Last year, new entrepreneurs were very busy: the number of new businesses across the United States boomed. In 2020 alone, 4.5 million entrepreneurs started new ventures. This startup growth is staggering — a nearly 25% increase from 2019, despite the COVID-19 global health crisis.
Entrepreneurs decide to become business owners for many different reasons. Some see a strategic opening in a market they want to capitalize on, while others launch passion projects they’ve wanted to pursue for a long time. It’s tough to universally define entrepreneurship since the term means different things to different people. However, all new business owners share one important component: they take risks on people and business ideas they care about.
If you’re looking to start a business, you’ll want to understand the different facets of entrepreneurship, so you can begin your startup and become a business owner yourself.
What’s an entrepreneur? Entrepreneurship refers to the process of taking a business idea and launching it into a startup. An entrepreneur is responsible for all elements of a new business: devising the business model, creating the product or service, securing financing and more.
A confluence of factors drives entrepreneurs to start a new business. Whether that's using innovative ideas for products or services or identifying a unique way to serve a niche market, entrepreneurs take on risks when they start their business. They also help solve problems and stimulate both local and national economic development.
How entrepreneurship works
Many elements define entrepreneurship. Each entrepreneur’s journey from turning a business idea into a reality is not linear, and any new business could encounter failures and setbacks.
Entrepreneurship works through the process of implementing a business idea and strategizing how to execute the idea successfully. Entrepreneurship can involve bringing a completely new product or process to the market or improving on an existing product or service to offer a better solution to consumers.
Finding an opportunity
To start a new business, entrepreneurs must have an idea for a product or service that will solve a problem consumers have or add value to their existing ways of life. Successful entrepreneurs identify these needs when forming their business ideas and use this information to inform their strategies to succeed and grow.
Promotion and confidence are important parts of the definition of entrepreneurship meaning. While launching a new venture, entrepreneurs need to advocate for their businesses and themselves to ultimately secure the resources they need to grow and scale their startups.
Often, the first step in acquiring resources involves putting together a business plan, which is a document that outlines a business’s mission and vision, strategy and projected path to profitability. Potential investors and lenders need this important information before deciding whether to help fund your new business.
Networking is also an important part of acquiring resources, because meeting with like-minded individuals in similar industries and with similar goals can help entrepreneurs gain important intangibles, like expertise and resources.
Types of entrepreneurship
There are various types of entrepreneurship, depending on your business objectives and goals. Figuring out your classification can help you create a more concise, focused and strategic plan to become a successful entrepreneur.
Small business entrepreneurship
The small business entrepreneurship definition includes anyone who is running their own business. This can include a range of professions, such as hairstylists, home repair technicians, consultants and more. There are 31.7 million small businesses nationwide, making up 99.9% of all U.S. businesses.
Scalable startup entrepreneurship
Scalable startups take an innovative idea with the intent of scaling their business model to turn it into a large, profitable company. In some cases, these entrepreneurs take on the most risk. Often, scalable startup entrepreneurs seek funding from investors, such as venture capitalists.
Large company entrepreneurship or intrapreneurship
Intrapreneurship is for individuals operating within an already established organization, who have a track record of successful innovation. They push out new services and products centered on customer preferences, with the intent of keeping up and evolving with market demand.
Social entrepreneurs focus their business on creating products and services that solve social needs and issues to make a local or global impact. Generally, they are focused on corporate social responsibility (CSR).
For instance, an entrepreneur may form a sustainable clothing company using recycled materials to make a positive environmental impact; another entrepreneur may begin a health-centric business to make a social impact.
Knowing the mission or goal underlying your new business idea is essential before taking the step to become an entrepreneur. An entrepreneurial venture with a clear vision will have different impacts on the economy and surrounding community, both of which will make a difference for long-term growth and viability.
Entrepreneurship and the economy
Along with creating exciting businesses, entrepreneurs benefit the economy by influencing economic growth through new ventures. It’s essential for entrepreneurs to know their value to the economy and broader economic development. Accordingly, they should have a clear sense of what their mission is to affect the most change.
Increase in job opportunities and wealth
Entrepreneurs help increase wealth across many channels by working with suppliers, distributors and investors to build their new businesses. Entrepreneurs that introduce new products, for instance, can create new markets or grow industries and subsequently generate greater profits for all stakeholders.
New businesses also lead to job growth. Because aspiring entrepreneurs need others to help them build their product or service, they create job opportunities that previously didn’t exist.
Together, these factors can increase national income and spur significant economic development.
Entrepreneurs and social change
Entrepreneurs can also create social and community impact. This is especially the case when new business ideas are aimed at phasing out or extinguishing outdated methods and replacing them with new, more efficient systems that revolutionize industries or ways of life.
Many entrepreneurs choose to give back to their communities. Without securing financing for a new business, however, entrepreneurs won’t be able to influence the economy or create new job and community opportunities.
Obtaining capital for any new business is crucial; some estimates put average startup costs at $30,000 (this is slightly lower for microbusinesses). Entrepreneurs can explore several different avenues to finance a new business or startup.
Angel investors are early investors in startups and new businesses. They seek brand-new business ventures to fund, often in small amounts, generally in exchange for small slices of equity. Entrepreneurs often find angel investors through networking or reaching out to independent investors in the industry they operate in.
Venture capitalists invest in startups they think have a strong potential for growth and profit. In contrast to angel investors, venture capitalists generally invest in later rounds of funding, such as seed and Series A, and invest more money, which generally heightens their level of risk. In exchange for this funding, venture capitalists take an equity stake in the entrepreneur’s startup.
Small business loans and lines of credit
Similarly, getting a small business loan or line of credit can help you get started, depending on the type of business idea and strategic model you have. Taking out a small business loan or line of credit means you do not have to give up equity to investors as an entrepreneur.
How First Republic can help your new venture
If you decide you want to embark on starting a new business, First Republic Bank can help fund your next venture and provide support for your financial needs through services like business banking and small business loans.