Raffi Amit, academic director of Wharton’s Goergen Entrepreneurial Management Programs, set the tone for the discussion by noting that academic research has debunked much of the conventional wisdom about entrepreneurs.
“There’s a myth that entrepreneurs have special traits that distinguish them from other people,” he said. “But research shows no unique characteristics. There’s a myth that entrepreneurs are risk takers. But research has shown that they try to manage risk. They outsource it where they can. And there’s a myth that entrepreneurs have some sort of secret method that they can apply to venture after venture. But many second-time entrepreneurs fail.”
What’s left? The dozens of speakers and hundreds of attendees at the conference debated the issue as they tried to find an answer. Their discussions resembled a concert by jazz great Duke Ellington’s famous orchestra — improvisational and occasionally circuitous. Ellington named one of his most famous compositions “Money Jungle,” an apt moniker, perhaps, for this year’s conference and the complicated, often wild world occupied by entrepreneurs.
$25,000 Credit Card Debt
According to Sam Hamadeh, founder and chief executive of Vault.com, a New York publisher of job information, being an outsider increases the likelihood that someone will want to start his own venture. “The more you are part of the establishment, the more you are giving up to start a business,” he said. “Minorities, immigrants, gays and lesbians are all more likely to start businesses than other people.”
Hamadeh, for his part, sacrificed the securest of establishment jobs — an offer from a prestigious law firm — to start Vault. Having just graduated from a dual-degree program at Wharton and the University of Pennsylvania Law School, he figured he had to plunge in then, or risk never making the effort. “When you graduate is as good a time as you’ll see to start a business,” he said. “The negative is you’re broke. But the positive is you’re broke, so you’ve got nothing to lose. I talk with my friends in investment banking who claim they want to try something entrepreneurial, and it’s always, ‘Just one more bonus season….'”
Hamadeh, a conference keynote speaker, also touched on a topic that would become a theme for the day: The trials of working with venture capitalists. “There’s too much emphasis today on venture capital as a funding source,” he said. “Historically, most businesses are funded using friends and family, credit cards, Small Business Administration loans and second mortgages. Very few companies are venture backed. I started Vault with $25,000 in credit card debt.”
Venture capital, he added, “makes sense for very few companies. When you’re in something that requires a lot of money to start or where time-to-market is critical, then maybe it makes sense.”
John Tedesco, president and CEO of Santa Monica, Calif.-based Guardian Mobile Monitoring Systems, agreed with Hamadeh’s assessment that socially established, financially secure individuals tend to be the least willing to quit their jobs and start companies. “The more wealth and prestige you accumulate, the more risk averse you become,” he argued. That makes sense: Failure costs more if you have more to lose; it’s the difference between securing a loan with a $1 million house and a $100,000 condo. Yet Tedesco also pointed out that people with money, credentials and connections are, in some ways, best situated to bounce back from business setbacks. If their ventures fail, they can tap jobs that might not be open to others. “The traditional corporate job is like a train,” he quipped. “There’s always another one coming.”
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