

Rules Have Been Rewritten: 21st Century Entrepreneurs are Different - gatsby
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FT.Com / Columnists / Luke Johnson

Entrepreneurs of the 21st century are different. The world of business has
changed dramatically since I entered it in the 1980s, and the rules of the
game have been radically rewritten.

An important factor has been the all-pervading influence of the internet. A
high proportion of start-ups are exclusively online or, at least, dependent on
the web. Various consequences flow from this digital revolution that affect
the very nature of a business. It means you can test an idea quickly and
cheaply and, if the trial does not work, you can reinvent it or just shut it
down. Thus feedback is much more rapid and failure is much less expensive than
it used to be. I would guess that most young entrepreneurs have experimented
more than we would have done at their age.

Online, all businesses are potentially international. This helps new
entrepreneurs think about overseas opportunities from the beginning. The march
of globalisation fits with this attitude. It makes sense to build for a world
market if you can. A company such as London-based card printing specialist
Moo.com[1] was designed to serve countries outside the UK from its early days.

Indeed, the word “scaleable” only came into common usage about a decade ago,
as did the phrase “going viral”. But what this means in practical terms is
that a 26-year-old such as Mark Zuckerberg can create a 500m-strong community
with Facebook – employing just 1,000 staff. Facebook is also an example of how
investors are willing – in certain circumstances – to back projects that have
minimal revenue, following a belief that a lucrative business model will
emerge in due course, as it did with Google.

Every young company now adopts social networking as one of its prime marketing
tools. An understanding of how to use Facebook, Twitter, Foursquare and the
rest is critical to the success of almost any brand appealing to the early-
adopter crowd. The rapid embrace of each new wave of technology has become the
new normal for all real go-getters. Things used to evolve much more gradually.

Start-ups are far more likely to be undertaken by graduates than they used to
be. In the past six years in the UK, there has been a 46 per cent jump in the
number of graduates describing themselves as freelance or self-employed. I am
sure that trend will continue, partly because comfortable jobs are much harder
to come by. Of course, many more people attend university now; yet when I left
Oxford, it was seen by many as “wasting” a degree to want to create a
business.

Female entrepreneurs are much more common than in the past, with almost one in
three UK start-ups in 2009 founded by a woman. I suspect that ratio was more
like one in 10 a couple of decades ago. Now women are much more confident and
ambitious in their careers, and there are plenty of role models of high
achievers in the workplace. I currently back two companies run by women – 10
years ago it was none.

Generally, the entrepreneurial universe is more diverse than ever. Ethnic
minorities were always over-represented (relative to the general population)
among the self-employed, because of culture and prejudice. But my observations
are that the backgrounds of business founders in 2011 are more heterogeneous
than ever. Drawing from such a varied gene pool can only be a good thing and
brings a much broader experience to the fray.

Most of these developments are positive – economically and socially. There are
more entrepreneurs, more diverse entrepreneurs, better educated entrepreneurs,
more digital and more collaborative entrepreneurs. I approve of each of these
advances. Yet I worry about one aspect of all this enterprise: job creation.
Many of these businesses need few staff – their whole philosophy is to use
computers to automate everything they can. And frequently they subcontract
abroad those elements that require much labour input. Emerging tech and
service companies do not generate well-paid, high-skill employment on the same
scale as industrial concerns once did. We shall need a heck of a lot of
Generation Y entrepreneurs to cure the crisis of worklessness in the west.

lukej@riskcapitalpartners.co.uk[2]

The writer runs Risk Capital Partners, a private equity firm, and is chairman
of the Royal Society of Arts

