Did you start your business not for passion or to save the world but just to make lots of money? Don't be ashamed, writes Leah Eichler. The world needs more founders like you. By Leah Eichler (CEO, r/ally)
I love change. Honestly. Two years ago, when I realized that my division at work was slated for the chopping block, I turned to my boss and said, “Great. How can I help wind us down?” I needed the push to launch my own venture and although I felt incredibly passionate about my new company, I can now admit that I had another motivating reason – money.
Unlike previous generations, launching a company now seems no riskier than accepting a new role. When was the last time we used the term "job security" without snickering? In fact, fostering entrepreneurship has become a mantra for those looking for solutions to the economic recovery. According to U.S. data, job growth is entirely driven by startups.
But there’s good reason to pay close attention to this new breed of accidental entrepreneurs spawned by the economic downturn – these white-collar workers who lost their lucrative pay checks. They aren’t motivated by the traditional reasons, mainly their passion to solve a problem or to hobby in work. These accidental entrepreneurs are hungry for profits and that’s a good thing.
"In the pursuit of entrepreneurship, these companies born of the recession can be described as the ‘absolutely, positively trying to get rich’ crowd," asserted Brian Burch, vice-president, consumer and small business segment marketing at Symantec, the security software company based in Mountain View, California.
Mr. Burch recognized that a major shift was underway when the net number of new companies launched in the U.S. per year sky-rocketed from the average of 600,000 to 6 million in 2010. Between 2009 and 2011 over 10 million new companies launched in the U.S., according to proprietary research conducted for Symantec, he said.
Symantec then commissioned a study by Forrester Consulting that discovered that these new entrepreneurs were more profit driven than their predecessors before the recession.
"This new crop of start ups born of the great recession was increasingly or primarily about replacing white collar income or rebuilding someone’s retirement nest or helping paying of a graduate school debt," observed Mr. Burch. These companies act very differently than traditional entrepreneurs because they are built for profit and they are built for scale," he added.
Unlike entrepreneurs before the recession, Mr. Burch said, these companies trying to hire more rapidly, were more focused on growth and were more likely to have an exit strategy. As an example, he cites data that shows job creation in Silicon Valley from Dec 2011-2012 was the equivalent to the Dotcom boom in the 90s.
He called them “profit machines.” He likens them to the velociraptors in the film Jurassic Park. They seem small, but when released into the wild, they remain highly adaptive and designed to compete, observed Mr. Burch, who predicts they will defeat some of their more traditional small business competitors and enjoy “disproportionate success.”
The question remains, how can we foster this new breed of money-hungry entrepreneurs, or velociraptors, and especially tap into female entrepreneurs, whose businesses tend to show slower growth, in terms of revenue, than their male counterparts?
According to Dell’s global entrepreneurship and development index (GEDI), the U.S. ranks the top place for female entrepreneurs. Canada wasn’t in the index but the assumption by Dell remains that results would be similar. Yet, statistically speaking, men are more likely to start a business than a woman and that entrepreneurial gender gap persists in Canada as well.
Some of the variations in the numbers and success rates of male vs. female entrepreneurs can be explained by their motivation. According to a 2012 TD Economics report, the desire to be one’s own boss and earn more money motivated 71% of men compared to only 53% of women. Meanwhile, the desire for better work-life balance motivated 25% of women to launch their own companies but only 7% of men.
The TD report does anticipate a change for female entrepreneurs and noted that the percentage of female-owned businesses intending to expand is on the rise and now surpasses the percentage of male-owned business claiming the same. The willingness of these female entrepreneurs to seek financing also suggests better growth in the future.
"There is definitely a phenomenon of female entrepreneurship happening," observed Susan Kates, professor and internship coordinator at Centennial College. Ms. Kates also observed that this trend serves women who want to be in control of their lives, and better balance family life with their business, but sees a number turning to entrepreneurship out of necessity.
"As women get older, they start businesses as they have lost jobs and being hired on as they get older becomes so much more difficult," she observed.
Even among her students, Ms. Kates observed an increasing number choosing the entrepreneurial route, often because they come from entrepreneurial families. But she cautions against focusing singularly on profits.
"Making money, of course, is important, but I don’t think it is really the only thing that drives a true entrepreneur; it is the excitement, the creative challenge, the sense of achievement, which really is the driving force," said Ms. Kates.
This post originally appeared on Femme-O-Nomics.