Is it Risky to Become an Entrepreneur?
Interestingly, there seem to be two predominant attitudes in the world toward entrepreneurs. One view is that entrepreneurs are some kind of heroes who shape the course of history and achieve tremendous success. Steve Jobs with Apple, Mark Zuckerberg with Facebook, Stelios Haji-Ioannou with easyJet, and Ratan Naval Tata with the Tata Group are inspirations who motivate others to follow their dreams and create their own ventures. Conversely, certain cultures may give merit to established entrepreneurs yet discourage nascent or new entrepreneurs to follow suit. In fact, nearly all graduates from college who visit their career centers in Europe will be offered advice on how to apply and seek a job, not advice on how to register a brand or form a company. Entrepreneurship still seems to be in most parts of the world a deviation from the norm and perceived as a risky career choice. For example, in Southern Europe, it is nearly impossible for banks to approve mortgage loans to self-employed entrepreneurs, even if their early stage venture income seems to justify a favorable decision (DaSilva, Janezic, & Hisrich, 2012). Banks prefer to give a loan to someone who has a lower salary but a “secure” job at a large corporation. This conventional position from banks and society does not seem to make sense nowadays, but still the practice prevails.
Given the mass layoffs of the past few years, is entrepreneurship riskier today than working at a big bank or law firm? A Harvard Business Review blog (Gibney & Howery, 2012) reveals that 215,417 jobs for attorneys will be available between 2008 and 2018, while over 430,000 new legal graduates will come out of universities during that same period. Those numbers indicate that only half will get a chance to get a job in their chosen field. There will be so many lawyers on the market for jobs that even those who get a job will probably have compensation packages that differ from the ones presently on the market. By contrast, the Kauffman Foundation did a survey of 5,000 entrepreneurial ventures started in 2004 in the United States (Robb & Reedy, 2012). Their results show that nearly 56% were still in business in the beginning of 2010 despite the world financial turmoil. Now if we consider financial rewards, entrepreneurs do have the possibility to make real money. Statistics from the venture capital industry reveal that 25% of first-time venture-backed firms are acquired for at least $50 million or file for an initial public offering (IPO) (Gompers, Kovner, Lerner, & Scharfstein, 2008).
Another positive feature of entrepreneurship is that motivated and happy people will usually perform better than individuals simply looking forward to their paycheck. In today's highly competitive market, only those who enjoy what they do and how they do it perform at a higher level.
This book will provide insights that will contribute to the success of any entrepreneur or investor seeking practical advice on how to measure performance and improve the financial state of an entrepreneurial venture in a global economy. Additionally, we will provide advice on how to reach and negotiate with investors to obtain the vital cash necessary for a venture to grow and eventually exit successfully.
Traits of a Global Entrepreneur
Several traits are common among entrepreneurs worldwide. These include cultural diversity, a strong desire to achieve, internal locus of control, clear vision, tolerance for ambiguity, integrity, and a global sense of responsibility.1 We will cover each briefly over the next pages.
1 For a thorough discussion of these traits as well as the need for global entrepreneurs, the topic of the next section, see Hisrich (2013) and Hisrich, Peters, and Shepherd (2013).
Cultural Diversity. Global entrepreneurs are individuals who are usually well traveled and who embrace cultural diversity both in and out of the workplace. They are not afraid of change or to face different sociocultural environments. They constantly seek challenges and new experiences with an “out of the box” feeling.
Desire to Achieve. Global entrepreneurs are willing to go the extra mile and face difficult and uncertain conditions to excel. Their desire to achieve allows them to go beyond cultural barriers and develop the set of skills required to succeed in an international environment.
Internal Locus of Control. Global entrepreneurs believe they and their team can intervene and influence the outcome of events and situations in a positive manner. They take responsibility for what happens and keep an open mind toward new ideas and potential solutions.
Clear Vision. Global entrepreneurs develop and maintain a clear vision as to where they are heading and make sure to share their vision with all stakeholders they interact with. They know employees must feel their work is essential for the success and prosperity of the global organization they integrate. Global entrepreneurs are positive, energetic, and confident individuals with both short- and long-term goals that express the vision of the venture.
Tolerance for Ambiguity. Global entrepreneurs face adversity with an optimistic mind-set and a willingness to learn. They have the ability to deal with contradictory or unexpected events while keeping an open mind and a focus on what their goals are.
Integrity. Integrity is critical for getting and keeping the support of employees, investors, and partners. Global entrepreneurs walk the talk by being honest, being morally upright, and meeting their commitments. Integrity is one of the most sought-after traits by customers, vendors, and investors. Without integrity from the top, the entrepreneur, the venture will soon falter.
Global Sense of Responsibility. Global entrepreneurs care about their employees and environment where they operate. They are sensitive to their employees’ and customers’ needs. Their goals are to not only build a profitable global venture but also contribute toward the sustainable development of the community in which they operate.
The Need for Global Entrepreneurs
In the past, companies ventured abroad only after having established and grown a strong business at home. They would start by approaching nearby countries and progressively establish partnerships. For example, Johnson & Johnson only decided to enter a foreign market 33 years after its inception. The country they chose to enter was an easy choice, Canada, as it could be easily reached by simply driving across the border (Isenberg, 2008). Walmart went global first in Mexico, rather than Canada, despite the language difference due to its closer geographic proximity to the company's headquarters in Bentonville, Arkansas.
Nowadays, companies are born global. From outsourcing manufacturing in China, employing a team of programmers in India, seeking funding on international platforms such as Kickstarter.com, and even selling their products internationally through the Internet, entrepreneurs and investors seek the best deals worldwide with little to no boundaries.
The world has changed, and today's ventures do business in several countries before dominating their local markets. Two main explanations justify entrepreneurs crossing borders: (1) defensive and (2) offensive motivations (Isenberg, 2008). Defensive motivation leads entrepreneurs to go overseas to produce products that are competitive in the global market. When one of the authors produced his first mobile software application for the iPhone, he requested budgets from several development teams in Europe and the United States using elance.com. The average fee for a U.S.-based production was $20,000 at the time. In Western Europe, the price for the same project would fluctuate between $9,000 and $15,000. He ended up recruiting a developer from Southeast Europe