High-Potential Entrepreneurs

August 31 2006 - U.S. entrepreneurs are streets ahead of their counterparts in other countries when it comes to developing innovative businesses that keep the economy dynamic and productive, according to the latest U.S. Global Entrepreneurship Monitor (GEM) directed by Babson College and the London Business School.

Entrepreneurs in the U.S. are more likely than any others to be motivated by opportunities in 'high-potential entrepreneurship' - the term GEM researchers use to describe fast growing, new ventures involving the latest technologies and knowledge-transfer businesses. In nine cases out of ten U.S. entrepreneurs are 'opportunity entrepreneurs'. A mere one in ten are self-employed because they have no choice.

Early-stage entrepreneurship is robust in the U.S., having maintained greater stability than the other G7 economies (Canada, France, Germany, Italy, Japan and the UK) after the economic downturn in 2000.

U.S. entrepreneurs have an excellent record of developing early-stage entrepreneurship (startups) into established business ownership. Compared to other countries, the U.S. has:

• more early-stage and high-expectation entrepreneurship
• greater investment rates, and
• a healthier economy overall.

According to the GEM report, high potential entrepreneurs (HPE) have increased U.S. productivity levels more than 100 per cent in recent years.

High-potential entrepreneurs tend to be:

• young and male
• come from the upper income groups
• are motivated by opportunity
• don't suffer from fear of failure
• social networkers, benefiting from relationships with other entrepreneurs and 'business angel' investors
• skillfully choose opportunities from the business, rather than the consumer sector - with 60 per cent of those opportunities being in the innovative technology sectors
• believe that there is no competition
• have different ways of thinking than the general population.

Much of the startup activity involving high-potential entrepreneurs has been internet-related. The U.S. dominates internet-related products and services. In 2004, for example, U.S. venture capital firms invested $21 billion in this sector, compared with $4.2 billion in 1994. In the same period the number of companies increased from 961 to 2,399. However, informal investing fuels most startup and early-stage companies. U.S. entrepreneurs average $70,200 to start a new business and contribute 67.9 per cent of that amount themselves.

Stephen Spinelli, Jr., Vice Provost for Entrepreneurship and Global Management at Babson College, is confident that there is a healthy entrepreneurial investment environment in the U.S. "For U.S. entrepreneurs great and small, there is more than sufficient external financing for them to start and grow their ventures," he said.

"This is because there is much more equity capital available than before the Internet bubble, and there are almost twice as many venture capitalists looking for good companies," said Spinelli.

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