This is the second part of my chat with Steve Blank, creator of "The Lean Launchpad" methodology, author of The Four Steps to the Epiphany: Successful Strategies for Products That Win, and lecturer at Stanford University, University of California, Berkeley, and University of California, San Francisco. In the previous installment, Steve Blank discussed new thinking about what it takes to make a startup successful.
Over the past few years, there has been a lot of discussion about the emerging entrepreneurial class, often springboarding within the digital realm, and increasingly defining today's business landscape. However, when looking at surveys that track small business formation -- such as reports from the U.S. Bureau of Labor Statistics and The Kaufman Foundation -- there seems to be no discernible uptick in small business formation.
In a recent chat, I asked Steve Blank, entrepreneurial visionary, about the widespread interest in entrepreneurial ventures and lack of data showing such growth. He points out that the words 'entrepreneur' and 'startup' mean "very different things to very different people, and we do a very bad job of differentiating them."
For example, he says, 99.9% of new ventures are not digital disruptors such as Twitter or LinkedIn -- rather, they are more day-to-day small businesses. For example, Blank continues, "my parents were immigrants, and the first thing they did in this country after working in sweatshops was open a grocery store. They were startups. Their goal was to feed the family, and keep the store profitable, period. When we talk about entrepreneurship outside of Silicon Valley, New York, or Seattle, entrepreneurs are small business entrepreneurs. They have different goals and different strategies, they don’t want to take over the universe."
Startups across the board have different goals and different funding models. Blank defined the five varieties of startups:
Small-business startups: As stated above, this is the most common type of startup, typically a small-scale venture such as a store or professional service that seeks enough profitability to support a living for the owner and perhaps a small group of employees. However, there will always be a dearth of funding for these kind of ventures, Blank says. "If your goal is a grocery store, beauty parlor, or web-based writing service, you’re not going to be able to raise a lot of capital, simply because the returns are not attractive to risk capital investors."
Scalable startups: These are the Facebooks and Apples, which set out to make a dent in the universe, while raising gobs of money. "These are the entrepreneurs that get all the press, the 1%," Blank says. "They wake up in the morning and want to create a billion-dollar companies."
Viable startups: These are the tech-savvy startups who want to build a business just big enough to eventually be acquired. "These are Web based, mobile based, startups, which don’t need tens of billions of dollars to start. You can start it on your laptop, or through Kickstarter."
Lifestyle startups: These are entrepreneurs that go out on their own to pursue a passion, such as opening a sports shop or organic food farm, or working as a contract programmer or designer.
Corporate startups: These are ventures that are launched within the walls of a larger, more established business that seeks new innovation and new business models. "Large companies are now dealing with continuous disruption. They're facing continuous disruption but new incumbents, by globalization. Their consumers now have instant access to pricing and competitive information. So companies need to respond in kind, and that’s been lagging."
One category Blank says doesn't rise to the level of "startup" are the under-the-radar, part-time entrepreneurs who may be exploring new opportunities in their free time, perhaps alongside a regular, full-time job. "It's kind of like saying, 'I’m an actor, but I spend my day as a waiter,'" Blank says. "There's nothing wrong with a wannabe entrepreneur, but an entrepreneur in my definition is commits to it full time, one who burns the boats on the shore. There’s really a different level of commitment when there’s no going back."