The many faces of entrepreneurship
When he arrived in Melbourne in 1990, Brendan Lewis did not want to tell anyone he was a West Australian entrepreneur. For good reason too.
Back then, West Australian merchant banker Laurie Connell had just died and entrepreneurs from his part of the world were notorious for their fast cash and flash habits. Connell, for example, took 150 of his closest friends to a country race meeting on a train he had hired.
Another WA entrepreneur Alan Bond, a former sign writer, struck a commemorative gold medal for guests at his daughter's wedding. The music stopped in the late 80s when Connell’s bank Rothwells collapsed. Bond, who had built an empire that left millions of dollars in debt, was sent to jail. The Australian Government meanwhile was pursuing another entrepreneur, former television station owner and manager of the failed Qintex Group Christopher Skase who was holed up in Spain.
Lewis said telling anyone at the time that you were an entrepreneur was a bad idea.
“The West Australian entrepreneur back then was synonymous with the spiv who vanishes into the sunset,’’ Lewis says. “Back in 1990, the word had a hideous name so I just told people I had a business and hid it.”
Lewis said that started changing from about 2000 with the rise of the internet billionaires, people like Larry Page and Sergey Brin who created Google, and Chad Hurley and Steve Chen, the founders of YouTube who ended up selling it to Google in 2006 for $1.76 billion. And then of course there is Facebook founder Mark Zuckerberg. They changed everything, says Lewis. Entrepreneurs don’t have a bad name any more.
The entrepreneur heroes
These days, folks talk about entrepreneur heroes. People like Mike Cannon-Brookes and Scott Farquhar, the co-founders of software company Atlassian. Or Didier Elzinga and his Adelaide-based company Rising Sun Pictures which has created visual effects for Hollywood blockbusters like Lord of the Rings and The Last Samurai. True, there are still some who might give entrepreneurs a bad name like, for example, one-time Australian internet high-flyer Daniel Tzvetkoff, who faces 75 years in a US prison after being charged in relation to $584 million money-laundering scheme. But unlike the 80s, those sorts of people are now the exception.
Certainly more are becoming entrepreneurs. While the latest Australian Bureau of Statistics figures show that the number of start-ups in the lead up to the 2010 election declined to 14.4% in 2008-09, down from 15.3% in 2007-08, franchising seems to be going from strength to strength to strength. The latest figures show it is actually outperforming the rest of the Australian economy.
While many small businesses were hit hard by the global financial crisis, a PricewaterhouseCoopers survey has found that franchise systems around Australia were forecasting growth of 13% for 2011, and 49% over the next three years. According to IBISWorld research, Australia is already the most franchised nation in the world on a per capital basis, with three times as many franchises per capita compared with the United States.
At the same time, different types of entrepreneurs and start-up merchants are emerging. These days, there are people who start businesses working from home, there are intrapreneurs working through their ideas in large organisation and hoping to turn them into stand alone businesses. Then there are portfolio entrepreneurs with a string of start-up businesses under their control, the armchair entrepreneurs working at arms’ length from the business and there are serial entrepreneurs.
The young guns
Lewis says one of the big differences between now and then is that today’s entrepreneurs are a lot younger than their counterparts in the 80s and 90s.
“Evan Thornley did LookSmart when he was in his 30s, Steve Outtrim did Sausage when he was in his 20s. Most of these businesses were formed by young guys with passion, not the grey haired old men who were cynically extracting value and shuffling assets.”
The word “entrepreneur” has become so popular that 21 and 22 years olds are now saying that’s what they do, Lewis says: “They wear the badge entrepreneur with pride but in fact in many cases, they make their income lecturing at uni or working for the department of lands but they have this project going on the side. That’s what they identify themselves as, it’s not their full-time job but their part-time passion.”
Lewis, a serial entrepreneur who now runs a marketing business Flinders Pacific, is teaching his children all about start-ups. They are only eight and 10 years old but he plans to set up a plants seeds business with them.
“There’s the specific goal of doubling their pocket money and the secondary goal of teaching them about entrepreneurship,’’ Lewis says.
“I tell them that if you want to do what you want to do in life, become an entrepreneur so you can spend your time doing things you’re passionate about rather than becoming an employee.”
Barry Westhorpe, chief executive of The CEO Institute, says one reason why entrepreneurs are held in better regard now is that they’re a lot more careful. These days, no one proceeds without a business plan.
“What we’ve been seeing is a move away from the high risk areas,” Westhorpe says. “Ugly words like bankruptcy and waste of investment time and energy have been replaced with calculated risks and closer evaluation of opportunities.”
“Opportunity is taken only if the chance of success is high.”
It is a case, he says, of lessons learned. Also, the banks have tightened up their lending since the 80s and regulators have put more focus into areas like corporate governance and investor protection.
“The penalties are better known these days with the trouble people have gotten into,” he says. “There is certainly more effort in the research stages of an area. Passion, determination and vision have always been a common denominator with entrepreneurs but there is more considered investment.”
“They are a lot more steady in their approach to ideas. It’s not the wild ideas that would easily get funding of some sort. They now require a business plan.”
Serial entrepreneur Neville Christie, syndicate chairman at The CEO Institute, says entrepreneurs are now very different from the business superstars of the 80s and early 90s.
“Entrepreneurs are now coming in a massive number of new ways that I didn’t see in my early life,” Christie says.
One of the key differences, he says, is that they are working in teams. These days, they are often not sole operators.
“The old pattern before the 80s and 90s was very much the sole entrepreneur setting up. Typically now, one person will come and see me initially and then the next time they bring their team and when I talk to the team, I find each of those are involved in three or four or five or six other businesses.”
“A lot of the people I mentor at The CEO Institute are one business people but the internet generation people are rarely involved in one business. They think differently, they are looking at multiple streams of income, and they look at bricks and clicks.”
“They have teams and the teams are much more flexible.”
“It’s not the solo entrepreneur, it’s the team based entrepreneur, but the second difference is each of those individuals will be the hub of other teams. Between them, they may be involved in 50 businesses.”
The G generation
The other difference is that start-up merchants today have a different value set.
“Instead of the greedy generation, the new generation is being called the G generation,” Christie says. “There is a much greater spirit of generosity. Acts of kindness are coming into their business strategy. Very few of the new entrepreneurs I meet only talk about money. They are talking about community, they are talking about tribes, they are talking about doing good for the planet, they are talking about making a difference.”
Clearly, that sort of language was unheard of in the 80s. If Christie is right, it’s a different type of start-up. It also means that entrepreneurs are now less likely to be shunned. Indeed, some might argue that the entrepreneur now has a better reputation than the corporate CEO from the big end of town.
Bruce McFarlane, a partner at law firm Hall & Willcox says: “The issue for big business is the salary of CEOs, particularly with businesses that aren’t necessarily profitable. That is tarnishing the reputation of big business.
“The entrepreneurs don’t often pay themselves large amounts of money on the way through. It’s on divestment that that they see their gain.
“People don’t necessarily have a bad opinion of that. If an entrepreneur has been able to start a business, grow a business and sell a business and make a lot of money, I think people see that as the great Australian dream.”
Another sign of the status of entrepreneurs is the way some universities are trying to breed them. Swinburne, for example, has a graduate school of entrepreneurship. Accounting firm Pitcher Partners has even created a course to teach the art of entrepreneurship to its team.
Don Rankin, chairman and managing partner at Pitcher Partners, says that the biggest impact of the global financial crisis was that it affected capital. It is now harder for start-ups to get funding. But it’s about the economy, entrepreneurs are now held in high regard, he says. And funding is now coming from different sources, like for example, angel investors or family wealth.
“You have a generation of people coming through and they are not tarnished,” Rankin says.
The big difference, he says, is that the word “entrepreneur” is now linked to innovation, it’s not about being short-term and flash.
“If you go back to the definition of entrepreneurs in the late 80s, it was more like a highly driven person who was willing to take a lot of risk about anything,” he says.
“The concept of an entrepreneur these days is far more about the aspects of being driven and taking risks but it’s also about something that’s different and innovative.”