Are Entrepreneurs Born or Made?

Ok, let’s get this question out of the way from the get-go. Whenever I do a talk, anywhere in the world, there is someone in the audience who puts up their hand and asks me this particular question. By now I can almost predict where in the audience the question will come from.

A few years ago I read an article based on some research conducted in the USA. The article spoke about the fact that the research had shown that the market segment with the lowest rate of  first time start-up failure were those 60 years or older. In other words, the highest rate of start-up success was when grandma and grandpa started a business.

On the surface, that might be just a cool fact, but when I thought about it more, I realised that this little piece of information actually broke the question “are entrepreneurs born or made?”.

At 60, you certainly were not born an entrepreneur, and if you have spent the last 30 years in corporate, you were definitely not made an entrepreneur.

A Little Deviation

I feel compelled to take a little deviation (I will do that a lot in this Blog). I have spent almost 20 years studying entrepreneurship and I have come across more than 500 definitions of what it is to be an entrepreneur. To date, I have not found a single definitive set of characteristics that describes all entrepreneurs. They are young, and they are old when they start, they are extroverts and introverts, they are tall and short, come from wealthy backgrounds and poor backgrounds, detail orientated and big picture thinkers. You cannot say that if you have X,Y and Z characteristics therefore you are an entrepreneur, or if you don’t, then you are not. There are simply some characteristics (and environmental conditions) that create a higher probability that you might become (and stay) an entrepreneur.

OK, I’m back

So, this article got me thinking. After some time, I realised that  the answer was not “Born” nor “Made” or even “Both”. If you asked the entrepreneurs in the room, they would say “Born for sure, we are different and special”. If you asked those who train entrepreneurs they will say “Made, definitely made. And if you come on my course I’ll show you how”.

I fall into both categories, I am an entrepreneur that helps identify and grow other entrepreneurs. So “Both” would have been a good answer for me.

But the more I thought about the difference between the nascent entrepreneurs remaining nascent, (The ones that have those great ideas in the shower and get not further than a few jotted down ideas and a few cursory discussions.)  and the ones that went from idea to trading (making consistent sales), the more I realised it was the wrong question to ask. There was another frame required.

The Five Conditions (required to move from a nascent entrepreneur to a trading entrepreneur)

1. Opportunity or Crisis

No entrepreneur I have ever come across has ever started a business without perceiving an opportunity (I think there is a need for what I can offer) or was undergoing a crisis  (death, divorce, loss of job, relocation, etc.)  Sometimes its both at the same time.

All trading businesses have this in common. That’s quite a simple one. Lets move on.

2. Tolerance for Pain

So you come up with the idea. Then you tell your wife/husband. You get that look, like “I don’t exactly know what you’re saying, but I hope this is just another one of your crazy ideas that you will forget about by tomorrow.”

When you keep at it with them, then the reaction often becomes a little more direct and dissuasive.

Then you go to your mates with the idea.  After listening to you for some time, and nodding their heads way too often, trying a few times to ask some “Dragon’s Den” questions, they mostly leave you feeling more ambivalent about your idea.

When you finally pluck up the courage to make a prototype, or put a proposal together to take to market, the potential client or investor asks you a whole bunch more questions you have not even thought about.

Most people stop there. The barrage of negative responses, criticisms, funny looks, “call me later’s” takes its toll. You drop the idea and go back to your old more predictable life (with slightly less criticism, and definitely less “Dragon’s Den” questions).

If you are one to push through this level, then you get the gift of another 6 months to 5 years of competitors trying to crush you, clients trying to squeeze your margins, staff running off with your ideas or clients, and a crap load more pain.

You have to have a tolerance for pain to move from a nascent state to a profitably trading state.

3. Tolerance for Risk

Ok, so its me and a 23 year old (lets call him Mike) that both have the idea, we both see the opportunity in it, and we both have the same tolerance for pain. I’m 48 with a wife, and 2 kids in a private school, a house with a mortgage, and a monthly overhead that makes me want to vomit. The 23 year old is single, has an old but paid-for car, rents an apartment (that he shares), and has a monthly overhead I can only dream of.

Who do you think will take action given the same opportunity and the same tolerance for pain?

The 60 year old’s we spoke about earlier have a closer risk profile to Mike, than to me. They have most likely paid off their home. When the kids moved out, they decided to move into a small “more manageable” apartment. They have an established network and some experience. So their risk profile looks closer to Mike’s than to mine, and are therefore more likely to precipitate into trading entrepreneurs than I would.

4. Belief in their Ability to Muster Resources

Not their ability to muster resources, but more importantly, the belief that they can. How many entrepreneurs have you heard say “If I knew then what I know now, I would never had started this thing.”? What they found out on the journey was that they required far more hustle and effort than they anticipated. It was their sheer belief that they could put together the requisite capital, staffing, clients etc that was the force that pushed them through the nascent period (the tough times where there was no income, no cash and few paying customers, but lots of promises and promise).

A healthy level of naivety (not knowing all the risks), and a deep belief that “I will find a way” make all the difference. Of course, if you know where the resources are and are able to coalesce them using your well established network (and reputation), then that makes it a lot easier.

5. Ability to Learn and Iterate

When I say iterate, I mean apply the learning back into the product or business. I have never come across a successful business where the original product or service that was conceived by the entrepreneur is the one that is in the market today. It has invariably undergone multiple iterations in design, pricing, positioning etc. in order for it to be market adopted.

In the early days when you go to market with your product, and most of the reaction is, “Can you rather do that in green?” you should  consider making it in green.

Entrepreneurs battle a lot with the balance of taking their “vision” to market, and letting the market mould their vision. Too resistant and you will most probably lose the client, too compliant and you will most likely produce a product/service that is undifferentiated and thus less likely to succeed. And then you have the Steve Jobs “They will buy the magnificence I produce” bravado going on in your head. The problem is that no one wants to lick your product.

Final thought on this

My view is that entrepreneurs are neither born nor made, that precipitate when these 5 conditions present at the same time. This can happen when you are 23 or 63 and they can present once, five times, or never.