Going by the buzz you hear, you’d be forgive if you believe that to be a successful entrepreneur, you need to be in your early 20s, have got admission in Harvard or Stanford and quit before finishing your education.
The reality couldn’t be more different. The average age of entrepreneurs is over 40. They don’t always come from the ivy league institutions. Some of them do come from the world of technology. But the majority come from the world of business, where their chief qualification was simply curiosity. They realised that they needed a solution to a problem they experienced that simply wasn’t available. Their curiosity led them to question whether this problem was also experienced by others. If they could find a simple solution to the problem, the next step was to see if this could be scaled up and if the solution could also be provided to others.
An excellent example comes right from the world of startups and entrepreneurs. Pre-1999, investors like VCs would raise funds averaging $80 – 100 million. They would then invest $1 – 5 million in promising startups. However, over the next decade, the average ticket size increased and investors began investing in multiple rounds on startups that needed more and more investor funds, since these startups delayed going public. As a consequence, the average funds raised by VCs today are $500 to 800 million. With such large funding rounds, VCs prefer to focus on deals where the minimum ticket size is $5 million, since they are limited by the number of deals that each partner can manage. To be eligible for this, the pre-money valuation of the startups needs to be about $8 – 10 million. This means that the startups that are more early-stage simply don’t qualify.
It’s been clear that VCs have been making money hand over fist, while the other wannabe investors have been unable to get in on the action.
Angel investors invest funds ranging from $50 to 200K. Cumulatively, it’s possible to get Since the angel investor networks tend to be very unstructured, there is a big gap for early stage companies, which unfortunately fall through the cracks.
Crowd funding opens up the opportunities to invest in early-stage privately held companies to anyone, giving the opportunity to invest as little as $100 or even lower.
The founders of IndieGoGo identified the gap in 2008, and Kickstarter soon followed in 2009. Crowd funding was on the way to becoming mainstream. In 2013, over $5 billion was raised by crowd funding. This jumped to $16 billion in 2014 and $34 billion in 2015. Today, over 50% of all funds raised by startups in the UK are by way of crowd funding. In effect, crowd funding has arrived.
It’s interesting that these founders did not address a technology, but simply the need for technology to commercialise. This harks back to the gold rush in the US, where the ones who really accumulated wealth were the men who sold the shovels.
The first step towards becoming an entrepreneur is not to see how you can become one, but to identify a need. Then, using your industry knowledge, validate if this really exists. Becoming an entrepreneur is in essence taking it upon yourself to address this need. It’s the point where you begin to see problems as challenges and opportunities. It’s when you do this that you’ve truly taken the first step toward becoming an entrepreneur.
Everything after this is simply semantics.
Do share your own stories of entrepreneurship and drop me a line if you have questions.