I'm going to get this course started by talking with you about having an entrepreneurial mind set. What does it mean to be an entrepreneur? Do you know what you might be getting yourself into? When I used to teach a traditional class in entrepreneurial finance at the University of Illinois at Chicago, I used to start things off by asking the students why they had signed up for my class. I'd usually have 50 or so students in the room and over time the breakdown of their responses got to be pretty predictable. There would usually be about one-third of the students who had specific businesses that they had in mind that they wanted to get moving on right away. Some of these were startups that they were planning to launch, and some of them were family businesses that they were planning to help manage. There would be another third who did not have a specific business in mind, but they wanted to learn about entrepreneurship because they thought it might be a career direction that they would want to pursue someday. And then there was the remaining third. For these students, my class was just an elective that fit their schedule. They'd heard it might be a good class, that's probably because I wasn't a tough enough grader, we've all been there. The fact is, that it doesn't matter whether you have a specific startup idea that you're pursuing, you think that starting a company is something that you'd like to try at some point, or you have no idea at all whether you're cut out to be an entrepreneur. My goal in this class is to lay a foundation and provide some practical advice, so that should the opportunity arise for you at some point, you'll at the very least have an idea about how to get started. I plan to kick off every lesson with a word cloud to give you a bit of a flavor of what we'll be discussing. This first lesson is sort of an introduction to entrepreneurship. Why do people choose to become entrepreneurs? If we were all together in a classroom right now, I'd ask you to tell me what you think of when you think of the world entrepreneur. One of the first responses I get would be a business owner. After that, we'd probably narrow it down to a small business or a startup business. Some of you would be focused on high tech businesses. The concept of rapid growth would come up as well. A few of you would want to discuss entrepreneurship as a way to disrupt industries with new technologies or business strategies. Sweeping away old ways of doing business and replacing them with new, more efficient, or more profitable approaches. If I were to ask you why you're interested in becoming an entrepreneur, a lot of you would probably say you'd like to be your own boss. Perhaps your current employer is unwilling or unable to allow you to pursue your ideas for a new line of business or a new strategic direction. Perhaps you'd rather just work for yourself instead of somebody else. Or perhaps you're motivated by an opportunity to build and own a new business in order to create personal wealth for yourself and your family. The kind of wealth that you'll never earn by drawing a salary in a traditional job. Or, you may be looking for the personal fulfillment that comes from knowing you've done something that truly matters. You're interested in starting your own company in order to solve big problems either in a specific industry or in society at large. Finally, you may be thinking of entrepreneurship as a way to build a legacy. Starting and building a successful company that will continue long after you've gone. These are all solid motivations. Without motivations like these, why would anyone choose to take on the risk associated with starting a new venture? The word entrepreneur comes from a French word, that I'll try to pronounce correctly as "entreprendre." Which can be interpreted as meaning "undertaker," no not that kind of undertaker. This would be someone who undertakes or takes on a major project. In the early 1800s, Jean Baptiste Say provided the first commonly understood definition of an entrepreneur. "The entrepreneur shift economic resources out of an area of lower and into an area of higher productivity and greater yield." The focus here is really on productivity. Entrepreneurs introduce new ways of doing things that enhance efficiency and productivity. This definition doesn't really address who benefits from the wealth that is created in the process. In 1942, the economist Joseph Schumpeter provided a new definition of entrepreneurship. He wrote that entrepreneurs reform or revolutionize the pattern of production by exploiting an invention or an untried technological possibility. He introduced the concept of creative destruction. So far, neither of these definitions really rely on the concept of new venture creation. In 1983, Howard Stevenson provided a new definition, one that it's much more focused on starting a company from scratch. Stevenson said that entrepreneurship is "the pursuit of opportunity without regard to resources currently controlled." Now we're starting to pay attention to how entrepreneurs launch new ventures. They start with a concept, they develop a strategy, they raise capital, they hire a team, and they build a business. In 2000, Scott Shane, from the Dingman center for entrepreneurship at the University of Maryland, and S. Venkataraman, from the Baton center for entrepreneurial leadership at the University of Virginia, co-wrote the definition of entrepreneurship that we'll use in this course. They wrote that entrepreneurship is the discovery, evaluation, and exploitation of opportunities. This is a simple but powerful definition and it's consistent with the three step, discover, test, launch approach to entrepreneurship and entrepreneurship education. It's also consistent with the build, measure, learn, feedback loop that's been popularized as part of the lean start up approach to entrepreneurship. If you look at all of these definitions, you'll see some entrepreneurial concepts that are included and some that are left out. All of the definitions focus on identifying or exploiting opportunities. Innovation is a central theme. Enterprise, or new venture development, is implicit in Stevenson's definition and value creation, through improved productivity or efficiency is part of Say's original definition. What these definitions don't say very much about is the concept of the entrepreneur as a business owner. The person who has the most to gain if the new venture is a success and the most to lose if it fails. Maybe this concept is not a necessary part of the definition of the word, but it's certainly part of the conventional wisdom. Entrepreneurs are risk takers, they put their money, their talents, and their reputation into starting a new venture. If they're successful, they can become wealthy, perhaps even famous. If they fail, and most startups do fail, they have to find a way to pick themselves up, dust themselves off, and start all over. Let's change our focus now and link what we're talking about with some of the other courses in this sequence. Some of you have previously taken Jeffrey Lowenstein and Jack Goncalo's Creativity Toolkit course, or Geoffrey Love's Strategic Innovation course. Here is my view of why makes sense as a three-course sequence. Creativity is defined as the ability to transcend traditional ideas or traditional thinking to create something new. Creativity is something that artists, designers, inventors, and yes, entrepreneurs have. Innovation is something more, for a creative work to be thought of as an innovation, it must be something that is shared and embraced as something that creates value. Innovation involves creating a solution and introducing that solution to the broader community so that it can be adopted by others. Now let's come back to our definition of entrepreneurship. Entrepreneurship involves discovering, evaluating, and exploiting an opportunity. Usually by launching a new enterprise to bring in innovations to the market, creating value for the enterprise and its stakeholders in the process. It's more than sharing an innovation with the world. It's about developing a viable business model, building a company, assembling resources, and marketing a product or a service. The common thread linking creativity, innovation, and entrepreneurship is leadership. It takes leadership to turn an active creativity into an innovation by demonstrating its value to the community and encouraging its broader adoption. It takes a different kind of leadership to build a business around an innovative new product or service and bring it to the market, capturing value in the process. It's possible for someone to be successful as an entrepreneur without being particularly creative or innovative. But it's rare for an entrepreneur to be successful without leadership skills. So, what are the key elements of an entrepreneurial mindset? What are the personality or character traits that successful entrepreneurs have in common? Here's my list. Entrepreneurs need to be creative problem solvers, able to use out of the box thinking to develop new ways to address customer needs and wants. They have to be market aware, able to spot trends, problems, and opportunities sometimes even before their customers do. They have to be action-oriented and able to make decisions about strategies and tactics in the face of uncertainty and ambiguity. They need to be focused on creating value for their customers, and on capturing part of that value for themselves in order to build a profitable and sustainable business. They need to be able to assess risks and take calculated gambles, and they have to be leaders. They have to be able to communicate their vision and get others to climb on board. Here are a few more. I think entrepreneurs need to be good listeners. They need to hear what their markets and their customers are saying and incorporate that information in order to achieve a product market fit. They need to understand that failure is a real possibility, if it happens, they need to learn from it and move on. And finally, they need to be able to focus on what's really important, the key drivers that are going to lead to the creation of real value. Those of you who've read The Lean Startup by Eric Ries will remember these key concepts. A startup is not a business, not yet. It's a group of people who are searching for a viable business model. Only after they've found that model, does it truly become a business. This is what failing fast is all about. If your startup is heading down a dead- end street with a product that the market doesn't really want or a strategy that isn't going to work. It's important for you as an entrepreneur to figure that out as quickly as possible, so that you can stop, turn around, and head in a new direction before you crash into that brick wall at the end of the street. That's what the build, measure, learn feedback loop is all about. Startups must be engaged in continuous experimentation. You can't just assume that you know what customers want, you have to check it out. If you're proven right, that's great, move on to your next assumption and check that out too. If it turns out that your assumptions were wrong, make the changes you need to make as quickly as possible and go through the process again. This isn't easy, but it's very important. In a recent crunch base study of 101 business failures, the number one reason why startup's failed, turned out to be the fact that there was no real market need for the product or the service. No real market need. It would have been better for a lot of these startups to understand that before they ever got started. You need to recognize that there's a big potential downside involved with becoming your own boss and starting a new business, it's hard work. Entrepreneurs work long hours, often for less money than they could make elsewhere at least in the beginning. Most startups fail,s and failure is personal for entrepreneurs. When a big company fails, the managers all have to look for new jobs. That can be tough. When a startup fails, the founders have to look for new jobs, too. But they probably also have a good chunk of their personal net worth tied up in the business that no longer has any value. They may have home equity loans or other debts that they can't pay. They may also have a profound sense of guilt that they let their employees, their customers, their investors, and their families down. That's why entrepreneurs can sometimes become paralyzed by the fear of failure. When the consequences of failure are so personal, the decisions can be harder to make. And you don't have many coworkers or colleagues to help you make the right ones. So, why would anybody be willing to put himself or herself through this? For three very basic reasons that I'm going to keep coming back to during this course. People choose to become entrepreneurs in order to make money. More money than they could make by working for someone else. They do it because they want to make a better place in some way, by introducing new technologies or new business processes. They will solve real problems for their customers or for society at large. And, they do it because they think it'll be fun; they can pursue their own dreams and work with people who share their visions. If you have an idea for a new venture that can do all of these three things, make money, make the world a better place, and be something that will be fun to be involved with, you're in a very good place. You should be able to find supporters who want to be a part of this with you. If you can do only one of these things, then it will be tougher for you, unless you can really do a lot of it. And to wrap things up, I'll leave you this one caveat, no money is almost always no fun.
