Launch - Summer 2008 - (Page 20)

Myths of By Jeremy Hanks Before you read this article, click here and take this entrepreneur quiz. 20 launch summer I’m reluctant to admit that I didn’t score very well on the entrepreneur quiz — 45 percent to be exact. Guy Kawasaki, a leading thinker on all things entrepreneurial, scored 40 percent. I’d venture a guess that you scored in the same ballpark. This quiz and the related book, “The Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live By,” were written by Scott Shane, a professor of entrepreneurial studies at Case Western University. Shane is also a researcher on new businesses for the Ewing Marion Kauffman Foundation and an angel investor with the North Coast Angel Fund. He’s the author or editor of 11 books and more than 60 scholarly articles on entrepreneurship. He knows what he’s talking about. “People start businesses based on the myths we tell ourselves about entrepreneurship and then are hurt when confronted by reality,” Shane says. “Investors believe these myths and invest money and they’re disappointed when they don’t hold true. Policy makers make policy based on these myths and then wonder why the economy isn’t growing with all these entrepreneurs now in it.” So for my own education (based on my score it seems like I need it) and to help aspiring entrepreneurs here in Utah, here are my favorite 10 myths (written by Shane) that are dispelled in this great book: It takes a lot of money to finance a new business. Not true. The typical startup only requires about $25,000 to get going. Successful entrepreneurs design their businesses to work with little cash. They borrow instead of paying for things. They rent instead of buy. And they turn fixed costs into variable costs by, say, paying people commissions instead of salaries. Entrepreneurship Venture capitalists are good place to go for startup money. Not unless you start a computer or biotech company. Computer hardware and software, semiconductors, communication and biotechnology account for 81 percent of all VC dollars, and 72 percent of the companies that got VC money over the past 15 or so years. VCs only fund about 3,000 companies per year and only about one quarter of those companies are in the seed or start-up stage. In fact, the odds that a startup will get VC money are about one in 4,000. That’s worse than the odds that you will die from a fall in the shower. http://yalepress.yale.edu/yupbooks/entrepreneurshipquiz.asp

Table of Contents Feed for the Digital Edition of Launch - Summer 2008

Launch - Summer 2008 Contents Editor's Note Dashboard Marketing Column Funding Column Sales Column Risks vs. Rewards Myths of Entrepreneurship Opportunities vs. Ideas Funding Options for Startups Making Sense of Term Sheets

Launch - Summer 2008

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