The True State of Start-Ups
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You've probably heard about all the people starting businesses as a result of layoffs. You may even be one of them yourself. But do you have a grasp on what the true state of start-up entrepreneurship is today--especially in light of the one-year anniversary of September 11? We talked to a bevy of entrepreneurial organizations to find out. Here's what they had to say.
How do you think the events of 9/11 changed things for start-ups?
Sean Magennis, vice chairman of the Young Entrepreneurs' Organization in Dallas, an international entrepreneurial organization with more than 4,700 members worldwide: I think people are now taking life a little more seriously. I mean that in the most positive light. From a start-up perspective, I think you're finding that people are.looking at their lives and saying "What's important in my life?" A year [after 9/11], people are still saying it--I see this trend in a lot of entrepreneurs I work with. They're saying "What is it that I can contribute?" as opposed to just going out there, making a buck and doing well, because they already know they can do that.
You're starting to hear a lot more about families; a lot of businesses are starting up around the whole [idea of] family--staying at home, relationships, getting back in touch with the softer side. It's really quite interesting. [Also,] the reality for start-ups today is making sure they have a very sound business plan [and] a great mentor team.that can really drill them and [help them] think through the various elements [of starting a business].
There's no lack of start-up ideas out there. The ones that are going to be successful are the ones that have really done their homework. And that's going to be the reality in the next year--and into the next 24 to 36 months. Some companies have flat sales; certain industries are done--yes, we all know that. But the reality is, with the right staff, with the right idea, with a solid work ethic, any entrepreneur is going to make it happen. It's just not going to be easy to get money today.
What is the state of start-ups right now? Where are they headed in the near future?
John Friess, founding member of Starve Ups, a start-up entrepreneurial organization in Portland, Oregon: I think we're building better businesses, and ultimately everyone's forced to maintain a shoestring mentality regardless of how successful their team has been in the past, how much money they raise, and how much protection they've got around their company. I don't think all of that matters that much anymore; it's really about [whether] you can get a viable product to market fast, sell it and get it into the black at a pace probably three to four times faster than what was acceptable two years ago.
That's what I really feel the start-up environment is all about now. [It's] becoming more difficult to get initial A rounds [of financing]--in that you used to be able to get an A round, post-seed round, with just a proof of concept or prototype. In order to receive anything beyond the friends and family round, people are going to need to have products that are generating customers and revenues.
In three to five years, I think it may start to regress back to what we were used to--where there's a little more leeway and flexibility for companies. [Right now,] it'll be difficult to find truly revolutionary products in the marketplace if no one's willing to put dollars behind them when they're just in the inception stage.
What is the attitude from students and young people regarding entrepreneurship today?
Mat Burton, director of university relations for SIFE, a Springfield, Missouri-based international nonprofit educational organization: From the students that we work with, I haven't seen any negative opinions formed. I don't think they're more pessimistic about the opportunity to start their own business. I think, if anything, they're just as anxious, or more than they ever have been, [to start a business].
If you were to walk onto a college campus and ask how many students hope to start their own business, you'd find that it would be a significant portion of the campus population. When they see some of the things that have happened with businesses and the economy, it makes them feel that they'd have a little more control over their own destiny if they owned their own business.