The 2 types of entrepreneurship - entrepreneuriat

The 2 types of entrepreneurship

Becoming an entrepreneur is easier than ever. The digital revolution offered what Schumpeter described as the “grasp of innovation.” Every new technical revolution—for example, the industrial revolution, or today’s digital revolution—brings with it a wealth of new opportunities.

For instance, the industrial revolution brought about the rise of the auto industry, the internet brought about ecommerce and social networking, and the creation of the iPhone launched the mobile app market.

The era we are now living in is full of opportunity—accessible not only to a few but to nearly everyone. Many factors helped launch a great entrepreneurs’ generation, including:

  • More well-educated people
  • Easy access to knowledge and people
  • Unexciting workplaces & feelings of dissatisfaction
  • Available funding
  • A very low technical barrier to entry

It is an exciting period where we see a lot of initiatives to support entrepreneurs who are developing and launching ideas. For instance, worldwide initiatives including incubators (Techstars, Y Combinator, etc.), bestsellers (The Lean Startup, Zero to One, etc.) and events (Lean Startup Machine, Startup Weekend, etc.)

It is a great time to be an entrepreneur, and there are two main approaches that entrepreneurs take to support a project. One is to go through the trendy speculative pipe and do whatever one can to leverage cash from funds. Another is to pursue a more organic route, maintaining complete ownership of the company.

Speculative entrepreneurship

This is the kind of entrepreneurship we hear about the most. It’s flashy and makes a great story, and therefore gets a lot of media coverage.

There are several reasons that can make it relevant to leverage cash:

  • Investing in machines to take your business to the next level
  • Artificially boosting your growth to remain #1 and kill the competition
  • Artificially keeping your company alive while you lose money every month
  • You do not need cash

When you are an entrepreneur, you mainly want to make the decision and give a direction to the projects you are launching. First-time entrepreneurs often make the mistake of focusing on raising funds first, when instead they should be directing their energy toward pursuing the goal of the company, and earning money to ensure its long-term survival.

Does your company have a goal if no one wants to pay for it? The answer is no.

Raising money should not be a goal in and of itself, but the consequence of a successful project. If you convince someone to invest in your project before it has been fully realized, it is not your company anymore. You now must answer to a boss who might be kind and full of great tips, but ultimately is interested in speculating on your company…and the thousands of other companies he or she has invested in.

Raising money has some great aspects. You can pay yourself a decent wage. You may get an ego boost if you are the only one among your family and friends who has been able to raise funds. You become respected among your peers. And if everything is going well, you are able to raise even more money on whatever projects you’re launching as you develop a proven track record.

But raising money means you will be stuck in the rat race. The never-ending “DO MORE” speculators will always expect more from you. If you are stuck in this cycle, or close to it, The Hard Thing About Hard Things  from Ben Horowitz is a must read.

If you earn a profit from your idea, just scale it, and invest that money back into your company. That’s the second kind of entrepreneurship—the prudent and long-term one.

Responsible entrepreneurship

This kind of entrepreneurship is less glamorous, because it requires working under the radar, as you don’t have a figurative money gun spreading dollar bills all over the place.

Responsible entrepreneurship bases its financial resources on 3 main pillars:

  • Money earned by selling services or products
  • Crowdfunding, one the innovations brought on by the digital revolution
  • Bank loans

As you can see, there are several ways to launch a company without giving a percentage of ownership to financial partners. Consider it seriously when you are looking to finance your project.

The 3 following entrepreneurs represent different ways of pursuing responsible entrepreneurship:

  • Tim Ferriss: Author of The 4-Hour Workweek, and the most well-known lifestyle entrepreneur. He encourages being productive not simply to make as much money as you can, but rather to make enough money to live the life you want.
  • Yvon Chouinard: Founder of Patagonia, the outdoor clothing and gear company. The main difference is that Chouinard built his company to create a sustainable business and avoid planned obsolescence—a way of doing business you cannot pursue if you do not own your company. Read his book to know more about his way of doing business: Let my people go surfing.
  • David Heinemeier Hansson: Founder of Basecamp and co-author of Rework. The anti-Peter Thiel. DHH has built his tech company, Basecamp, without leveraging funds, proving that it is possible. His book is interesting to read if you want to rethink the way you work and/or manage. If you like this book, you probably won’t like The Hard Thing About Hard Things. Also, check out the Rework podcast and follow @DHH on Twitter—it’s priceless.

Never say never—to succeed in business one must think practically. But if you are looking for a way to finance your project or your company, think twice before accepting funding from anyone.

Alban Vantal

I’m one of the Kool Corp’s founders.