Breaking Out or Breaking Through
Wealth Building through Entrepreneurship
Jeffrey Robinson, Ph.D.
NYU-Stern School of Business
2005 NSBE National Convention
Boston, Massachusetts
March, 2005
Agenda
•
Opportunities in Entrepreneurship
•
Becoming an Entrepreneur
•
•
3 Myths
1 Truth
•
Supporting Entrepreneurs
•
The Rest of the Story
Opportunities for Entrepreneurship
• Traditional Entrepreneurship
• Social Entrepreneurship
• Community and Economic Development
• Franchises
• Corporate Venture Capital
• Private Equities
• Venture Capital
Traditional Entrepreneurship
• Earl G. Graves, Black Enterprise Unlimited
• Robert Johnson, BET
• Oprah Winfrey, Harpo
•
•
•
•
Cheryl Mayberry McKissack, Nia Enterprises
Randal Pinkett, Ph.D. BCT Partners
Melanie Mosley, Light Dynamics
Winslow Sargent, Ph.D., XCelis
Types of Ventures
Life Style Business: less than $1 M in revenues
(forged out of your passion)
Growth Business: between $1 M and $20 M +
Social Entrepreneurship
Community & Economic Development
• Charter/Contract/New Schools
– Edison Schools
• Social Service/ Social Action
– One Economy
– Poverty Solutions
• Underserved/Underrepresented
– CitySoft
– CityFresh Foods
• Economic Development
– Greyston Foundation (Greyston Bakery)
Capital Side
• Corporate Venture Capital
• Private Equities
• Venture Capital
– Carthage Ventures
Myth #1:
“I need lots of money.”
How Much Money They Had
In terms of start-up capital, including personal assets, Inc. 500 companies started
with little.*
25
23%
(B)
20
15
13%
(A)
12%
(C)
13%
(D)
12%
(E)
13%
(F)
14%
(G)
10
5
0
1
2
3
4
5
(A) Less than $1,000
(E) $50,001 to $100,000
(B) $1,000 to $10,000
(F) $100,001 to $300,000
(C) $10,001 to $20,000
(G) More than $300,000
6
7
(D) $20,001 to $50,000
*”Start-up capital” refers to funds raised before any product or service was delivered.
“Personal assets” includes savings, mortgage or other personal loans, credit cards, 401(k), etc.
Where the Money Came From
The following sources of funds provided Inc. 500
start-up capital.
4% (E)
2% (G)
4% (F)
2% (H)
8% (D)
10% (C)
SOURCE
OF
FUNDS
17% (B)
(A) Personal assets
(B) Other founders’ personal assets
(C) Assets of family or friends (other than co-founders)
(D) Commercial bank loan or line of credit
(E) Private equity investment
(F) Financing from a supplier, customer, or other business entity
(G) SBA loan or funds from other government program
(H) Formal venture capital
53% (A)
Executive Compensation
CEOs taking home only five figures are in the small
minority. Here’s a salary guide.
9% (D)
40% (A)
22% (C)
SALARY
28% (B)
(A)
More than $500,000
(B)
$100,001 to $250,000
(C)
$250,001 to $500,000
(D)
Less than $100,000
Since Start-up
12%
of companies have raised
venture capital.
17%
of companies have raised
private equity.
Myth #2:
“I am destined to fail.”
(a.k.a “The Odds Are Against Me!”
Survivor
Percentage of businesses still in operation among ...
Companies of all sizes Companies that hired Companies that hired
5 or more people
1 to 4 people
(Soloists included)
After 2 years
76%
92%
94%
After 4 years
47%
80%
87%
After 6 years
38%
76%
79%
After 8 years
29%
53%
70%
After 10 years
21%
41%
62%
Source: U.S. Small Business Administration, The State of Small Business: A Report of the President, 1997. Data for year 10 are
estimated by the SBA.
Myth #3:
“All the good ideas are gone.”
The Opportunities are Here
•
•
•
•
Untapped Markets
Underserved Markets
Underdeveloped Markets
Unique Perspectives
3 Myths, 1 Truth
• Myths
– I have to have lots of money.
– I am destined to failed.
– All the good ideas are gone.
• Truth
– I can build wealth through entrepreneurship!
Truth #1:
“I can build wealth through
entrepreneurship.”
• Wealth Building
– Fortune Magazine - 40 under 40
– 7 out of 10 millionaires are self employed
– Fortune Study
• 69% of top 1% of wealth are entrepreneurs (1998)
Average Sales and Receipts by Race and
Ethnicity of Business 1997 Economic Census:
Surveys of Minority-Owned and Women-Owned
Business Enterprises
$500,000.00
$448,294.00
$400,000.00
$338,852.00
$300,000.00
$174,069.00
$200,000.00
$155,242.00
$86,478.00
$100,000.00
$White, nonLatino
AfricanAmerican
Asian
American
Indian
Latino
Average Number of Employees by Race and
Ethnicity of Business 1997 Economic Census:
Surveys of Minority-Owned and Women-Owned
Business Enterprises
5
4
3.1
3
2.4
2
1.5
0.9
1
1.2
0
White, NonLatino
AfricanAmerican
Asian
American
Indian
Latino
What can you do now to prepare?
1. Write a business plan
2. Enter business plan competitions
3. Make contacts while you are in school or
with local business schools
4. Volunteer to work with minority small
business owners and entrepreneurs
5. Don’t give up on your dream!
Breaking Through or Breaking
Out to …. Entrepreneurship
What are my options?
• Become a Second Job Entrepreneur
4
Options
• Become an advisor or consultant
to some entrepreneurs
• Become an investor
• Become a full-time entrepreneur
Second Job Entrepreneurs
• 2 – 3 million people are doing this
• Pro: Low risk, low or no capital required
• Con: Can you do two things well at the same
time
Investing in Small Business
• Private Equity Markets
– Angel Investor Groups
– Bridge capital
– Venture Capital
• Consider investing in industries and ideas you
understand or know a significant amount about
Support Strategies
• Patronize and encourage the use of small
minority owned business
• Sit on advisory boards and boards of directors
of social ventures and start-ups
• Consult with minority entrepreneurs (leverage
your MBA and your experience).