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Entrepreneurs are born, but can they be taught?
With a mother like his, no wonder Richard Branson became an entrepreneurial dynamo.
His Virgin Group straddles dozens of ventures – from music to cars to cell phones to bridal gown sales. Yet it’s Branson’s Virgin Atlantic Airways that his independent-spirited mom may have influenced most. After all, Eve Branson, 80, once talked her way into a glider pilot training program by masquerading as a man.
By Jim Hopkins, USA TODAY
"There are definitely traits which I inherited," Richard Branson says with a grin in a new documentary, Lemonade Stories, about mothers’ influence on entrepreneurial kids.
The film raises critical questions that experts are debating more than ever: Are entrepreneurs born? Or are they taught to turn good ideas into great companies?
Scouting answers, U.S. universities have poured $1 billion into the subject in the past 10 years. Along the way, they’re upending business schooling – adding hundreds of instructors and thousands of classes on entrepreneurship.
The outcome is crucial to the U.S. economy as it struggles to claw back 2.4 million jobs lost to the recession. Entrepreneurs historically have led the nation out of hard times. Start-ups, often begun by laid-off executives, create as many as 80% of jobs. But amid the slow recovery, there are worrisome signs that entrepreneurship needs a boost.
Just 6.8% of discharged managers started companies last year – down from 9.6% in 2002, Challenger Gray & Christmas said last week in a survey of 3,000 workers. That’s far below the 15% average in 1991-92 as the nation emerged from recession, the outplacement firm says. Overall, the share of workers who are self-employed, 7.4%, was up fractionally last year from 2002. But that’s still below the last peak, 8.5% in 1983, when self-employment rates started sliding.
Educators want to create more entrepreneurs like Earl Graves Sr., the founder of Black Enterprise magazine, whose success landed him on DaimlerChrysler’s board. Graves, 69, sold Christmas cards when he was 7 – imitating his father, who held three jobs at once.
"I was always thinking of where I was going to make more money – and how," he says. "People who don’t have ambition – they get a regular job."
Branson started his British empire at 17 with a high school magazine. More than 30 years later, Virgin Group employs 35,000 and has $7.9 billion in annual revenue.
Branson, 53, famous for over-the-top antics such as donning a wedding dress to promote his bridal business, inherited his mother’s tenacity. "She just never takes no for an answer," he says in Lemonade Stories.
Entrepreneurs like Branson are born – though skills can be taught, too, experts say.
From family, they inherit many traits key to entrepreneurship: creativity, drive, a willingness to take risks.
Male entrepreneurs are about twice as likely to be self-employed if their parents were self-employed, says Babson College Dean Patricia Greene, citing research by others. Moreover, 35% of female entrepreneurs had self-employed fathers vs. 24% of wage earners, Greene’s research shows.
Arthur Blank, co-founder of Home Depot, recalls the risk his father took starting a pharmaceuticals supply business. The elder Blank, father of six, was in his late 30s when he began the venture. He died five years later, when Arthur was about 15. Arthur’s mother, Molly, refusing to give up on the family firm, successfully took over. The business was later sold.
That never-say-die spirit can’t be taught, Blank, 61, says.
But with education, he says, "If somebody has that potential, that kernel within … it can be nurtured."
Book learning
So, what can be taught about entrepreneurship?
•Skills. Young ventures, unlike big existing firms, need to be organized from scratch.
That means basics like writing a business plan, deciding whether to incorporate and knowing how to get intellectual property protection. It also means learning to get financing from the most common source – friends, family and credit cards – and the least common, venture capital.
•Frequency. Students need to know that starting a company isn’t as rare as they might think, so they shouldn’t be afraid to try.
About one of every nine U.S. adults was involved in starting a company last year, the Ewing Marion Kauffman Foundation said in a survey of 9,195 adults. Ventures might never go further than doodles on a lunch napkin. But that’s a start as "common as getting married or having a baby," says Kauffman CEO Carl Schramm.
•Opportunity. That means learning to recognize when you have a great idea – and when you don’t. Being the 18th person to open a nail care salon in an already crowded market is a crummy idea.
"But inventing a machine to fix broken nails would be a great idea," Schramm says.
Kauffman, trying to supercharge start-ups, is spreading entrepreneurship education across university campuses, and away from their business school homes.
The foundation, created by a health care entrepreneur in Kansas City, Mo., gave a combined $25 million to eight universities in December. The schools must match the grants with $50 million more. Over seven years, Kauffman will track graduates against those from other schools to see if they have higher start-up rates.
Howard University will use its $3.1 million grant for a host of programs, including training education students about entrepreneurship’s importance. Then, as teachers, they’ll make it part of their everyday class work in elementary and high schools, where they might inspire future entrepreneurs.
"Entrepreneurship is certainly not the exclusive province of business. It can mushroom anywhere," says Barron Harvey, dean of Howard’s business school in Washington, D.C.
Another Kauffman beneficiary, the University of Rochester, got $3.5 million for a variety of programs, including one to train Eastman School of Music students to develop ventures around music.
They’ll learn the pitfalls of getting financing, says director Jim Undercofler. A Rochester student hatched an idea for a music school aimed at older adult learners.
Raising the ante, music publishers were interested in creating large-print music. To pull it off, the student needed a "crushing" amount of money to buy or lease 20 pianos.
But he couldn’t tap venture capital for the idea, so the project died. "There was no question in my mind that it would have worked," Undercofler says.
Born and raised
That entrepreneurs can be hatched in unlikely academic fields rings true to Joe Phillips. His story underlines the fact that entrepreneurs are often born -and raised.
Phillips, 40, is a third-generation entrepreneur near Phoenix. His Italian immigrant grandfather was a grocer in Phoenix. Phillips’ father dropped out of school to launch a produce pushcart business that blossomed into trucking, cold storage and vegetable wholesaling.
Joe Phillips and three siblings learned about business at the dinner table. "You couldn’t go to my family’s house without it being business," he says.
He graduated from the University of Arizona with degrees in finance and – more important for his entrepreneurial future – psychology. After jobs at Charles Schwab and a Wall Street start-up, he returned to Phoenix to co-found Second Look Financial in 2002. It has 18 employees.
His psychology education is crucial to helping clients at the financial services firm, he says. Money management is fraught with emotion, he says, so, "You really have to … read them first in how they think about and act toward money."
Still, Phillips says he inherited 70% of his entrepreneurial skills. "There’s something there that is innate," he says.
It’s the other 30% that educators are focusing on, with help from entrepreneurs such as Howard Lester, chairman of housewares giant Williams-Sonoma in San Francisco.
Lester funded an entrepreneurship research center at the University of California, Berkeley, in 1991. He wants to arm more aspiring entrepreneurs with skills to boost their success rates.
About a third of start-ups fail in four years. "I’m sure we could do much, much better," Lester says.
Graves, the publisher, says the secret for start-up success is a pit-bull-like refusal to give up. "You have to have a junkyard-dog mentality," he says: "I am a junkyard dog!"
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