Enterprising London: entrepreneurship and innovation in the UK’s capital Helen Lawton Smith Professor of Entrepreneurship Centre for Innovation Management Research, Department of Management Birkbeck Business Week June 28 2012
What is entrepreneurship? “an organized effort designed to pursue a unique, innovative opportunity and achieve rapid, profitable growth” (Legge & Hindle, 2004)
"London is brimming with entrepreneurial spirit across a huge range of sectors. New enterprising start-ups are going to be ever more important to our city’s prosperity and as we continue to creep out of recession we must do all we can to support those with the brightest ideas”. Boris Johnson announcing Mayor's 'Business Bootcamps' May 2012
Distribution of total early-stage entrepreneurial activity- creation of 20+ jobs expected in 5 yrs Source – Levie et al 2009
“Silicon Roundabout” • A concentration of firms around the Old Street roundabout • Announced by the Prime Minister in 2010 as a world-leading technology city to challenge Silicon Valley
Five myths about entrepreneurship (Economist 2009)
Myth 1 Entrepreneurs are orphans and outcasts But • All business is a social activity: entrepreneurs almost always need business partners and social networks to succeed. • Entrepreneurship flourishes in clusters.
Myth 2 Most entrepreneurs are just out of short trousers Some of today’s most celebrated figures were young when they got going • Bill Gates, Steve Jobs and Michael Dell all dropped out of college to start their businesses, founders of Google and Facebook were students But, Not all successful entrepreneurs are kids. • Harland Sanders started franchising Kentucky Fried Chicken when he was 65. • Gary Burrell was 52 when he left Allied Signal to help start Garmin • Kaufman Foundation examined 652 American born bosses of technology companies set up in 1995- 2005 found that the average boss was 39 when he or she started & number of founders over 50 was twice as large as that under 25.
Myth 3 Entrepreneurship is driven mainly by venture capital. But, • Matters in capital intensive industries e.g. high tech and biotechnology • Can also help start-ups to grow very rapidly. • Venture capitalists fund only a small fraction of start-ups. • Money for the majority comes from personal debt or from the three fs:.friends, fools and families. • Messrs Brin and Page founded Google without any money at all - launched it with $1m raised from friends and connections.
Myth 4 To succeed, entrepreneurs must produce some world changing new product But, • Some of the most successful entrepreneurs concentrate on processes rather than products. • Richard Branson made flying less tedious by providing his customers with entertainment. • Fred Smith built a billion dollar business by improving the delivery of packages. • Oprah Winfrey has become America’s richest self-made woman through successful brand management.
Myth 5 Entrepreneurship cannot flourish in big companies. But, • many big companies work hard to keep their people on their entrepreneurial toes. • Johnson & Johnson operates like a holding company that provides financial muscle and marketing skills to internal entrepreneurs. • big firms often provide start-ups with their bread and butter. • In many industries, especially pharmaceuticals and telecoms, the giants contract out innovation to smaller companies. • Procter & Gamble tries to get half of its innovations from outside its own labs. • Microsoft works closely with a network of 750,000 small companies around the world
Challenges facing entrepreneurs in the business environment • Unique selling point? “Must have” products • Management team: core competences • Investor criteria • Resources • Money, premises, qualified people • Information • networks, new markets, support (public and private) • Size of market • Competition • Regulations: UK, Europe and other countries • Keeping up with technology • Exit options