Helping everyone reach the top of the pyramid (photo credit must read FRANCOIS GUILLOT/AFP … [+]
Should entrepreneurship development infrastructure i.e. business schools, incubators and area developers focus on VC based entrepreneurship to nurture an elite or on unicorn entrepreneurship where everyone can benefit?
Is Entrepreneurial Development wasting learning resources by teaching VC-based entrepreneurship to entrepreneurs and students who need to know Unicorn-Entrepreneurship?
Entrepreneurial development nowadays mainly teaches:
Small Business – but is a 4-year degree necessary to develop a small business?
· VC-based entrepreneurship, which assumes that VC is necessary to develop growth companies. Accordingly, many business schools teach innovation, viable products, business plans, and VC financing; and organize business plan or pitch competitions; and shark tanks.
But is VC based entrepreneurship the right direction, especially for the 99.98% who don’t fit the narrow profile and requirements of the VC industry, and for the 100% who don’t get VC before Aha, i.e. proof of potential:
· VC is Capital-for-the-Privileged. It funds ~100/100,000 enterprises and does so after Aha. Is Entrepreneurial Development passing up an opportunity to teach everyone the skills to get off the ground without VC, as 94% of unicorn entrepreneurs did? (The truth about VC)
· VC has mainly worked in Silicon Valley. In an analysis of entrepreneurs with $85 billion in revenue, 88 percent of those in Silicon Valley used VC. But most of them used abilities to delay VC until after takeoff. Does Entrepreneurial Development need to teach the skills and smart strategies to come to Aha?
Outside of Silicon Valley, 91% did not use VC. They used skills, smart strategies and capital as a tool that works anywhere, before and after Aha! Should Entrepreneurial Development teach the skills and smart strategies to grow without VC?
Entrepreneurial development can be improved by:
· Teaching capital efficient Unicorn entrepreneurship instead of capital intensive VC based entrepreneurship. With Unicorn-Entrepreneurship, entrepreneurs can learn to grow without wasting their time and opportunity looking for VC only to be rejected. VCs turn down about 98-99 percent of entrepreneurs seeking money from them.
· Emphasizing skills – not ideas. Entrepreneurs have to go to Aha to be taken seriously. Unicorn-Entrepreneurs mainly achieved Aha and beat first movers by using financially savvy strategies and skills.
· Encouraging capital-savvy skill competitions instead of capital-seeking pitch competitions. Pitch competitions assume that smart judges can choose winners. But VCs, who are the brightest professionals in the startup business, wait for Aha, i.e. proof of potential, and then fail at 80 percent of their ventures. So why can pitch competition judges do better? Before Aha when no one can judge skills.
UE can drive successful business growth anywhere, especially in business schools and community colleges that are not prominent on the VC radar. Teaching finance savvy skills allows entrepreneurs to prove their potential based on real performance, not pitch performance.
Making VC more accessible may just mean more VC losses. The top 3% of VCs are said to earn 95% of VC returns. To get high returns, VCs need unicorns. Increasing the number of VCs and the availability of VCs is not likely to create more home runs without developing more unicorn entrepreneurs.
MY TAKE: If the goal is to create more unicorns outside of Silicon Valley, and among underprivileged communities and women-owned enterprises, teaching Unicorn-Entrepreneurship can do more than just VC. Without Unicorn-Entrepreneurship, entrepreneurs could wait for capital that may never come, and squander the opportunities they get. If the goal is to build more unicorns, in all communities, rich and poor, Entrepreneurial Development should stop promoting pitch competitions and start developing skills competitions. And universities outside of Silicon Valley should stop following Silicon Valley’s VC model popularized by Stanford and focus on educating financially savvy entrepreneurs rather than capital-intensive business plans.
