- Entrepreneurship is the process of developing and establishing a business idea.
- It takes innovation and resourcefulness to come up with a unique concept, find funding for it and launch the business.
- The main types of entrepreneurship are small business, scalable startup, large company and social entrepreneurship.
American entrepreneurs have been very busy; the number of new businesses across the United States is booming. In 2021 alone, entrepreneurs filed nearly 5.4 million applications for new business ventures. This startup growth is staggering — a nearly 23% increase from 2020, 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 there are many different types of entrepreneurs. 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 successful business owner yourself.
Entrepreneur definition
Entrepreneurship is an age-old concept that refers to the process of taking a business idea and launching it into a startup. An entrepreneur, then, is responsible for all elements of a new business: devising the business model, creating the product or service, securing financing and more. An entrepreneur may pursue new opportunities on their own or jointly with other entrepreneurs, becoming co-founders of a new company.
Why do people become entrepreneurs?
Many motives drive entrepreneurs to start a new business, like to:
- Use innovative product or service ideas to serve a niche market
- Help solve problems
- Stimulate both local and national economic development
- Be their own boss
Whatever their reasoning, people who choose to become entrepreneurs must first demonstrate an entrepreneurial mindset.
Entrepreneur characteristics
Successful entrepreneurs tend to exhibit several common characteristics, including:
- Creative and motivated to form a new business that offers something unique to their given market (or creates a new market entirely)
- Resourceful and solution-oriented to logistically get their business off the ground
- Tenacious and flexible to weather the obstacles that may come their way
Establishing a new venture isn’t for the faint of heart; entrepreneurs face competitive and financial risk-taking when they start their business. Take stock of your strengths and areas for growth before launching your business to better mentally prepare yourself for the journey ahead.
What does an entrepreneur do?
Many elements define entrepreneurship. Each entrepreneur’s journey from turning a business idea into a reality isn’t linear, and any new business could encounter a variety of failures and setbacks.
An entrepreneur 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.
Find 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.
Acquire resources
Promotion and confidence are important parts in the definition of entrepreneurship. 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. Whether aiming for angel investing, venture capital, or business loans or lines of credit, potential investors and lenders will seek this important information before deciding whether to help fund a new business.
Networking is also an important part of acquiring resources because meeting with like-minded individuals and mentors in similar industries and with similar goals can help entrepreneurs gain important intangibles, like expertise and resources.
Build the business up
Once an entrepreneur has developed a solid business idea and amassed resources to make it happen, they will need to hire any additional talent required to run the day-to-day operations. If they plan to stay involved with the new company, many entrepreneurs will also oversee business administration and cash flow as they grow their companies. And in the age of social media, it’s easier than ever for digital entrepreneurs to reach their target demographics as they scale and grow their businesses.
Entrepreneurship financing
Obtaining capital for any new venture is crucial. The U.S. Small Business Administration has found that approximately 50% of new businesses need less than $25,000 to launch. Entrepreneurs can explore several different avenues to finance a new business or startup.
Angel investors
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
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 don’t have to give up equity to investors as an entrepreneur.
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.
|
Type of Entrepreneurship |
How It Works |
|
Small Business Entrepreneurship |
This can include a range of small business owners, such as hairstylists, home repair technicians, consultants and more. There are 32.5 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. 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 Entrepreneurship |
Social entrepreneurs focus their business on creating products and services that solve social needs and issues to make a local or global impact — like a sustainable clothing company using recycled materials to make a positive environmental impact. Generally, social entrepreneurs are focused on corporate social responsibility (CSR). |
Entrepreneur examples
There are countless successful entrepreneurs throughout economic history. Some of the most notable examples are highly successful tech tycoons like Bill Gates of Microsoft or Mark Zuckerberg of Facebook, who both developed their ventures while in college. Steve Jobs and Jeff Bezos created Apple and Amazon, respectively, out of garages.
However, with more small businesses and startups launching than ever, one may need only go to their local coffee shop or commercial district to find plenty of successful entrepreneurs on a smaller scale.
Why is entrepreneurship important?
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 often 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. An entrepreneurial venture with a clear mission may have different impacts on the economy and surrounding community, both of which can make a difference in long-term growth and viability.
Additionally, many entrepreneurs choose to give back to their communities, whether by donating to nonprofits, investing in up-and-coming companies or mentoring the next generation — to name a few.
Are you ready to become an entrepreneur?
Do you have an innovative idea that you want to bring to fruition? Make sure to consider all the risks and rewards of entrepreneurship and seek out advice from other entrepreneurs as you move forward.
