People tend to think that all entrepreneurs are alike — that everyone who starts a business is the same, that they have the same challenges, the same needs, the same motivation, the same end game. And that’s simply not true. Working in communities across the country, we’ve found that it’s helpful to cast a wide net in describing entrepreneurs and the resources that support them. It takes more than just one type of business to create a healthy, economically vibrant community. It takes all four quadrants of entrepreneurship. Entrepreneurs and the companies they lead are different—and that’s exactly what makes working in this field, in matching entrepreneurs with the right resource at the right time, both exhilarating and challenging.
Quadrants of Entrepreneurship
Entrepreneurs aren’t all the same, and the companies they lead aren’t either. So perhaps a more helpful classification would be to define entrepreneurs by the type of companies they lead and their goals for growth. Entrepreneurs fall into four categories: Main Street, Microenterprise, Second Stage and Innovation-Led. To give a perspective on the numbers, here’s a breakdown of the quadrants of entrepreneurs across the United States.
- Microenterprise: 77% 23,836,937
- Main Street 21% 6,822,074
- Innovation-Led 1% 289,817
- Second Stage 1% 280,540
Starters (people thinking of starting a business): 14,806,479
Big business (employ more than 100): 170,653
Innovation-led enterprises are businesses in which research and development brings forth an innovative product or process. The innovation typically involves intellectual property that contributes to a strong competitive advantage in the marketplace and serves as a foundation for a high rate of growth. Often formed around life sciences or technology innovations, these enterprises can require significant funding and specialized facilities. Owners are willing to give away equity to investors to secure the financial resources they need to grow. These businesses may cluster around research institutes and universities as technology is transferred from research labs into the marketplace.
Second-stage enterprises have survived the startup phase and have owners who are focused on growing and expanding. The second-stage firms generally have between 10 to 99 employees and/or $750,000 to $50 million in revenue. For these companies, business plans have morphed into strategic marketing plans. Finding a location is replaced by funding an expansion. Defining a market niche transforms into finding new markets, launching a new product line, exporting or selling to the government. And finding a team to launch the business becomes a search to find the experts who can take the business to the next level.
Main Street companies make up a large segment of our economy, serve communities’ growing populations and define our cultural character. You’ll recognize these entrepreneurs among your local dry cleaner, grocery store owner, coffee shop owner, restaurateur or graphic design boutique. Main Street entrepreneurs aren’t driven by rapid growth. The founders create them to build a successful career in their area of passion and expertise and plan to work in the company for a long time. Their exit plan may involve selling the company to a key employee or passing it on to a family member.
By definition, microenterprises are businesses that require less than $35,000 in capitalization to start. In today’s economic environment, dislocated workers and retirees are starting these companies to replace income lost through downsizing or the recession. In the microenterprise space, a segment of support organizations help those in poverty build wealth through microenterprise. Referrals may come from social services agencies and this group may need additional technical assistance due to lack of basic math skills, etc.
Why Can’t We All Just Be “Entrepreneurs”?
There they are: the four types of entrepreneurs and the kind of companies they lead. So why do we feel the need to reclassify entrepreneurship? Who does this help? In a word, the entrepreneur. Different groups deliver different economic impact. And they rely on different resources. Knowing who our entrepreneurs are helps us map the entrepreneurial ecosystem and determine whether we’re meeting the needs of all the players. Knowing the types of entrepreneurship helps us—economic developers, policymakers, investors, even fellow entrepreneurs— understand what the entrepreneurs who lead these companies need, where they want their businesses to grow and how to give them the resources they need to get there.
By Maria Meyers and Kate Hodel