The End of Entrepreneurship as We Know It?

Tougher Times

That has to be a strong incentive, considering the obstacles to starting and running a business in this economy. "Launching a new business is a pretty difficult task," notes John Ferber, the 26-year-old co-founder and chief Internet officer of Advertising.com, a Baltimore-based Internet advertising business that earned $11.4 million in 1999. Ferber believes Internet companies that got in early and now have a 12- to 15-month head start provide a barrier to new start-ups. "We've seen every idea that's come down the pike in recent years," he explains, "and right now I don't see much that's giving consumers something new."

Other business owners agree that starting new businesses today is tougher than it was only a few years ago. They also place the lion's share of the blame on Internet culture.

"You could almost see the air leaking out of the new business market when the NASDAQ was falling," says John Mueller, the 35-year-old owner of The Idea Factory Inc., a Menomonee Falls, Wisconsin-based home products company.

Back in 1995, Mueller got a fast start selling his product, the Rinse Ace, thanks to a "Best of the Show" spot on the home shopping network QVC. "It was easier for me to start my business then than it would be today," he says. "The sad part is, when the Internet market suffers, the rest of us do, too. In [the consumer products market], we've never been able to compete against the dotcoms in terms of getting funding."

Challenging both new and entrenched entrepreneurs these days are venture capitalists' high expectations. "It's crazy out there right now," says Scott Harris, the 37-year-old CEO of Toy Craze Inc., the Cleveland toymaker whose "Crazy Bones" toys are about to be marketed by McDonald's in a massive promotional giveaway later in 2000. "We're experiencing 15 percent annual growth rates, and that's not good enough for a lot of people. With some Internet companies reporting 100 percent growth, venture capitalists weren't even looking in our direction."

Harris stops short of saying new entrepreneurs can't make it today-he just warns it's going to be tougher. "Let's face it," he says. "If you're in the service or Internet sectors, times are tough. The landscape is capital-intensive, and a lot of the customer base has consolidated rather than expanded. If you have realistic expectations, a good business plan and are tight with a buck, starting a business today shouldn't be impossible. It just depends on how bad you want it."

Does that mean Harris would consider giving it all up and going back to a kinder, gentler corporate world? "Umm, no," he answers, without missing a beat. "That thought never entered my mind."

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This article was originally published in the September 2000 print edition of Entrepreneur with the headline: The End of Entrepreneurship as We Know It?.

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