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The Entrepreneurial Dilemma

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4 Responses

  1. Ken Rhodes says:

    Michelle, I like to add a new dimension to your post. You wrote:

    >>the paper also highlights the significant risk and uncertainty inherent in any entrepreneurial venture. Having a big idea is not enough; a lot can happen as an entrepreneur tries to get that idea to market. Litigation is just one of these risks. But certainly instituting litigation to protect a patent or challenge the application of an existing law to the entrepreneur’s product or business model is not cheap. Litigation can easily consume a large portion of an entrepreneur’s working capital.>>

    I found nothing to disagree with in what you wrote, but I think you focused on a small percentage of “entrepreneurs,” the ones who try to “make it big” based on a “big idea.” I think a much greater number of entrepreneurs are simply “regular, hard working folks” who decide they’d rather own their own business instead of working for a salary while somebody else makes the profit on their hard work. Those folks don’t have any intellectual property to protect; just the idea that hard work and integrity should be rewarded in the marketplace.

    That was the path my partner and I followed. We were decently paid computer software engineers, but my wife convinced us that if we were going to devote every waking hour to our careers, then that devotion should be for equity, not just for salary. So we left the company we were working for and started our own software programming company. No venture capital; just a couple of guys who went out on their own.

    We did our own marketing, our own accounting, our own taxes, and our own administration. Twenty years later, we had 200 employees, and we were able to sell our company for enough, not to become wealthy, but to retire comfortably. To me, that was the quintessential entrepreneurial spirit–we did whatever we had to do to “make it happen.”

    And interestingly, we too were subject to the vagaries and the risks of potential litigation. Not over intellectual property, but over much more mundane issues like employee conflicts, intransigence of clients, and claims of much larger competitors that we “cheated” in competition for contracts. Yes, the legal risks we faced were constantly in our thoughts, and many times we had to take a cautious approach to avoid the possibility of litigation, which would have been vastly too expensive for a little company like ours.

    So you are definitely correct that litigation is a risk always in the mind of the entrepreneur, even when that entrepreneur is simply the air conditioning repairman who decided to start his own air conditioning contracting business.

  2. Michelle Harner says:

    Ken:

    Thank you so much for this addition to my post. I think it adds a very important dimension to the risk analysis and other drivers underlying entrepreneurial ventures. You are absolutely correct that the “big ideas” of entrepreneurs do not need to be technology-driven or necessarily all that big. Persistence, skill and passion for your endeavor may be the critical factors. You are also correct to note that entrepreneurs of all types face enormous risk, including litigation risk. Even one employee or contract dispute might raise the cost-benefit issues discussed in the post. In addition, I have attached a link below to an interesting study that suggests your type of success story is rare, which says a lot about the persistence, skill and passion of you and your partner.

    Best regards, Michelle.

    http://www.hbs.edu/research/pdf/09-028.pdf

  3. A.J. Sutter says:

    Michelle, the data in your linked paper pertains to venture capital-financed companies (see pp. 5ff), not companies like Ken’s. A question worth pondering, and highlighted by your oversight and Ken’s comment, is why has the term “entrepreneurship” become associated — not least significantly, in the minds of legal and management scholars — with a constellation of flashy financial services (venture capital, underwritings, M&A).

    BTW Japan’s economy, which is roughly the size of Germany’s and the UK’s combined, rests quite heavily on the shoulders of entrepreneurs in Ken’s category, and yet the country is regularly trashed for not having its own Google, etc.; a random example is here.

  4. Michelle Harner says:

    A.J.:

    Thank you for emphasizing this distinction. I was focused more on Ken as a first-time entrepreneur, but I take your point on venture capital financing. I also agree with you that, although any startup/small business venture is (at least in my opinion) entrepreneurial in nature, startups that do not pursue or secure venture capital financing often are overlooked. On this point, many thanks for the link.

    Best regards, Michelle

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