Several forces are converging to make this an unprecedented time to start a business. And that trend is already bearing fruit. Consider the fact that the number of the nation’s smallest businesses, those which only employ their owners, increased by 2.2 million from 1997 to 2002, according to the Census Bureau.
As a result, one of every nine American adults was involved in entrepreneurial activity in 2003, the most recent year for which statistics are available from The Global Entrepreneurship Monitor.
Why are so many Americans going into business for themselves? As Roger McNamee, a Silicon Valley venture capitalist and investor, argues in his book, The New Normal, technology, demographics, and economics have presented entrepreneurs with opportunities that are unprecedented — and apparently unlimited.
For example, as companies work to reduce their fixed costs and become more flexible, they are trying to outsource many activities that were done, until recently, in-house. This new wave of outsourcing activity benefits small businesses in two ways:
First, it makes world-class services like accounting, call centers, human resources, tax preparation, marketing, and IT support affordable to even the smallest business that can’t afford a dedicated staff for those functions.
Second, it provides outsourcing clients for entrepreneurs who excel at a specialized skill.
Consider Salesforce.com. Marc Benioff, a former executive at Oracle, started the company in 1999. It provides tools to help small companies manage their direct sales. Because it is an on-line service, clients can gain all the benefits of salesforce automation and customer relationship management, without paying to install expensive software and complicated IT infrastructure. The company quickly grew to $50 million in revenues by 2003, and raised $110 million in an initial public offering in 2004.
A second factor driving the launch of larger high tech startups is the flood of venture capital available, sitting in the coffers of the leading funds. However, only a tiny fraction of entrepreneurs should look to venture capital to fund their start-ups.
Why? First, as McNamee insists, the best business ideas don’t need investors. With interest rates low and home equities high, entrepreneurs can often borrow the seed capital themselves. More ...
