Entrepreneurship as America’s Greatest Export

Posted by: Jeff Bussgang on June 24

Fareed Zakaria’s new book on post-American world order is a fascinating read. I won’t speak to the political ramifications of the new world order that Zakaria outlines, but I was struck by the one important element of America’s lingering contribution to the world that he seems to have missed: entrepreneurship. In an era where the role of America in the global economy is increasingly uncertain, I believe that one of our chief and most respected outputs will be entrepreneurialism.

American history is full of stories of great entrepreneurs. Like in many situations, there was a strong self-selection bias. If you were rugged and daring enough to venture across the Atlantic Ocean, you were more likely to be willing to shake things up in society than go along with the status quo. Walter Isaacson’s biography of Ben Franklin shows that Franklin - the ingenious inventor, philosopher and writer - was above all a great entreprenuer who combined practical application with commercial instincts. Thomas Edison, still the holder of more US patents than any individual in history, continued in this great tradition throughout the 19th century. Bill Gates, Steve Jobs, Michael Dell and other modern iconic entrepreneurs continue to inspire young entrepreneurs around the globe to pursue the art of the possible.

In recent years, the venture capital industry has tried to institutionalize entrepreneurship and export it. By working with different entrepreneurs in a range of industries across a range of business cycles, VCs try to figure out the formula for entrepreneurial success and impart those lessons on the next generation of young Franklins and Edisons. After 30-40 years of perfecting the recipe, they have begun to export it beyond America's shores. In the last decade, VCs from Silicon Valley and Boston have jumped on airplanes and traveled throughout Europe, Asia and beyond to instill their brand of entrepreneurship, sponsoring venture capital funds in these regions and localizing their company-building lessons and discipline.

China's venture capital industry has exploded, from nothing a decade ago to over $1.4 billion in 2007, with expectations that it will grow tenfold in the next few years. India's story is a similar one, with $1 billion in venture investments made in 2007. A closer look at the firms making these investment reveals American roots. Many of the general partners were educated in America - typically at Harvard or Stanford. Many of the firms contain executives that learned the art of venture capital in America, either as VCs themselves or entrepreneurs at VC-backed companies. And an increasingly number of firms are sponsored or partially owned by American VCs. Kleiner Perkins, Sequoia, Benchmark, Accel, DFJ and many other top-tier venture capital firms have developed subsidiaries or joint ventures in Asia and Europe to practice the art of the venture capital in those geographies.

Thus, although America's corporate, political and military dominance may be waning - as Zakaria reports - I would argue its entrepreneurial influence is ascending, in an accelerated fashion.

What are you seeing?

Reader Comments

Tyler

July 5, 2008 12:39 AM

China in and of itself is not that entrepreurial. Its more like 'what is mine is mine--and what is yours is mine too'...

Private Equity and many VC firms are not that entreprenuerial by nature. Financial engineering is not entreprenuership. On the other hand only a small segment of PE and VC are actually invested in entrepreneurship.

If they are funding start ups---go for it--reduce their taxes to 10% on all gains...but thats only part of the VC/PE game. The rest is a pyramid scheme.

The US is lacking in many regards because they have contorted the landscape away from entrepreneurship and towards maintaining the status quo of corporate America.

Todays notion of globalization and other factors limit the growth of entreprenuership in the long term. The competitive edge is given to large companies wanting to cut costs-- instead of ground up entreprenuers. Until it is stopped the US economy will continue to decline.

Not all international trade is good. Bad trade can be stopped and should be stopped. Some international trade is good... and it should be encouraged. Cut and dried "its 100% good (or bad)" is wrong...I would say the split between good and bad is 50/50...

Squeezebox

July 2, 2008 12:48 PM

America is the land of opportunity for thinkers and dreamers. A few (mostly Jewish) vaudeville producers and performers started fooling around with cameras in the 1920's. From that came the moving picture or movie.

Wilbur and Orville Wright didn't set out to change the world, they just wanted to fly like birds, and didn't take no for an answer. There was no venture capital back then, they just had to buy the parts little by little with profits from their bicycle shop.

John Patterson didn't invent the cash register, but he knew a good thing when he saw it. He bought one for his coal company, then bought NCR and made it a household name. He would have been a venture capitalist if it had existed then, but his only choice was ownership. He set up a group of inventors called "The Barn Gang". Alumni include Colonel Deeds, who later founded what would eventually become Delphi (an auto parts supplier spun off from GM).

America doesn't have a monopoly on good ideas, but venture capital is a tool to turn those ideas into reality.

YOu can't force entrepreneurship, but you can give people a chance to do it. I like microcapital. It gives housewives a chance to make and sell things useful to their markets.

Key ingredients to entrepreneurship are access to capital, natural curiosity, and education about the world around you

K.G. Scheessele

July 1, 2008 10:11 AM

Agree with the post about the VC-backed startups as a particular genre of entrepreneurship. It's only one avenue for consideration. Lots of folks (like us) took savings and a credit card to start a business (no VCs 30 years ago!). Others tap relatives and friends for some additional funding to get going. Still others go the franchise route.
All of the above have their positives and negatives ... an entrepreneur's goals/plans/model/culture are the deciding factors on which route is best for him/her.

Curtis

June 30, 2008 11:29 AM

There is no doubt that an entrepreneural spirit is what guided America to its capitalistic prominence; however, if we want to keep our place in the world, we had better realize quickly that taxing the rich (largely entrepreneurial in scope) is the quickest path to destruction. Once we turn our praise for them to disdain, and begin to punish the wealthy for their accomplishments, we will force those with the ideas to expand our workforce to leave and take their ideas and money abroad. Its time the professors and politicians, who could never make it on their own, begin to get behind our entrepreneurs instead of fighting against them.

Omar A. Samaniego

June 29, 2008 11:45 PM

I think that America is a good place for being an entrepreneur and then an innovator. Just think about it, could Bill Gates be what he is if born in e.g. South America?, no. Reason is simple, Latin America needs to develop in such a way that topics like intellectual property protection and reliable legal system are part of common sense, and not only a kind of utopia. However, this is only one feature of American society, and there are many weakness points. To ensure America’s future as a good place for entrepreneurs and innovators, proper policies shall be extended to Americans who cannot access to education; a recent Harvard education program for poor people is an example of such policies. That is a long term strategy, and must be a part of a government policy.

fred wilson

June 27, 2008 08:41 AM

jeff, it's not only vcs from boston and silicon valley that are travelling around the world looking for entrepreneurs.

i am on a month long search for good deals in europe right now.

and have just finished Zakaria's book. it is a great read.

fred

erik

June 26, 2008 11:27 PM

successfull entrepreneurship in america is possible because of the cheap money. there are able entrepreneurs in every parts of the world who don't have such an easy access to money to take their ideas as far as it's possible in america.

logic

June 26, 2008 05:39 PM

Our greatest export is war. We have a very robust public/private partnership, where national policy creates conflicts and companies sell armaments. War, entertainment and pharmaceuticals are our key plays.

S. Potter

June 26, 2008 04:45 PM

The problem with this article is that is talks about VC-backed startups as if this is the definition of entrepreneurship. I thoroughly disagree. VC-backed startups are a particular genre of entrepreneurship, which in my view is way over exaggerated. Easily 98% (a very conservative estimate) of VC-backed startups fail because they adopt the VC tenets of *only* considering the IPO/buyout bottom-line.

The article starts out talking about great entrepreneurs like Franklin and Edison, but they were not only considering the bottom line at the expense of everything else, they wanted to improve a niche product or activity, whatever that happened to be. Conversely only those that think about gazelle-style business models, most of which are destined to fail within 7 years anyway, get VC money. By the nature of VC investing they just bet that out of 25 startups chasing "the big idea" of the moment, one will be successful with a nice enough pay off to fund the no-thinking VC's third jaguar for his/her 16 year old daughter, and $4m home in Woodside, CA. And appease the original investors with slightly above market returns.

The real entrepreneurs can be found in small town America maybe with Angel funding, but mostly organically grown and usually profitable from day one (or possibly day 90). Real entrepreneurs don't bother with VC money because they know what strings are attached.

Why is the US finance elite insistent on exporting total shite that is unsustainable and doesn't adopt true capitalistic values of the free market?

Donald Neely

June 26, 2008 03:48 PM

Globalization is unstoppable.
Feelings of entitlement are unAmerican.

American society promises everyone access to shelter and nourishment. Everything else is a luxury. Be brave and seek challenges.

Wannabe Entrepreneur

June 26, 2008 03:17 PM

Growing up in India I was engrained with the thought that business and businessmen were shady and making money, being the boss was not morally right!

Working for the public sector and/or the government was the accepted as novel and the right thing to do after education!

My graduate studies in USA changed the way I thought and made me head to business school for another degree. I now am a firm believer in entrepreneurship and that making money is not bad as long as it’s done right.

Alas for many wannabe immigrant entrepreneurs from India like me, the most productive years are lost waiting for the coveted greencard and many of our ideas will remain ideas!

Chuck G.

June 26, 2008 02:23 PM

I am so glad this article was made. My father was able to run a household with 8 kids, a stay-at-home wife and no mortgage...on Long Island! Plus I got to see him much more since he worked from home. Because my father chose to be in business for himself and give up the rat-race-status-quo-job, our quality of life has always been great. People come here to America for opportunity, not to sell their soul to a job..they can do that much more easier outside of this country since that's where all the jobs are anyways. I'm 24 and "retired" thanks to my father's example. If America is to survive the current economy, it needs to go back to its roots and fess up that a job is suppose to be ONLY be a stepping stone to then run your own company. Colleges have become just overpriced cubical-slave factories instead of being an asset to society. Observe this when most students are there since their parents just want bragging rights and they have no clue what to do nor do they even get a job in what they studied. This lack of the entrepreneurial spirit we've had up till now is what created the society of overworked, fat Americans instead of dreamers and trail blazers like we used to be.

Meebosh

June 26, 2008 01:26 PM

Dear Zak, the US has only itself to blame for its trade deficit. Part of the deficit is due to oil consumption. Who told Americans to drive large SUVs? Who told them to buy homes further and further away so that their commute is 50 miles each way? Why did they not build more commercial transportation like trains / subways / buses - instead of only in large cities? Who told them that they have to buy and consume everything in sight? Ever travel to Europe Zak? China? Japan? Ever see how they live? Smaller homes. Apartments. Communities that are more tightly packed together. Europe has wages as high as ours. Their trade imbalance is minimal. If it wasn't for their value of the Euro they would be in decent shape during these times. Downsize American lifestyles ... lose some weight so you can fit into a car that has a 2.0 liter engine ... instead of being a McDonald's baby.

Chetan Dhruve

June 26, 2008 12:58 PM

America is great at entrepreneurship - but it has something even greater - a huge mass of consumers willing to try and buy the new things the entrepreneurs offer. Without that, Bill Gates et al would be toast.

That's why it's not so easy for the model to be exported - you can transport money, VCs and so on. But you can't transport the attitude of customers.

Dominic

June 26, 2008 12:32 PM

All the cheerful articles and reports on entrepreneurship always fail to mention one vital aspect: Poor odds of success.
Don't get me wrong, I admire entrepreneurs immensely, they are the foundations of a real capitalistic society and I think America should revitalize its "make new things" roots; we are, sadly, becoming more and more a society full of lawyers, financial speculators and "consultants".
But for every successful Bill Gates, Michael Dell, Steve Jobs, or Thomas Edison there are millions of entrepreneurs out there that mortgage all they have and lose it or that can barely make a living.
Even when you have everything "right" (a valuable product, marketing expertise, etc...) luck is still a very important part of entrepreneurial success...even Bill Gates admitted that. Nothing you can do about it, just the "nature of the beast".
Furthermore, not everybody can be an entrepreneur, I strongly believe it is one of those qualities you cannot learn..either you have it or you don't...you can refine it though.
I do not think entrepreneurship "for everyone" is the answer to a declining standard of living for the middle class and mounting social anxiety everywhere in the industrialized world, not only in USA.
Everyone is important, without great and dedicated workers, the entrepreneur cannot turn its vision in tangible products.
We should stop thinking of working people (the non-entrepreneurial class)as commodities that can be discarded and replaced on a whim...this "philosophy" is creating huge long term damage....for example nobody wants to become an engineer anymore for fear of being "commodized"; when a merger or acquisition is announced, everybody in the target company run for cover and go in "survival mode" looking for themselves, seriously impacting the productivity and value of the organization.
The consequences of this are enormous and they are just starting to become very evident.

John Smith

June 26, 2008 12:12 PM

Venture capital along Harvard and Stanford detail the narrow minded and ignorance the americans have portrayed along years to go from the best to the worst. However intelligent countries who are willing to break the paths and outperform themselves like China, India etc. have demonstrated their entrepreneurial spirit of making something better of just believing to be the worlds super power.

Joe Reis

June 26, 2008 11:14 AM

I agree with your observation that entrepreneurial influence is ascending in America. There is a huge incentive for Gen X, Y, and younger (which I'm a part of) to ditch the insecurities of corporate life and use time and money a bit more wisely. Entrepreneurship is likely the only thing America will have to offer, as nearly everything else will be commoditized.

Zak

June 26, 2008 10:08 AM

Well thank goodness the US has a surplus in something! It’s unfortunate that our greatest export (entrepreneurship) doesn’t change the fact that the US is declining in its production and export capabilities. Perhaps the world will pay the US in “entrepreneurship credits”?? Articles like this, as well as books written by ‘globalists’ like Fareed, make me sick. It shouldn’t be a surprise that America is declining when people like Fareed proclaim the “globalization is good for everyone” mantra. The simple fact is that the US is declining because it has accepted these ideas of transferring production (and therefore sales) to other countries. Our Deficits increase while US workers have to compete with “dollar a day” workforces. People like Fareed think this is great because he’s more concerned with the rest of the world---the US worker, according to him, should just “accept” a lower standard of living so the rest of the world can become richer. Fluffy, BS articles like this blind us to the FACT that the US produces less things of value and utilizes MORE credit (a la the trade deficit) to maintain its standard of living. If we allow the future of the US to be dictated by people like Fareed then it’s almost a certainty the US will decline to a “Great Britain”-like status.

Shree Vatitkuti

June 26, 2008 08:48 AM

In my business, we deal with a lot of entrepreneurs that are building client-facing offices in the U.S. with operations in India. I also see a few VCs opening funds in Mumbai. It is frustrating, though, because Indian Law hampers the typical VC deal. For example, there is an informal ruling that warrants cannot be issued to foreign nationals. I highly recommend Tarun Khanna's book on the subject.

Aamir Jan

June 26, 2008 06:55 AM

I would add that innovation and marketing are also America's great exports. New technologies are almost always "Made In USA". America excels at taking innovations to market. No other country has that "lab to market" process worked out so well. Other countries may be good at imitating, outsourcing, or at low-cost production, but America is Number One in BRAND NEW. Corporate America too, with whatever else that ails it, is still the benchmark for global merit and equal opportunity.

esayas

June 26, 2008 03:14 AM

When I think of the USA, the first thing that comes to my mind is entrepreneurship and Silicon Valley. When I think of the rest of the world, well, I think of copycats.

Sheridan Tatsuno

June 26, 2008 01:57 AM

Here in Sweden, Silicon Valley is still viewed as the Mecca of venture capital and entrepreneurship, which Swedish science parks are trying to stimulate. As a longtime business strategist who was hired to inject Silicon Valley DNA, I agree that the U.S. has much to offer in the way of global connections, advice, training and insights -- if more VCs are willing to jump onto planes.

K.G. Scheessele

June 25, 2008 01:09 PM

August 8th will start our 30th year as a company. From a 3-decade vantage point, there is no doubt that entrepreneurial influence is ascending in the US from my perspective.

Relatively speaking, it was harder to overcome the “small business” perception then, than now. But, I’m happy that things have changed for the better for budding entrepreneurs.

I believe that the US can and will keep the innovation lead in this arena. The cultural aspects of risk-taking support and relative lack of a traditional, inbred social/economic caste system (I expect that some folks will disagree with me on this), facilitates starting a business in this country.

While it’s still not easy, I don’t regret taking the plunge in 1979.

Thank you for your interest. This blog is no longer active.

 

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Staying Entrepreneurial contributors

Renowned executive coach Marshall Goldsmith, serial entrepreneur Jeff Bussgang, a partner at Flybridge Capital in Boston, and Dr. Steven Berglas, executive coach, management consultant, and expert on "the stress of success," share their tips for staying entrepreneurial in trying times.

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