Entrepreneurship formula
Startup is always risky, each year thousands of people start company but only few succeed. People may remember in March 2000, after two years of tremendous growth with hundred thousand startups called “DOT.COM” suddenly the market crashed, most startups disappeared and many dreams were shattered.
A government study found that during that time, thousand of business professionals who used to work for big and well established companies left their jobs to start technology companies. From June 1998 until March 2000 there was huge number of money transferred from traditional investment accounts to startups in Silicon Valley, lured by the promises of startups Initial Stock Offering (IPO) that could make million or billion dollars for investors. However most startups were never profitable because they were based on “Expectations” rather a solid financial foundation. Entrepreneurs’ goals were to set up company as fast as possible then sell them to investors, no one has any plan to earn money and grow. These entrepreneurs with big tittles like CEO, CFO, and President of “DOTCOM” spent investors’ money rather than made money for them. When investors stopped invest and pulled their money out, the whole DOTCOM market crashed.
What can future entrepreneurs learned from this lesson? First, you cannot start a company based on “ideas and wishes”. You need solid evidence to validate your idea of starting a business. Second, you cannot grow the company without being profitable; you cannot depend on investors’ money but your company must make money. Third, you cannot start a company and hope to make million dollars within a short time; it needs time to grow so you must learn to be patience. To start a company is difficult, to make profit is more difficult and grow it into an enterprise is very difficult. You need someone to guide you along the way. Unfortunately, entrepreneurship is not a skill that can easily be taught in school, even many business schools are teaching it. How do you find someone with experience to teach this skill? Where do you get successful entrepreneurs to share their experience? People like Steve Jobs, Bill Gates, and Sergey Brin gave few speeches but never wrote textbooks.
With so many startup failures, a recent study by King’s College in London has suggested that: “Entrepreneurship may be in the blood, more to do with genes than classroom teaching.” The author concluded: Successful entrepreneurs like Gates or Jobs never finish school, never take a business class. Many entrepreneurs had advanced degrees in business and finance but still failed. No one can teach this subject because entrepreneurship is NOT a science but an art.” Not surprisingly many business schools immediately “invalidated” this notion. A business professor wrote: “If it is in the genes, I like to know what gene? Can we get a sample of Steve Jobs or Bill Gates genes and prove that they are different from other people. This view is completely wrong.”
Today many business schools are still teaching entrepreneurship based on traditional business theories. Students learned macro and micro economic theories, finance, accounting, marketing, management techniques, business laws and a course or two in entrepreneurship where students believe that it is possible to develop an idea, start a company, get money from investors, build a product, sell the product, and make a lot of money. Of course everybody know the classic “fairy tale” about college students sitting in the library invent new idea for a technology. They quit school, start the company from little money borrow from friends. Their early success allows them to get additional money from investors; create wonderful product and bring it to the market. They grow the company, hire their friends and issue stocks. Their stocks go up and up then everybody became millionaires and billionaires. This “fairy tale” is told to students everywhere and they love it. No one checks the logic and no one asks if it is so simple then why only few succeed? Why there is only one Bill Gates and not hundreds or thousands?
There are questions that I have asked myself: If startup idea is a technology then why does it come from business school? What does a business student with knowledge in economics and finance know about technology? Is there a conflict between traditional management training to avoid risks and entrepreneurship training which require risk taking? Should startups and entrepreneurship be taught in science, technology and engineering school instead? What does an engineering student with skills in computer and electronics know about business? What does a computer science student with programming skills and knowledge of algorithms know about marketing and sales?
Business curriculum has proven set of theories and processes for managing companies and investing. They have been very successful but when it comes to technology and innovation, they are clueless. Engineering and computer science curriculum also have proven set of theories and processes for develop innovation and technology. They have been very successful but when it comes to customer relationship or revenue streams, they are also clueless. We are at the dawn of a new century; we need a new curriculum to help us thrive in this challenge. I believe entrepreneurship should be taught as a new field created by the integration of Business and Technology (IT, Bio and Nano). Startups should be taught based on innovation idea to develop disruptive technology but follows a business process to ensure that they achieve profitable goals and grow into an enterprise. If you want to be an entrepreneur, you must start with a foundation in Science, Technology, Engineering and Math (STEM) and follow a “dynamic business process” to ensure success and that is the entrepreneurship formula.
Sources
- Blogs of Prof. John Vu, Carnegie Mellon University
