An article on the World Economic Forum website by professors in the UK and Australia gives reasons for universities to support more student entrepreneurs. The article indicates that 41 universities’ entrepreneurship curricula include:
- Entrepreneurship theory
- New company formation
- Risk finance
- Intellectual property
- negotiation skills
- Design thinking
- Creativity management and
- Lean startup to “shorten business development cycles”.
The above curricula follow the venture capital method which focuses on the Idea, Strategy and VC. The assumption seems to be that VCs, mentors, and other “volunteers” will help bring the idea the students developed to a level where the VCs can fund it and select someone who is qualified to lead. The implicit assumption seems to be that the idea must be exploited and there is no need to train the student. Does the student get any benefits or can they run the company as VCs find professional CEOs on about 30% of their projects? Perhaps, but if the company goes through multiple rounds of funding and suffers from watering down from the VCs and the various members of the professional management group taking stock options, the students will be lucky enough to get a few shekels.
In an analysis of $ 22 billion entrepreneurs who built businesses from startup to revenue and valuation of more than $ 1 billion, entrepreneurs who were replaced as CEO retained approximately seven percent of the wealth created, while entrepreneurs who were VC avoided, retained an average of 52 percent – more than 7x.
Another problem with the above method and all of the “accelerators, hackspaces, makerspaces, invention spaces, incubators, wet labs, and digital observatories” offered by universities (at a significant cost) is that they focus on the opportunity; H. the product or service or app. It does not focus on the student’s skills in building the business based on the opportunity. This is important because, in an analysis of $ 85 billion entrepreneurs, about 1 percent started with the Idea + VC model; H. Developed the idea and then received angel and venture capital.
5% developed and demonstrated the unicorn strategy. They were then replaced (or fired) by CEOs hired by the VCs. This means that around 6% used the classic VC model.
The remaining 94% used the unicorn entrepreneurship model, in which the entrepreneurs built the business and kept control of the company. This suggests that the unicorn entrepreneurship model is 16 times more productive than the VC model.
The problems with the VC method are as follows:
- VCs only fund around 100 / 100,000 companies
- VCs fail at around 80 of the companies funded, which means VCs succeed at around 20 / 100,000 companies and only one is a home run
- VCs finance according to Aha, d. H. After demonstrating the company’s potential. Entrepreneurs need skills to close the capital gap and bring up an unproven idea!
- 94% of billion dollar entrepreneurs focus on skills, not innovation. Some of the greatest entrepreneurs in history have had success with a product (or service) that they imitated or that could easily be imitated. These include unicorn entrepreneurs like Bill Gates, Steve Jobs, Michael Dell, Michael Bloomberg, Jeff Bezos, and Mark Zuckerberg.
The article points out that in the “unpredictable post-pandemic world, universities need to prepare them (students) for careers that they themselves define”. I see the opposite – more students seem to want protection from a large company. It would be good to see the data supporting the assumption in the article.
The authors are proud of the number of startups. Startups don’t mean success. Can we get more done with less investment by teaching the skills of unicorn entrepreneurs used by billion dollar entrepreneurs and not wasting money on the endless makerspaces and the like?
MY TAKE: It’s tragic that the entrepreneurship education community chose the Idea + VC Hook, Line and Sinker method. Given that scientists pride themselves on the fact that their intellectual contributions are based on “research”, is there any research that supports their focus on the Idea + VC method? My data shows that 99% of billion dollar entrepreneurs used their business skills to get started and 94% used the unicorn entrepreneurship method to avoid VC. Why are we spending millions on a strategy that can be improved by a factor of 16?
For more information, please join my talk on Developing Globally Competitive Entrepreneurs on January 21, 2021.