Entrepreneurship: From
Start-Upto Exit
David Molian, formerly Senior
Lecturer (Associate Professor) and
a Visiting Fellow Cranfield School
of Management, UK
Former Visiting Faculty, London
Business School, UK INSEAD, France.
Molian_EI_163346.indd 1
David Molian, MA (Oxford), MBA (Cranfield)
Abstract: This article provides an introduction to en-
trepreneurship as a positive career choice. It explains
the rising importance of new enterprise creation to key
stakeholders, such as government, policy makers, educa-
tors, and established corporations. It discusses sources of
opportunity for new business creation and evaluates the
commonest ways of getting into business for oneself. It
goes on to discuss the challenges of growth and strategies
for enhancing the chances of success. Finally, it presents
standard approaches to valuation at exit.
Keywords: entrepreneurship, owner-manager, start-up,
fast growth, high growth, strategy, business focus, market
niche, valuation, exit
Introduction: Entrepreneurship
and Why It Matters
Entrepreneurship is the pursuit of opportunity beyond the
resources you currently control.
Howard Stevenson, Harvard Business
School Professor and widely regarded
as the godfather of the study of entrepreneurship
In the last 25 years, entrepreneurship has been trans-
formed from a topic of marginal interest into a subject of
pressing urgency. Across the world, governments, policy
makers, educators, commentators, and even big business
have all started to take entrepreneurship seriously. In fact,
very seriously indeed.
Governments and policy makers have woken up to two
important facts. The first is that mature large corpora-
tions are not, on the whole, creators of jobs. The multi-
national businesses that grew and flourished in the three
or four decades after the second world war have ceased
to be the engines of economic growth. Corporate manag-
ers are under relentless internal pressure to cut headcount
wherever possiblewith all the implications that has for
national tax-paying bases. Second, the evidence is mount-
ing that fast-growth entrepreneurial businesses are hugely
Expert Insights 2016 1
12/7/16 4:52 PM
 Entrepreneurship: From Start-Up to Exit
instrumental in new job creation: one study
conducted in the United Kingdom, for ex-
ample, concluded that 50 percent of net new
jobs in Britain in the 2000s were created by
6 percent of such businesses (UK National
Endowment for Science, Technology and the
Arts, 2009). Not surprisingly, many govern-
ments now actively encourage their citizens
to start and grow new ventures.
Educators are responding to the d emand
from their students, who see starting and
growing businesses of their own as a r ealistic
career alternative to working for other peo-
ple. Today, any business school that claims to
be taken seriously has an entrepreneurship
faculty and incorporates entrepreneurship
as a core element of its masters programs.
Within 10 years of graduating, 30 percent or
even more of graduates from a typical MBA
cohort from a top school will be in business
for themselves.1
Commentators such as journalists, busi-
ness writers, and film-makers view entre-
preneurs as important economic actors and
the source of compelling stories in their own
right. The Social Network, which tells the
story of the founding of Facebook, grossed
$250 million worldwide in box office sales,
was nominated for eight Academy Awards
[the Oscars], and won Awards in three cat-
egories. Business founders such as Mark
Zuckerberg are the new celebrities, h eroes
and occasional villainsof our times.
Big business increasingly sees engaging
with entrepreneurs and entrepreneurial
businesses as a major source of innova-
tion and a faster, more agile way of re-
sponding to rapid changes in technology
and consumer behavior. Historically, large
companies have engaged in corporate
venturing, either sponsoring their own
managers to start new ventures or invest-
ing in external new ventures. The record
of both approaches is patchy at best. To-
day, more and more corporations are in-
vesting in their own business incubators/
accelerators, supporting would-be entre-
preneurs with promising ideas from their
conception through to commercialization.
2 Expert Insights 2016
Molian_EI_163346.indd 2
One leading exponent of this strategy is
Telefnica, the Spanish telecommunica-
tions giant, which has a dozen such busi-
ness accelerators across Europe and Latin
America under the Wayra brand. Start-ups
that are accepted onto the Wayra program
receive office space, intensive mentor-
ing, advice from lawyers, accountants and
other specialists, and an injection of funds.
This is not mere philanthropy. Telefnica
is explicit that it plans to integrate winning
business concepts and technologies into its
core business. Wayra is in turn part of Tele-
fnicas Open Future initiative to provide
the business with a continuous flow of in-
novation in the markets where it operates.2
Who are the Entrepreneurs?
In one sense, the answer to this question is
simple: they are the men and women who
foundor buyand grow businesses. But if
thats all they have in common, this state-
ment of fact does not provide much insight.
Behind this question lies a rather more in-
teresting one, which is can we identify
common qualities or characteristics that
enable us to predict who is going to be an en-
trepreneur? If we can, then those stakehold-
ers identified earlier, governments, policy
makers, and educators, can begin the pro-
cess of preparing those with the greatest
potential and steer them in the right direc-
tion as early as possible.
Unfortunately, decades of social science
research have failed to provide definitive
answers to this question. Much of this work
has taken place in the domain of psychology.
Over the years, a consensus has emerged
that there are five major dimensions of per-
sonality (the big five), or traits3, which
are applicable to human beings in general,
and which can be reliably tested and mea-
sured. As an example, take the dimension
of introversion versus extraversion. Most
people are predominantly one type or the
other. You might expect entrepreneurs to
conform to the extravert type. Many do,
but by no means all. It seems likely that
those entrepreneurs who are more on the
12/7/16 4:52 PM
 Entrepreneurship: From Start-Up to Exit
introvert side exhibit an ability to switch
on more extravert behavior as and when
they need to, that is to perform for a partic-
ular audience on a particular occasion. Al-
ternatively, they may recruit extraverts to
do this job for them. Either way, this pres-
ents real problems in testing and predicting
entrepreneurial potential.
There are, it should be said, associations
between the likelihood of starting a busi-
ness and certain personality traits or be-
haviors. Business founders are more likely
to be optimistic or overly optimistic about
their chances of successthey believe they
can beat the odds, even though three out of
four businesses are likely to fail within ten
years of starting up.4 Their previous history
often shows a desire to achieve and out-
compete their peers, and many affirm that
it is their need for independence rather
than a desire to get rich which primarily
motivates them to start a business (Van
Gelderen, 2010). But none of these traits or
behaviors is a sufficient or necessary con-
dition for being an entrepreneur.
Who are the Successful
Entrepreneurs?
If we cant predict conclusively who will
embark on a career as an entrepreneur, are
we any better at predicting who will suc-
ceed at this? There is some debate about
what is to count as success, but for the
sake of simplicity we can take three cri-
teria which most peopleentrepreneurs
includedwould agree on: the business
needs to survive beyond the start-up stage,
it needs to grow, and it should develop value
which is independent of the founder(s). In
other words, eventually somebody is pre-
pared to pay good money for it.
The obvious people to look to for evi-
dence of the ability to predict entrepre-
neurial success are those who put their
money (and other peoples) where their
mouths are: early-stage equity investors
such as venture capitalists (VCs) and busi-
ness angels. Business angels are wealthy
individuals who operate either singly or in
Expert Insights 2016
Molian_EI_163346.indd 3
syndicates, putting their own money into
new ventures at start-up or shortly after.
Typically, they are prepared to invest at
an earlier stage in the cycle than VCs, who
prefer to inject money when the venture
founder(s) has proven that there is a mar-
ket for what they are selling.
Business angels have been around long
enough for their ability to predict success
in terms of financial return to be mea-
sured and compared. The data suggest that
across the board long-term returns on an-
gel investments average 2.5 times the capi-
tal committed. On the other hand, a large
proportion of angel investments fail. Of
course, there are some outstanding excep-
tions. Angel investors in technology busi-
nesses that have made it big, like Google,
Facebook, and Tinder, have made returns
over a thousandfold. But these are rare, and
angel investors in general (a) accept that
their money once invested is completely
at risk, and effectively write it off, and
(b) a cknowledge that they play the game
for fun and interest as much as to make
money. Angels typically manage their risk
by investing in sectors they knowperhaps
where they have founded and sold out of
businesses themselvesand by having a
portfolio of investments.5
Early-stage VCs also operate on a port-
folio basis, and, like angels, tend to spe-
cialize in particular sectors. It is a rule of
thumb that in the average VC portfolio of
ten early-stage investments two or three
will fail, five or six will perform mod-
estly, and one or maybe two businesses
will deliver outstanding returns. As with
business angels, the shooting stars pay
for the rest.
To sum up, picking winners is difficult
and even the experts get it wrong! What
looks at the outset like the perfect team
addressing the ideal opportunity can go
off the rails, and sometimes the most un-
likely ventures prove to be a hit. If there
is a magic formula for predicting success,
it remains, like the recipe for Coca-Cola, a
well-guarded secret.
3
12/7/16 4:52 PM