowest accumulation of funds since 2003; it is also a 52% drop from the third quarter of 2010 which saw 53 firms raise $3. 6 billion. Bygrave & Zacharakis, 2007. Entrepreneurship, New York: Wiley. ©
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