Independence is the Real Reason that Entrepreneurs Start Companies

by Nathaniel Whittemore

category: Trends

Published November 08, 2009 @ 11:23AM PT

• 4890 Views

An interesting piece in BusinessWeek suggests that of those characteristics we associate with entrepreneurs - job creation, disruptive innovation, community rejuvenation it is the independence and freedom to work for one's self that actually drives most people to start their own companies.

Using data from the U.S. Census, Tax returns, and a number of academic studies, Professor Scott Shane of Case Western Reserve University paints a slightly different picture of the average US entrepreneur than the Steve-Jobs-ian model we perhaps have in our heads. Some of his key findings:

• The primary reason people start businesses is to avoid having a boss.
• Only one quarter of all businesses in the U.S. actually have employees.
• Only 9.4% of U.S. businesses have more than four employees.
• Only 15% of the male entrepreneurs and only 7% of the female ones want to maximize their business' growth.
• Only half of nascent entrepreneurs expect to have sales of more than $100,000 in their fifth year of operation.

This is pretty remarkable stuff if you take into account the average image of the "entrepreneur" that the media presents. In fairness, it's reasonable to ask if those not looking to maximize growth (or social impact, or something) are really in the same category.

But it does present a slightly different picture of the macro-economy that we have to play with. My best guess is that, given that my generation has grown up with more freedom of choice than just about any in history, the desire for independence among American workers is only going to increase.

I think this information and these trends provide some really interesting opportunities. First, it suggests that more entrepreneurship training - from accounting to management to whatever - should be strung throughout the student curriculum. Second, it means that there are some real opportunities for smarter, more directed professional training and continuing education.

Third, it means that there are probably opportunities for third party companies to build alliances and platforms that deliver the benefits of scale to small companies that otherwise wouldn't experience them. Two great examples: Shopify.com, which provides an extremely adaptable storefront experience that would otherwise cost an arm and a leg to have custom built, and Etsy, a marketplace for entrepreneur-artists and craftsman to sell their goods that has raised over $30 million in venture capital and continues to see growth in traffic.

These are just early examples of using networks to make the patchwork of small enterprises as a vehicle for economic prosperity and business and social creativity.

(Photo: A visualization of all Etsy members from when the company first started in 2005, by Jared)