I sometimes visit university business school classes on entrepreneurship and talk about funding early-stage companies. You might think that I would be buried in related questions, like the investing process, sectors of interest, investment size, equity stake, board composition, and so on.
While I got those questions, an equally common question has little to do with being an entrepreneur. Instead, it is “How can I become a venture capitalist?”. Seemingly, a high percentage of students in entrepreneurship classes don’t actually want to be entrepreneurs -- they want to be venture capitalists. After speaking to many investors I discovered that they had the same experience, with would-be VCs lurking in supposed entrepreneurs. And it wasn’t just at business schools. It was everywhere.
Not to put too fine a point on it, but why don’t more entrepreneurs want to be entrepreneurs? After all, would would think that if you went to the trouble of registering in a program on entrepreneurship, or an evening event on starting your own company, you would be interested in becoming an entrepreneur. (Admittedly if you are so nervous about becoming an entrepreneur that you want to take a few years out of your life to learn in a business school about being an entrepreneur then maybe you’re more interested in the idea of being an entrepreneur than in actually being an entrepreneur.)
Our goal is to create more entrepreneurs, and it’s not clear that is happening. Consider the following related graph of outplacement agency data. It shows that entrepreneurship participation rates, as measured by middle-managers and executives being released from companies and looking for new ventures, peaked back in 1989. Despite a recent relative recovery, we are still only at one-third the participation rate seen at the prior peak, and slightly below the long-run average.
One of the biggest problems we face as a society is convincing more people to be entrepreneurs. It is a numbers game, with failures vastly outnumbering successes, thus requiring that more and more entrepreneurs try their hand if we are to have any chance at creating companies and products that matter, and that help solve the huge problems we face. Despite the well known merits of being an entrepreneur, and despite a vast expansion in venture capital and entrepreneurship programs, it is not clear we are bringing as many would-be entrepreneurs into the entrepreneurial fold as we should be. And maybe, at least judging from the number of entrepreneurs who want to be VCs instead, we are even scaring them away.