NCOE Explodes Myths of Entrepreneurship

There is often a disconnect between government policies to encourage entrepreneurship and the actual practice of launching fast growing companies, according to the fourth major report from the National Commission on Entrepreneurship (NCOE). Five Myths about Entrepreneurs: Understanding How Businesses Start and Grow is being released to educate policymakers about the vitally different characteristics of entrepreneurs and traditional small business owners. The report also sets out key policy implications based on these different characteristics. 



NCOE argues many policies are based on misconceptions about entrepreneurship: 

• Myth One: Entrepreneurs take wild, uncalculated risks to start their companies. In reality, many entrepreneurs, when they start out do not have much to lose, and they have an uncanny ability to convince others -- employees, individual investors, suppliers, and landlords -- to share their start-up risks. 
• Myth Two: Entrepreneurial companies are all based on high tech breakthroughs. Most entrepreneurial companies are not based on breakthrough technologies -- they are often not the ones that first make the great discovery. Rather they tend to make smaller innovations to products or processes and then perform exceedingly well. As companies fund research and make discoveries, they tend to develop breakthrough technologies. 
• Myth Three: Founders of entrepreneurial companies are experienced experts in their fields. Entrepreneurs with little expertise in their fields have started many of the most successful companies. 
• Myth Four: Entrepreneurs have a well-researched, well-conceived strategic plan when they start their companies. What enables most entrepreneurs to be successful in their new ventures is their flexibility to change. Starting a new business is like jumping from rock to rock up a stream rather than building a bridge from a blueprint. Companies develop tightly constructed business plans when they are ready to seek outside investments. 
• Myth Five: All entrepreneurs rely on venture capital to fund their businesses. Venture capital companies only fund a very small number of businesses each year -- about four thousand overall. Most entrepreneurs start with their own money and money from friends and family, and only look to venture capital when they need to capitalize on their successes, usually in the later stages of growth. 

While presenting the report at a Senate Small Business Committee forum last week, NCOE Executive Director, Patrick Von Bargen, noted there is a degree of confusion in the policy realm about the true characteristics of entrepreneurial growth companies, especially those in their early stages when they most resemble traditional small firms. This confusion, he said, tends to misdirect policy initiatives intended to aid entrepreneurs. 



Five Myths also discusses various policy ideas that emanate from these debunked myths, including education policy that fosters improved analytical skills necessary for entrepreneurial companies; policies that encourage the growth of employee stock option participation; an improved intellectual property protection system; expanded public investment in basic research; enhanced university-based tech transfer; policies to make government more entrepreneur-friendly; and policies to change security regulations to allow more individuals to invest in new companies. 



To obtain a copy of Five Myths, contact NCOE at 202/434-8066. The report soon will be available on-line at: http://www.ncoe.org/