There are four different types of entrepreneurship:
- Small Business Entrepreneurship
- Scalable Startup Entrepreneurship
- Large Company Entrepreneurship
- Social Entrepreneurship
An entrepreneur is not defined by the category of entrepreneurship they work in. They can build businesses in any category and are still termed entrepreneurs. However, it is most common for an entrepreneur to work within the confines of a single category.
Let’s walk through each type as described by Steve Blank.
1. Small Business Entrepreneurship
99.9%* of all companies in the United States fit into this bucket. Small businesses are run by individuals who want to provide for their families. The businesses grow from profits, loans from friends and family members, and occasionally small business loans from banks.
These businesses are all around us. Realtors, hairdressers, consultants, grocery stores, travel agents, e-commerce storefronts, carpenters, plumbers, electricians, and restaurants are all examples of small businesses. Most of these businesses are barely profitable. Although small businesses are the most popular form of entrepreneurship, the stereotypical entrepreneur that you hear about in the news does not fit in this category. Those entrepreneurs belong in the Scalable Startup category.
2. Scalable Startup Entrepreneurship
Scalable startups are the most ambitious type of entrepreneurship. These are companies that have a grand vision that will change how entire industries work. Even though they make up only a small portion of entrepreneurship, these businesses attract most of the media hype and investment dollars. The reason for this is the incredible returns that these companies have offered investors in the past.
For a scalable startup to function, entrepreneurs raise money from venture capitalists and work to prove hypotheses about the market. Once a startup has showed enough traction toward their goals, they build world-class teams and raise more money to support their vision. Silicon Valley has become a well-known hub for these companies, although other cities have strong startup networks too. Examples of scalable startups include Airbnb, Amazon, Google, and Facebook.
3. Large Company Entrepreneurship
To stay relevant in this modern-day and age, large enterprises must continue to innovate. This means that they need to invest in small projects and ideas from within the company, or they need to acquire them from outside the company. A great example of large company entrepreneurship in practice is the story of Waffle.io.
The Lean Startup revolution, which began at the start of the 20th century, furthered the number of large companies that try to practice entrepreneurship inside their organizations. Eric Ries, in his book The Startup Way, argues that companies need to recognize entrepreneurship as a core role within their organization. We will continue to see more large company entrepreneurship adopted as these ideas spread further.
4. Social Entrepreneurship
Social entrepreneurs work on the world’s social needs and problems: poverty, homelessness, bullying, hunger, drug abuse, child abuse, unemployment, gender discrimination, and more. These ventures may be non-profit, for-profit or hybrids.
Social entrepreneur’s goals are to make the world a better place, so there is much smaller focus on the creation of wealth. Bill and Melinda Gates are prominent social entrepreneurs who have spent millions of dollars to improve healthcare systems around the world. If you would like to learn more about Melinda’s efforts, check out her book The Moment of Lift.
Each type of entrepreneurship comes with its own set of challenges and rewards. Which type of entrepreneurship do you find to be the most valuable? Comment below.
*The definition used to represent a small business is a company with less than 500 employees.