Common myths about Entrepreneurs

There are many misconceptions about who entrepreneurs are and what mo- tivates them to launch firms to develop their ideas. Some misconceptions are because of the media covering atypical entrepreneurs, such as a couple of col- lege 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 entre- preneurs 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.

1. 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 stud- ies 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.31

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 be- come entrepreneurs.32 After witnessing a father’s or mother’s independence in the workplace, an individual is more likely to find independence appealing.33

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 ac- quaintances or role models.34 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.

2. 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.35 This finding is affirmed by The Hartford’s 2013 Small Business Success Study. The study conducted a survey of 2,600 business owners. A total of 79 percent of the participants rated themselves as conservative rather than risky.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 em- ployees.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 chal- lenging goals, a behavior that is sometimes equated with risk taking.

3. myth 3: Entrepreneurs Are motivated Primarily by money

It is naïve to think that entrepreneurs don’t seek financial rewards. As dis- cussed 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

4. myth 4: Entrepreneurs Should Be Young and Energetic

Entrepreneurial activity is fairly evenly spread out over age ranges. The age distribution of business owners, determined by the Kauffman Foundation and LegalZoom 2012 Startup Environment Index, is shown in Table 1.4. As shown, the majority of individuals who start companies are in their thir- ties and forties. Not suprisingly, given this age distribution, the majoity of business owners have work experience prior to launching a new venture.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 capi- talists 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.

5. 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 5,000 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 three or four? Most of us could come up with Jeff Bezos of Amazon.com, Mark Zuckerberg of Facebook, and maybe Larry Page and Sergey Brin of Google or Larry Ellison of Oracle. 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 DIRECTV, even though we frequently use these firms’ 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.

Source: Barringer Bruce R, Ireland R Duane (2015), Entrepreneurship: successfully launching new ventures, Pearson; 5th edition.

One thought on “Common myths about Entrepreneurs

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