Serial entrepreneurs have the habit of creating businesses
DURING the last year, we have seen record numbers of people starting businesses for themselves across the UK and according to Start-Up Britain, over 627,000 new firms have so far been created in 2017.
This is not surprising given that the creation of new firms has been a priority of both the Welsh and UK Governments for a number of years. Indeed, the Start-Up Loans scheme – established to provide capital to entrepreneurs – has lent over £350m to over 50,000 new businesses since it was established four years ago.
However, not all of those starting a business are doing for the first time and a growing number establishing new ventures are so-called “habitual entrepreneurs” who have done it before and are looking to do it again.
They include serial entrepreneurs – those who prefer to close one business before starting another (such as Steve Jobs) – and portfolio entrepreneurs – those who run a number of businesses concurrently (such as Richard Branson).
So what does research tell us about such individuals and their firms?
First of all, habitual entrepreneurs make a disproportionate contribution to the level of business start-ups across the UK.
While making up less than 1% of the UK population, habitual entrepreneurs set up around one in three start-ups of all the start-ups in the UK. In addition, those with previous entrepreneurial experience are over three times as likely to start a new business as those with no previous experience.
This may reflect the greater resources that are available to those who previously sold a business that, in turn, provides the start-up capital required to make intentions become reality.
This clearly suggests that those with previous entrepreneurial experience are more likely to be thinking of and actually starting a new business. However, this still begs the question why enterprise support is focused almost exclusively on getting new entrants with no previous experience into entrepreneurial activity?
Of course, the “holy grail” for policymakers is not the lifestyle business established by the vast majority of those starting a business, but those new businesses that can create can create wealth, employment and innovation in their local economies.
And habitual entrepreneurs may be the solution as they tend to run larger businesses than novice entrepreneurs, which reflects their ability to raise start- up capital from the proceeds of previous businesses or through leverage of existing company assets.
They also utilise their previous track record in business ownership and their entrepreneurial experience to persuade venture capitalists to invest in their business.
Not surprisingly, habitual entrepreneurs have a far higher requirement for start-up finance than novice entrepreneurs. This is particularly the case for portfolio entrepreneurs which suggests that their focus is on creating high growth firms over a period of time.
The networks and skills developed through prior business ownership also make it likely that up to a certain point, habitual entrepreneurs will be aware of a great quantity and quality of opportunities, and the confidence that such entrepreneurs gain from prior entrepreneurial activity usually leads to future success with other ventures.
It should be of no surprise that habitual entrepreneurs expect to create a greater level of employment, higher turnover in both the first and third years of trading, and export a high proportion of their output.
If these expectations are accurate, then it is clear that businesses started by habitual entrepreneurs are exactly those which governments across the world are looking to support, and conform to the “scale up” concept of the minority of rapidly growing businesses which create a majority of employment in the small business sector.
In particular, portfolio entrepreneurs are also more likely to be running businesses that are providing entirely new products to the market, entering markets where they face no competition, and to a lesser extent using newer processes and technology. This may reflect the use of new business starts by portfolio entrepreneurs to enter high-risk growth markets, whilst insulating their existing businesses.
Therefore, given the importance of those with previous ownership experience in generating new businesses, it seems clear that policymakers could and should be targeting greater support in 2018 at supporting proven entrepreneurs rather than increasing start-up levels in general.
If both the UK and Welsh Governments want to create the growing companies of the future, then there is certainly mileage in promoting the entrepreneurial potential of those individuals who have “been there and done it”.
In particular, portfolio entrepreneurs are also more likely to be running businesses that are providing entirely new products to the market...