© Amar Bhidé January 15, 1999 The Origin and Evolution of New Businesses ehT drofxO ytisrevinU sserP detcepxe( .bup :etaD .voN)9991 st nee ltfbnoaoTC stnemegdelwonkcA ecaferP 1. Introduction Part 1: The Nature of Promising Startups . 2. Endowments and Opportunities 3. Planning versus Opportunistic Adaptation secru ogsneiRr u.c4eS 5. Distinctive Qualities 6. Corporate Initiatives .7 CV dekcabspu-tratS ser uytrnaenVoitu l.o8veR Part 1: Summary and Generalizations traP :2 eh TnoitulovE fo gnsielsgsdeenliFsuB . 9. Missing Attributes 10. Existing Theories and Models 11. Critical tasks 12. Exceptional qualities Part 3. Societal Implications 13. Reexamining Schumpeter. 14. Facilitating conditions 15. Taking Stock secner esdfenecaRidneppA Copyrighted mateial. Do not reproduce republish, broadcast or otherwise distribute .re dtlho ghni or fiyeosphsot ic tme.urhto etfhdep atecrif ud woodtoDo orrenppbneUr 0 © A. Bhid é Jan 15, 1999 stnemegdelwonkcA .noit udb risar’swtnaonohHos cnd,e rev,ab eewiyttorl SaHcerr s t oeteIangodregnuvancexaceca dah hcus e cdanneuuo lfnfoonrip ym dlr owwei vtaht a tae rygnam fo e hd tessaseed rinpixe sihtkoob nn ea oe. sbm sloeaadHh ssi’wdra wtfonoHemetat sseuroicsnoc bmyu omservfi ryelde kyirlev extraordinary mentor, who has unstintingly given me his time, loyalty and support. divaD zteffahC s,s ueeotd io anpn.m gio senceysi h erde tsnui nfer ovaoduycolionrpsjapremiBa insightful suggestions about the ideas and arguments, David served as de facto editor and writing coach. s nhotiiswsucsiD Srikant Datar helped me formulate the ‘investment-uncertainty-profit’ framework I used in Part 1. Iain ,nrubkcoC Pankaj Ghemawat, Myra Hart, Josh ,renreL ekiM ,streboR evetS nalpaKdna Hank gnilieR daer lareves ,stfard deifitnedi ym snis fo noissimo dna ,noissimmoc depleh naelc pueht language and logic, and provided data and references. Bill Sahlman’s comments helped me think about eleghlgntaairs nesdo venifomatoi ssoi ph.tkoob sg nn ois i gdestdartc’snrouuteauwortgobBogcacunSse ym hguo rylr asetfar dtpek em gn.idorgawrof yer dlmifnsieoauthotr eeo)n vsSelalBgog aHos(hsceSn id srsua eBvturagaaHe lllaorceveS ,esitrepxe ylbaton sirhC ,esoiJrygrA ,occaradaB Carliss Baldwin, Jon ,itt osi eB,mtatJe kasdenHiL,lliH Herminia Ibarra, Robert Kaplan, David Kotchen, Walter Kuemmerle, Warren McFarlan, Richard Tedlow and Karen Wruck. Lunches, e-mail and snail mail correspondence with Olivier Blanchard, Glenn ,drabbuH Andrei ,yr menefirieee tJl dShtnSraeboR Shiller served as valuable quality control mechanisms. diS Balachandra, John Deighton, Ashish Nanda, V.G. Narayanan, Gus Stuart and George uW tnepsynam hours answering various technical questions. , rnn,e whevloosaurJaeaB CDPe, DalsuoaRP e g,r rodoeroG al,hFocbikRcE Gendron, Alan re g,oyRdenneK Kline, Marcia kyc beyht cidl eaadeirv orrepb bnea Wsd,unx Saudoi Rv,ahDcivesodaR comparing my observations against their practical business experience and knowledge. ni veetKaico shscAraeseR notniH depleh ezinagro dna tcudnoc tsom fo eht sweivretnihtiw entrepreneurs that this book draws on. Laura ssiw see dyitfn lve oaedarlpheenepotphatmhltnoceicohP data. Charlene Niles of Inc. magazine and Joanne noitam rydo eefns dne n& iivfi.vioKooncCriMpuG from their databases. Julie Yao took charge in the final months of this project and made its completion otni a .ezeerb stnedu tmSorf ym ABM sessa lectorw revo owt derd nsurhepap taht I evah nward nodna helped test and refine my ideas about entrepreneurs. Ken ssash eyrtPisrev idnrUo f edxfhoOoTeLcaM a c.che t bk ieerowrRotuw s dae nevaalipsnop sy ernreeveb Kohn edited the manuscript with a light and lufthguoht .dnah atreboR nworB depyt egral snoitrop fo eht tpircsunam dna tpek ym lanoisseforp efilni order. remroF SBH ,naeD nhoJ McArthur has been an enthusiastic supporter ; his successor Kim Clark, and my research director Teresa Amabile, arranged for the resources needed to see this work through .noitelpmoc re t ,syr imessvAe iruaG dedivorp ekil-kcor troppus dna ynam tnellecxe .slaem yelhsA s’ektdoW company and understanding helped me get started and saw me through much of the first iteration. Her mother, Carol Cross Wodtke, volunteered her artistic talents for the illustrations. My daughter Lila ,no ista ce ahywr saetm dr sol rgdiruruedf fetdatla i hdSovagd t o iodKr.lte-p yesead dsrafyepllMsessop s’rehtom noitceffa dna elpmaxe tpek em gniog hguorht a tluciffid .doirep ehS dessap ,yawa ,sala tsujnet days after I had turned in the final draft. oT lla f. os,tkulnoe ayf yhtmt rra uepohlY esh aehn odrgnla oafey nhelotblias csfeoforp noitagi l.dbpnoiahsdneir f I epoh I nac ekam ti pu ot uoy.yademos 1 ©A. Bhid ,é Jan 15, 1999 2 © A. Bhid é Jan 15, 1999 PREFACE This effort to demystify and organize our thinking about entrepreneurs through systematic research has practical roots. I undertook the research that has led to this book in order to address a problem in business education. Courses in entrepreneurship have gained great popularity, as increasing numbers of students want to start and build their own businesses. In 1979, the year I graduated from the MBA program at Harvard Business School, a solitary course in starting new ventures attracted fewer than 001 .stneduts nI ,6991 enin sesruoc dellif revo 0041 tneduts .staes ,ylralimiS s’drofnatS ssenisubloohcs stroper taht revo 09 tnecrep fo sti ABM stneduts won tcele ta tsael eno esruoc ni .pihsruenerpertne eW sel vosaoshhe cn,si ys,rurube t vd n,ae lei.eks rlwl s ccase ioof ee-aba vtthsorshflehOssortldcafuaiulohsc sei tl si afev sioiieer ntgc ueacrr gelp aau–nnbmoloieaot syrrc e edpewhdruedotetkrihtsctsornnveeoeMcd sp o ,lw seessr v negow eycus osdeursddht nddennels ocaakeierortDh prantwpmIeonrcim Jungle Book s esc ’uddd nlogaarintBon DisccMaM ni .a neil httCtrioLff esah n edeebto vche icdotrtaatmeuesotebsrays starting and growing new businesses. s d r.s eees nssvhnl oe uacoarivnchrsrot iooa aefa ft feevreoaesreogihessprttRs raiesolnnAciisub schools and research in the United States came of age in the 1950s and 1960s, large corporations dominated the economic landscape. According to the historian Alfred Chandler, a “new form of capitalism”, the “large managerial business enterprise”, appeared in the last half of the nineteenth .yrutnec 1 This new form, which was controlled by a hierarchy of salaried executives rather than the owners, “dominated the core industries in the United States” 2 . y eb dh d ntrlfearo Wo IWd, ns ya0eb6h9t1 t.is ueomtaic uenqbIibu 7691 Galbraith observed that the five hundred largest corporations produced nearly half the goods and services annually available in the United States. ytne v:ee Sth“otriwarblaG years ago the corporation was still confined to those industries—railroading, steamboating, steel-making, petroleum recovery and refining, some mining—where, it seemed, production had to be on a large scale. Now it also sells groceries, mills grain, publishes newspapers, and provides public entertainment, all activities that were once the province of the individual proprietor or the insignificant firm.” 3 Large corporations represented as dynamic an economic force as the individual entrepreneurs who had initially founded them fe stosJim o.n o echeT Schumpeter had regarded the rise of the large snoitar oesplarboacti vde nntaisace rtoafht hcus t naem pdollueovwe dmmsoioldati pya bcgnilfitesht “innovative energy” of the individual entrepreneur. “The perfectly bureaucratized giant industrial unit,” Schumpeter ,etorw ton“ ylno stsuo eht -llams ro dezis-muidem mrif dna ”setairporpxe“ sti ,srenwo tubni the end it also ousts the entrepreneur and expropriates the bourgeoisie as a class which in the process stands to lose not only its income but also what is infinitely more important, its function.” 4 Schumpeter’s contemporary, the economist Frank Knight, also believed that managers who did not own a significant share of the enterprise would be much more conservative and risk-averse than the founding entrepreneurs. 3 ©A. Bhid ,é Jan 15, 1999 In fact, large corporations undertook entrepreneurial functions remarkably well. They introduced jet engines, television sets, plastics, pharmaceuticals, mainframe computers, and a host of new products to .tekram citsemoD seinapmoc derutnev saesrevo dna emaceb .lanoitanitlum yehT osla detnemirepxehtiw and adopted new forms of decentralized organizations to accommodate their increasing size and scope. Schumpeter’s “perfectly bureaucratized giant industrial units,” to use Chandler’s words, “provided a fundamental dynamic or force for change in the capitalist economies”—a transformation “which brought the most rapid economic growth in the history of mankind.” 5 ehT htworg dna msimanyd fo egral snoitaropro cdemees ot ecuder eht ecnaveler fo ehtlaudividni entrepreneur. At the turn of the last century, Galbraith wrote in 1967, “the corporation was the instrument of its owners and a projection of their personalities. The names of these principals—Carnegie, ,rellefekcoR Harriman, Mellon, Guggenheim, Ford—were known across the land.” 6 feom i et h ytB Galbraith’s writing, the heads of the great corporations were unknown (“Not for a generation have people outside Detroit and the automobile industry known the name of the current head of General Motors” 7 ) and owned no appreciable share of the enterprise. The importance of these ‘organization men’ and the snoitaroproc yeht dellortnoc edam eht laudividni ruenerpertne a ssel gnillepmoc tcejbus fo.yriuqni The increasingly routinized nature of corporate initiatives suited the norms and aspirations of business scholars. Starting a new venture, the economist Frank Knight wrote in 1921, involved “an evitiutn i”.tnemgduj woH sruenerpertne hcaer a ,noisiced eh ,etorw saw a yllacifeiltbnaemiochst“afnu .yretsym eW tsum ylpmis llaf kcab nopu a ’yticapac‘ ni eh ttnegill eltanmiina ot mrof a erom rossel correct judgment about things, an intuitive sense of values.” 8 The modern corporation sought to make the ,.nsouiot i as rvsseoestncesnolyIrmp retepmuhcS etorw ni ,2491 si“ gnieb decuder ot.enituor lacigolonhceT ssergorp si ylgnisaercni gnimoceb eht krow fo deniart stsilaiceps ohw nrut tuo tahwsi deriuqe rot ekam ti krow e lnbia”t.csiydaewrp 9 derapmoC ot tahw l osmnl uol yaiaedBschiittcneud“ ”sessecorp 10 of the individual entrepreneur, routinized corporate initiatives provided greater opportunities .yr icuiqtnaim ertosfys Some researchers built a symbiotic relationship with their subjects. The large corporation’s hcaorppa ot wen sevitaitini dluoc eb detnemucod dna detaulave yb sralohcs ni ,ecnanif,gnitekram ,y gd. ee sdtps e na or,nrarddlayi et enellls hssnavoe pshtliehsiecoofdcrcnuoesesisrtrvisondufobC .srekam -e ntoairsoipcr eo rd c,os eFrel ocpedsnmtesaaapenxglfieaeof phreophrtp esu fo tetNneserP sei nds, aelshpt oicma .osuo cns tyscsioidl a tisean estypn eeu iploavrlshoaleoarpne mVaoavslseAodhcs e kkdcilrl ueeoM swmu eoh.i tsl eot orgtnffiaeotenm rhatDotms&peRvni Scholars found reliable data on large companies more readily available. Startups number in the hundreds of thousands annually and are prone to disappear soon after they are launched. Their financial records are private and often poorly maintained. Large companies are much less numerous and more stable. Audited, standardized, and public accounting data allow researchers to test hypotheses through ynapmoc-r edtnn ai l.ascniorsoitrsaiphmoc kcotS tekram secir pedivo rrpeh teovnia tkcceijtbsodrayrof 4 © A. Bhid é Jan 15, 1999 testing theories. A researcher like Rumelt for instance, could make a case against unrelated noitacifisr eyvbid gnin iemvaixsenetxe atad no n oei htstaeciigfeitsarretvsi dfo 001 fo eht tsegral005 industrial corporations in the United States. 11 e hsTcimonoc efo gniy ds unetogsirtaal reorperwoc .eervoimtcartt a ehT esir fo ehtegral corporation created a significant demand for trained professional managers. This was met by a dlofynam increase in the capacity and number of MBA and other business programs. For example, in 1956, 138 institutions in the United States granted 4,266 Master’s degrees in business. In 1990, 668 institutions granted 77,203 Master’s degrees .12 gniruD eht emas ,doirep eht rebmun fo s’rolehcab seerged nissenisub rose from approximately 50,000 a year to about 250,000. The curricula for such programs, and the underlying research, was naturally orientated to the problems and practices of large companies. tnemeganaM gnitlusnoc ,smrif esohw hcraeser stegdub won lavir esoht fo eht gnidaelssenisub , s oldsonlo uahg o cntf ,si ies dere orr ei e t aoehnevrdw m hwagreeetetprsehdrrmmaesgloaoleiefscfhifye and more prestige. When Marvin Bower and his two partners launched the management consulting firm, yesniKcM & ,oC ni ,9391 yeht yllaitini devres llams seinapmoc tub neht ylkci udqetavitlu cregralstneilc ohw dluoc yap rehgih .seef ehT rehgih seef dewol lyaesniKcM ot tiurcer hgih yt isltanuaqtlusnocdna invest in intellectual capital, which in turn helped secure more large clients. McKinsey is now a high- eliforp retiurcer ta eht pot ssenisub ,sloohcs sdneps revo 05$ noillim a raey no gnidliub ,egdelwonk saha ediw-dlrow retsor fo suoigi tdsnear—pstne islecunitnoc ot diova eht sputrats dna llams seinapmocohw . tsysoeatnepinfac Entrepreneurs have now recaptured the popular imagination. ,ylg nsiusoaietricbnm Iagnuoynem and women dream of starting their own businesses rather than rising through the corporate ranks. snaicitiloP kool ot sputrats rof sboj dna cimonoce .htworg ehT dewener tseretni sah detarenega tnacifingis dnamed rof citametsys egdelwonk tuoba eht evitcnitsid serutaef fo laudividni.pihsruenerpertne . ddn eadsm e a e s,heeedts rchrgu es ettcdowna,va nebeihtemcilansow iwun oytobehlanhp mkTpfeuotssys Their resurgence of the entrepreneurs derives in part morf eht gnirepmet fo eht citsilaernusfeileb about large corporations. Managerial capitalism, to use the historian Alfred Chandler’s terms, did not eliminate entrepreneurial capitalism. Owner managed companies, which receded to the background after eh tdno cdelSro W,ra Wllits d itdnuoc crao fylra efnlah .fcyoitmiovniotcc ea ehT wsetncudodrnpa dep os yltl bee as vkd t’ner i dinedaeosnngeKmrr’iaiseadwDl wlndOnoaEoPL dre ap hpoetlsieowvhetd yb eht yllanoisseforp deganam MBI dna .kadoK sputratS detaerc wen ,seirtsudni hcus sa yhpargorexdna .no ieslib v ase,dcsll reeonantowvihorscnauSkH Bsa eht ts e t Wdn,eimcosuP id flotoara tptispaaeclsa sy wes fovAsohrB’suMnsosn e. vsdeer tsaSiwropHr ests nese nn fi igossai urtbsbupaeancerpe rytnnaem de kft rlu.oaodwhbeAyol ps m erte ss ea- krasm,d vhfe, caaoi raotlr2saflrn fiee4abcfmSohsw9uBt1lHa se s nshiet niriweswu ebnf a,hst ee0el0yi5 ohylwlpnmoe % 6dek rso ewni inhatpi mweorcomnaht .seeyol p0m0e0,001 13 5 ©A. Bhid ,é Jan 15, 1999 hguohtlA eht loo hdcesta rsbeetlaeucdarg hcus sa treb o,Rara mtanNecdMiserP fo eht droFrotoM Company, students were more ambivalent about careers in large corporations. Charles s’htr O3691,koob Social Structure and learning climate: the first year at the Harvard Business School dettco inalfnoc neewteb eht slaog fo SBH dna senhotit ag rn.i ispfttsoanaleudcuitrst am e h’Tstne deugtasmi fosseccus gnidrocca ot Orth reflected “the promoter/entrepreneur archetype” rather than the “administrator/manger image implied by the professional standards the School has generated. The financial genius, the tax law manipulator, the “wheeler-dealer,” and the supersalesman images are as much or more the admired stereotypes to some students as …[the] managers on whose training the School has concentrated.” Through a questionnaire Orth administered to incoming students, he found only 55% indicated a commitment to “an administrative career”; the others were “interested in entrepreneurial opportunities” or unsure what they wanted to do after graduation. 14 stne vnEi e hs t 0.ske n7sfocto9neonum1oiheomi lstbotfee oacaohbeprtgiornepamhrloTo“c big corporations,” h ,teei ctaonordo rb“”twl .oaeynGseon lom n oniI sfe soh7et5c 9e ,1r edtheotneo“nno of the largest U.S. Corporations failed to turn a profit. Only one of the largest 200 finished the year in the ” .,,dr yeeelrvgt ernsw aemolurh qieefrsebwu So nregnol immune to losses. Penn Central filed for dr e e dee;l dehrys snrkec y.iaacwtershpopthtt sLuaCul rfoayk lrbnieaadb be nfnoIi sefsh,oet2c8e9r1 eight of the top 100 industrial companies and 21 of the largest 200 ended the year with a deficit. tnemyolpmE ni egral seinapmoc deppot tuo sa .llew nI ,9791 divaD hcriB dehsilbup a ydutshcihw claimed that small firms generated 66% of all new jobs created in the U.S whereas “middle sized and ” y. wlsweebefvonijt adleedri v,oe rc,pn s anmelorgairbfal 15 With the 1980s, startups and entrepreneurs became fashionable again. Bernard Goldhirsh launced Inc. , “the magazine for growing companies” in 1979; by 1996, Inc. had reached a circulation of 659,263 in North American compared to 893,945 for BusinessWeek ; 457,408 rof enutroF ; and 783,456 rof sebroF .16 Inc. s’ htworg detcartta srotitepmoc hcus sa Entrepreneur and Success . Interest in pi hdserruaeons ens ros .pelsenoeriostshunucpebsm a gcnidro coctA adtealdipm oycb emor ezJtaKa krnoiwes r eudmoeocrs esfef to dase t ltnSeoii honsthUscesn idseutbide rnc ecezalopduoc entrepreneurship. In 1998 120 offered it as a major. “Driven by student and alumni demand” Ethan Bronner wrote in the New York Time in 1998, “no field is hotter today in business studies than that of entrepreneurship.” 17 The obstacles to serious research on entrepreneurs however remain. On the practical side, it is still difficult to get reliable data. The financial rewards for developing expertise on new and growing ses s ne einsga iermesiaeuunlrnba—ipwtmonoloc cot evah a r eyttaiecragpa cot yap rof tre pexceivdanaht .se ilnla a pmmlmesaoluc bt eopshreiTp ctnsou cj. ssuaoir es tgcneo lLsgae hntfe le hdtl ehitfi wwe-fllew demarf sesehtopyh taht srehcraeser nac mrifnoc ro.yfidom , dyeneadmnbI pih sederinv ulo et seye ialtnehelh acebtpetece rohipfpcttsoesfiarortcne scholarly inquiry. lo msutasBegg utsaht ereht“ si a tros fo Heisenberg principle that holds for 6 © A. Bhid é Jan 15, 1999 entrepreneurial acts.” If reported in detail, “such an act is no longer entrepreneurial.” 18 Others argue that ec neahmtr offore ps ewssedsnneenpies dun bosrot ctaaf httonnac e bde.iydlu ltdasnc aitthagmueattsys Philip Thurston remarked in a colloquium on teaching entrepreneurship that, after a decade of teaching in the field, he had found that “education in business administration [was], at best, a minor factor in ”.spu -stsr ealntuisfssusbeccus 19 tA eht emas ,muiuqolloc rehtona naretev ,rehcaet hcrA ,yelooDdesserpxe eht noitcivnoc taht eht cimedaca noisseforp did ton wonk rehtehw“ yna lanoitacude seitivitca nac niyna direct sense aid significantly in the development of the crucial ingredients of entrepreneurial success.” tdseotmubi r dtdenavohec iyslereh ob tytefch iatstf rnouetednierpe rltunfesse cdceuwseiv r yedetalnhoioD decisively to their success. Their answers, which pertained to timing, guts, determination, luck and so on, did not parallel the subject matter typically encountered in academic programs. 20 s sselnoiosh ucwBson e gv,naiihndmruo lcoacta Bronner , gnitanod“ sdaolkcurt fo srallod ottes up centers and chairs in entrepreneurship, yet there are no scholars to fill them.” The number of entrepreneurship chairs has grown from 18 in 1980 to more than 200, but dozens remain empty, because ss slte oon yonislhnseic autss d cbaahns detilyii fard wri anycetesaeidnhschm ieteteosdcdtneeaornccclalif s rdin eail wh odrocsoaudshhonecfe nssi’syutb i.sm re , eh r8wkvte9eri b9Nonsm1YUA eftopeS ,pihsrue nfeorper thnceihw owt e r.edwellifnu eh Ts’loo h,cnsae degroe G,ylaD dlot Bronner that he saw “entrepreneurship as a word in search of a meaning in the academic sense.” 21 The growing demand for entrepreneurship courses is often met by hiring adjunct or part-time faculty. Compared to other disciplines, the number of new researchers being trained is small. Jerry Katz, of St. Louis University, has compiled a list of universities in North America and Europe that have a doctoral program or doctoral students in fields such as entrepreneurship, small business, family business and small and medium sized enterprise studies. In 1998, according to Katz, only five schools— Wharton, Georgia, Calgary, the European Doctoral Program in Entrepreneurship, and the Joenkoeping International ssenisuB loohcS ni dereffo—nedewS lamrof larotcod smargorp ni .pihsruenerpertne rehtonA owtnezod se tsdaler oron oetilhfcacfo n so d,yoa,st ie helatr thcsuna drgrsceteouaaavudpoelfnbiprscovuhecostrr“p or infrastructure for students to specialize their research and teaching in entrepreneurship.” 22 The .sma rolgsaolrr Aopshtltc oiodowde htsci es dlro d eaa t2esrtpf3nlcomo 1iocto9boac2mhoccs noteworthy is the number of top-ranking schools that do not have doctoral programs or students in entrepreneurship. Of the top 20 business schools in U.S. News and World Report'’ 1998 rankings, only five—Harvard, NYU, North Carolina, UCLA and Wharton—were on Katz’s list. eh Tyduts f elosratut ntin)sen poC eseeaiVdievnct( enrop dkapeoncpectaamrxboe-ceChVt . sct eci .csh i pdyesT lmsf oerlel a ei oyttignlyrwdobi ueie leeatusqnswernncsmnuhaea ribtlgfooonhcs VC-backed startups represent an intriguing combination of individual enterprise and professional management. The VC backed model involves market research, business plans, experienced founders, and lanoisseforp erutnev stsilatipac who provide advice, oversight, and significant financing. Compaq , sd .resl e wiesdsyo hd’nelleto q udl llmaroiunop pefvfafmf mtosaopou rsxuCptpee -macatohcrCtuasts 7 ©A. Bhid ,é Jan 15, 1999 doR Canion, Jim Harris, and Bill Murto, had all been senior managers at Texas Instruments, and they had deta lnu amalrpof- loltew ekat no MBI h t yi rlw.oltiacrcuei dpgaouorslpo n hdrceoenttosseavennSeiB dep lneehsoR Canion raise $20 million in start-up capital—funds that allowed the new business to behave like a large, sophisticated company from the start. noinaC dluoc tcartta decneirepxe sreganam ybgnireffo them generous salaries and participation in a stock option plan. Compaq also had a national dealer network established within a year of exhibiting its first prototype. Sales totaled more than $100 million in the first year. Startups like Compaq bear a close relationship to the large modern corporation. In many ways, the VC phenomenon represents a variant of managerial ,msilatipac dna sti yduts a lacigol noisnetxefo ssenisub .hcraeser ekiL eht srekam-noisiced ni egral ,seinapmoc erutnev stsilatipac yrt ot esucitametsys procedures and criteria for making investments and provide capital under well-specified terms. They back experienced entrepreneurs like who bring to their ventures the professional management practices of large .snoitaroproc nredoM seiroeht fo ,ecnanif noitazinagro ,roivaheb ygetarts dna os no edivorptneinevnoc frameworks for analyzing the capital structures, contracts and investments in VC backed firms. Researchers can secure and analyze data about the VC industry. Like large companies, venture capitalists airr oeeftv ii.srt eeccdsn enri cj aetei bvultyoioba enram yhuiep rTfto etis losty,etinsev reteapdidminoicf making investments and use well documented contracts. Venture Economics and other organizations publish data on their investments and rates of return. tuB saerehw gniyduts erutnev latipac stif eht gnitsixe smron dna selyts fo cimedaca ,hcraeserti provides limited insights about the typical entrepreneur and startup. As we will see, venture capitalists tsevni ni lanoitpe csxreuenerpertne dna .serutnev yreV wef sputrats yfilauq rof CV .gnidnuf tuO foeht y lnroaiel nls iew msedsneemnri oshfucbae raey ni eht ,S.U sC Vdn uyflno a . dweerfdn uqhapmoC stneserper eht noitpecxe rehtar naht eht elur rof .sputrats tsoM sessenisub sa deifilpmexe yb ,PHlleD sretupmoC dna yawetaG ohw( won etepmoc daeh ot daeh tsniaga qapmoC ni eht CP ,)tekram tratstuo with limited funds, professional management and planning. And, in this crucial area of the under- .egd e c lsidwsteo ea snwd nmeik eeei ewvenzlsdtovitunsraltbayphaismtliipac se sn 8n siy8e d et9 hh ge en l1owcInnewhiSuta iisetsBce ayornnuHa tndjuibfIauogtcesb entrepreneurship. I had little background in the field. Apart from two unsuccessful attempts to start a ,erutnev I saw yl ndieapmeets ni ee hthtacraooprrpop cao.tssenisub I d adheviece rym ABM tadravraH in 1979 before startups became fashionable. The logic and rationality of the corporate paradigm dec n.aermtne I ndeehk trroo wfe vsirf aye eytsani K&cM . oeCrehw I deir to tylp pdeannaifeehrt theories I had learned at business school. A etarotcod ni ssenisub noitartsinimda dewollof nierehwI .sn osir t eed advlere oihoifetcpf oksr rieaoawosgtheocrr sNeadevlerit d nIeohr tfknsoactg nfiohcaet students about starting and growing their own, usually small, businesses. I had some clues that suggested that the business school approach required significant noit arcoiffi deohm tdlro w. sfpoutra ts yteAsniK cIM de rd eastvh saoslehceontsioiirhsdtocuaesbhhtt 8 © A. Bhid é Jan 15, 1999 erew desab no seiduts fo egral lairtsudni seinapmoc did ton ylisae refsnart ot eht dflo rgonwileehw-eerf finance and investment banking. The traditional model of competitive strategy called for companies to gni tysyns ltri eheeasvcvstrnuise oistai stprsyai mpebtreogeeera pvrptemopnloabcvadn aikaetessus technologies, brand names, or high volume plants. As described in my article, “Hustle as Strategy”, 23 the ease of imitation and ytilibign uffo secruoser ni yn alm asiecsnsa entninifesvuebr psmrif gmnoirhfsilbatse sustainable advantages. Profitability is more a function of tactical and operational ability (“hustle”) than of superior long-term strategy in the traditional sense. Casual observation suggested that execution might be of greater importance than strategy in startups as well. nekyabt rserdenvu oneek easwtetcenber e ,r,f nnaofdwoeoiaoiltdhhtcsatr elsasri odytMcod individuals—the so-called “raiders” of the 1980s—and corporate mergers. CEOs of large corporations ylerar edam elitsoh rednet sreffo dna demialc rieht sregrem dluow edivorp cigetarts ro citsigre.nsytsifeneb elitsoH snoitcasnart erew yllacipyt nekatrednu yb sruenerpertne ohw thguos kciuq ,snruter yllausuhguorht the sale of unrelated assets, in order to raise financing for their deals; synergies or long-term business strategy did not interest them. nI eht gniwollof ,edaced I deirt ot ekam a noitubirtnoc ot pihsruenerpertne noitacudeyb gsnsneel iceae y nw u kyfeetwddsalihreoin etlttebhvaeirwanfigneecefdradnidinapntidilmuaomcetsys .sevitaitini I dehsilb uepsruoc ,seton esac seiduts dna dravr asHsenisu Bweiv e,Rselcitra lla htiwa lac iegvoi gtr.apotdinerepcbserp y Mesop reurpeh si eott a dryseglapeleotadlniieit vioentdipleh slaudividni trats dna worg rieht nwo ,sessenisub ot edivorp a tnerehoc ,noitanalpxe desab nocitametsys observation, of an important phenomena. This synthesis, which pulls together the concrete experiences of eht lareves derdnuh ,sruenerpertne yletarebiled sedulcxe ticilpxe woh‘ ’sot ni redro ot sucof noitnettano tahw sruenerpertne od dna ot tup rieht elor otni a redaorb cimonoce .txetnoc esohT ohw daer neewtebeht lines to infer practical advice should do so in conjunction with my earlier writings. This inquiry, which looks at entrepreneurs mainly from an economic point of weiv stneserperna troffe ot tnemelpmoc rehtar naht egnellahc gnitsixe cimonoce .seiroeht I sserdda snoitseuq focimonoce import which lie outside the traditional boundaries of the discipline. In order to do so, I rely on theories s tncw uamdrrontdrasf. n yyoagtc oe g li ,nl or f siamhayoydgtocvcrlnnrynoeaefseei rmpghfoiattrepxe weF fo ,su ,revewoh evah a pe egdnidnatsrednu fo lla eseht seiroeht dna nac etaler ylisae otrieht dezi l.ayigcoelposnimret I ,evah ,erofereht thguos ot krow htiw tsuj eht ,kr admedtnpaelcca-lleswaedi from these fields and to use sparingly their specialized terms. I have also grappled with colloquial explanations of entrepreneurial success based on terms such as determination and persistence. Rather than ignore such seemingly ambiguous ideas, I have tried to give them precise meanings in the context of eht cificeps sksat dna snoitcnuf ta hstruener p.emrrtonferep ,yllufepoH eht troffe lliw eb dedrager ton saa 9