Largely due to media saturation in the context of Facebook and Instagram, among other companies, the words “entrepreneurs”, “startups” and “innovation” have come to imply a technology company. However, technology startups are actually estimated to be only about 1% of the startups in this country, and those same words also apply to the “other 99% of companies”–enterprises set up on “Main Street,” including service-oriented businesses.
This observation about the nature of entrepreneurs, startups and innovation has been made in the past by serial entrepreneur and Stanford University entrepreneur professor Steve Blank, and is reiterated in a recent guest post on Steve Blank’s website by Jerry Engel, the Faculty Director of the National Science Foundation Innovation Corps(and the Founding Faculty Director of the Lester Center for Entrepreneurship at UC Berkeley.)
As Mr. Engel notes,the reality is that the United States is still a nation of small businesses: 99.7% of the approximately six million companies in the U.S. have less than 500 people and they employ 50% of the 121 million workers getting a paycheck. They accounted for 65 percent (or 9.8 million) of the 15 million net new jobs created between 1993 and 2009. And while they increasingly use technology as a platform and/or a way of reaching and managing customers, most are in non-tech businesses (construction, retail, health care, lodging, food services, etc.)
So, using Steve Blank’s observations made in his recent book, co-written with Bob Dorf, The Start-Up Owner’s Manual, it is worthwhile to survey the field on the various types of entrepreneurs, lest we think that innovation, startups, etc. only belong to the technology sector. Here are Mr. Blank’s and Mr. Dorf’s observations on the distinct types of startups:
The small business entrepreneur: often service-oriented businesses like dry cleaners, gas stations and convenience stores, they define success as making a profit, but not aspiring to take over an industry or build a $100 million business.
Scalable Technology Company Startups: These are the traditional technology entrepreneurs, with visions of disruptive businesses that will result in companies with hundreds of millions of sales. Scale will require external venture capital investment in the tens of millions of dollars. According to Mr. Blank, these scalable startups tend to cluster in centers such as Silicon Valley, Shanghai, New York, Bangalore and Israel, and make up approximately 1% of entrepreneurs.
Buyable StartUps: Startups geared to mobile/web apps, funded on less than $1 million in risk capital, founders are happy to sell these enterprises to larger companies for $5 million to $50 million.
Large Company Entrepreneurship: Launching a scalable startup inside a big company, injecting Silicon Valley entrepreneurship principles into either core product expansion or introducing new products into new markets with new customers.
Social Entrepreneurship: Build innovative nonprofits that seek solutions to social problems rather than profits.