Wharton Professor: The 7 Hidden Types of Entrepreneurs | with Lori Rosenkopf

28:30There's a formal designation of B Corp. Would it be accurate to say that all B Corps kind of fall under that purview of social entrepreneurship or socially oriented companies, but not all socially oriented companies are B Corps? I want to be real careful with these words here. There's a benefit corporation, which is a legal form of corporation. And that requires that the owners declare, here are impact goals as well. So that becomes part of their reporting. And then B Corp is a standard that companies can aspire to. So it's an accreditation, if you will. And so people who wish to pursue that, cost them money to pursue it, will do that.

29:17They like to hold up that label to say, you know, we're about purpose as well as profits. Those are two separate things, but they tend to get conflated. I think all corporations that are registered as benefit corporations, I would call them all social entrepreneurs. I think the B Corp are a subset of those. So you might go for that designation and put all the time and money into it if you're already a benefit corporation. The way people use the term social entrepreneur really varies. Here's something really interesting about our students. If you ask them, are you a social entrepreneur? And we've done this at Venture Lab.

30:01About one in seven of our student founders will say, raise their hand, say, I'm a social entrepreneur. But then if we ask them a different question, we say, are your impact goals, do you have impact goals for your organization? 70 % of them will say, of course I do. You know, it's important to me, particularly for the young generation. They really want to work on some of the issues that are really important. And so there's this disconnect between people claiming that label of social entrepreneur. And I think that might be because historically, women are better represented in social entrepreneurship.

30:35There are about 50 percent of social entrepreneurs, whereas only about 20 percent of entrepreneurs overall. all, some of our students, I think, are very wary of that label because they don't want people to think they're not about being a high growth entrepreneur. But of course, they are saying, I want to do things that are good for the environment, good for society, good for people and the like. In essence, there might be a residual social perception that if you're a social entrepreneur, you're not necessarily going to be super high growth. You're not necessarily going to be super profitable. You might be a nonprofit.

31:15Right. The reality is they're not mutually exclusive, but sometimes they can be seen as mutually exclusive. I think that's right. Think about nonprofits and say, well, this isn't about creating lots of financial returns. But what we're seeing is that more and more social entrepreneurs are finding ways to be very profitable. like the story of Caitlin. Another story is about Miranda Wong, and she has built a company that cleans plastic out of the oceans. And when she started it, it was totally a nonprofit sort of situation because you get that plastic and you have nothing to do with it. And it costs money to do this.

31:59So you have to get donations and grants and the like. She eventually figured out away with chemicals to upcycle that junk that she was taking out of the ocean. And now she's selling that. And so she's found a way to make the company profitable as well. And she's gotten lots. I think she has about$27 million in funding now that she's been able to raise now that there is a profit motive that she can show for that. So more and more people are moving in that direction. But I think the historical connotation really did come from the nonprofit world. You know, maybe even to stereotype, but think way back, you know, the women at home, the housewives saying, what can I do to help my community and slowly building that into some sort of social service organization.

32:44But again, that's not what we're seeing. Certainly with the students at Venture Lab, they're interested in high growth entrepreneurship with a social purpose. So we've talked about the disruptor, the unicorn. Yes. We've talked about the bootstrapper. We've talked about the social entrepreneur. Yes. What's the fourth type of entrepreneur? The technology commercializer. This is the person who does not invent a technology, but finds a technology that's already out there and figures out a way to bring that to some set of customers that need that. The story I tell is Joan Lau. And Joan is the CEO and founder of Spirovant Sciences, which is developing a cure for cystic fibrosis.

33:28So this is a life-changing cure if they can make this work. And of course, pharmaceuticals is a space where it just takes forever. It's expensive and it takes years. I think$2 billion on average to bring a drug to market, 14 years. So she's got a long road ahead of her. The interesting thing about Joan is that she calls herself an accidental or an unintentional entrepreneur. She was trained as a neuroscientist. She was working for Merck, a big pharmaceutical firm. And so she was working on problems of health and fulfilling some of her personal mission and purpose. But she said there was so much bureaucracy and she'd spend time in meetings with a bunch of people talking about whether pills should come in two packs or four packs.

34:13And she wanted to really focus in on how do you make something more life changing. And she wound up leaving the big company to go work for someone who had a small biotech that was pursuing an interesting cure. She became CEO of that company. Then she started investing in other companies with a partner. And now they have, she and her partner have a series of firms that they've been building up to commercialize these technologies that are invented in universities by scientists who don't really know how to commercialize them. So it's a lovely story. And there are so many different sorts of technologies that are out there at universities.

34:55In companies, there are lots of orphan technologies as well. And so you don't have to be a scientist to do this, but you have to be able to think about how to connect this science to an application that people could use. So if a person wanted to follow this route, would they read patents, get to know people who are in the research field, and then propose partnerships? They can do that. They also can just license those patents from universities all have technology transfer centers where they can do that. And then they would build out the partnerships and maybe get an advisory board. Let me give you another example.

35:35A student of ours, her name is Reijing Zhang. And Reijing entered a contest at Penn. It was called Y Prize. What they would do each year is say, here's a technology that's been patented and we don't know what to do with. nobody's doing anything with. And the students come up with ideas of how it could be used. So that year for the competition, the technology was nanotechnology, super small materials. And Ray Jing, she was a business school student, but her parents, I think they were eye doctors, they were certainly doctors. And she wound up thinking about the eyes and the fact that if you have glaucoma, you have to do things to reduce that pressure.

36:19And if you could use a really small scale material. The kinds of implants that people will get could be a lot smaller, which means they're more comfortable. They're less likely to fail. You can install them. The operation to put them in is quicker. And she won the competition and she has been building out a company and now they're in clinical tests with rabbits and it's working. So she started to think about problems because there was a patent there. But other people might say, here's a problem and we need some technology to solve it. To go back to the Miranda Wong example, Miranda knew she had to do something with this plastic.

36:58She had to figure out, you know, what's the chemical reaction that would allow me to do that. So far, we've discussed the disruptor, the bootstrapper, the social entrepreneur, and the technologist or the technology entrepreneur. The fifth is the The funder? The funder. The funder. And this is fundamentally different, no pun intended. Most people don't think of funders as entrepreneurial, but I'm seeing a lot of people who are starting their own funds. So they are building a small company. The sales part of entrepreneurship, they're trying to sell their thesis to limited partners. They're trying to sell their backing to all the founders who are looking for funding.

37:49And they're trying to sell themselves as an employer of the people who they're bringing into the firm. So the activities are much the same. The person I profile in the book is Jared Tingle, and he is the founder and managing partner of Harlem Capital. Jared is African-American and he was working in private equity and felt like he was seeing underrepresented founders and CEOs not get as much at the table. And he felt like money was being left on the table and he wanted to do something about that. So he wound up joining with a friend and they founded Harlem Capital with the mission of funding 1 ,000 diverse founders.

38:36And they've been quite successful thus far. They've had two funds. They were raising a third at this point. And so his goal is to be ringing the bell at NASDAQ with some of those firms. They have lots and lots of internship programs, and they're proud to say that one in nine of all the diverse people working in the field of venture capital have gone through one of their internship programs. What's interesting to me about that is that the investment thesis is essentially a value-oriented thesis. There's alpha being left on the table. We can capture that. This can be highly profitable by virtue of finding these undervalued gems.

39:19Jared would answer that question by saying it's a growth thesis, that there really is a flywheel here, that the more that you can put people with this mission at the table, the more founders are going to come to them. They get an incredible number of inbounds. Most of their deals that they fund are actually coming to them inbound because of their reputation. And the more that they are creating their folks through their internship programs and putting them out there. So I think you would argue that. So it's a growth thesis then. I believe that it's a growth thesis. We've just seen Cherry Rock Capital.

39:59This is another Warren alum, Stacey Brown Philpott, enter this same space looking to raise well over$100 million for her first funds. So I think that we're going to see more growth in that space. On the other side of the funder is the acquirer. Tell me about the acquirer. More and more schools are starting programs in what they call ETA, entrepreneurship through acquisition. This is because there is a tremendous opportunity to acquire small to medium sized businesses, too small for private equity, but small to medium businesses where the founders are looking to cash in. the original owners are looking to cash in, and there's opportunity for modernization and scale and the like.

40:51So professionalization can really help. A great example, two of our alumni went into the funeral home space. And this is because funeral homes, think about it, they're very local. You have to know and trust your undertaker. So they're hyper-local. And the older generation that has been running this family funeral home, in most cases for many years, has a set of offspring who want nothing to do with the business. And so these two gentlemen from our program wound up acquiring over a dozen funeral homes at this point, and they're still growing and scaling. And then you can start to enjoy the economies of scale of having multiple ones.

41:40You have to acquire and grow carefully because of that set of trusted relationships that you have to look to maintain because people don't want to feel that it's too corporate. So that's a great space. And so you see acquisition, you see it in some of the same spaces where you see bootstrapping in that it's a lot of personal service, our home repair sorts of things where traditionally people have started their own companies. And then again, they've done well and their kids are off doing things that are very different and not taking over the business. There's a lot of opportunity to consolidate.

42:14And think about home repair, that you go around in a van and you have to figure, you're spending a lot of your time driving from place to place. If you can roll up several of those sorts of businesses, it's much easier to manage an overall fleet. You can use tech to do that. And so you can handle a lot more business with the same set of employees. For the average individual investor who's listening to this, who's interested in possibly acquiring a business of their own rather than bootstrapping one, what recommendations would you give? Due diligence is incredibly important here. You want to be able to ensure that the company's revenues are legitimate, that the processes are in place, that you're acquiring a business that is already going to give you a predictable revenue stream, but where you see lots of opportunity to really grow and expand that.

43:11And that growth might be by rolling up several of the same, like the funeral home example or dental offices, med spas, another example, or that growth could be more vertical or complementary. An example, Perry Steiner started Exactus and he bought a mom and pop data service for mortgage services. And then he started building a set of complementary services by buying up companies. And now he has a more full service shop with Exactus. From an individual investor's perspective, does the funding for these acquisitions, does it come from savings, from home equity? from perhaps some retirement funds?

43:58Some entrepreneurs, right? Let's call them acquirers for now. Some acquirers will use their own funds, but others will create a search fund. And so they'll raise from other investors who want to back them as CEOs, funds, first of all, to support a search for a particular sort of business. So you would say, my thesis, I want to look for med spas in this space that have the potential to grow in such and such an amount. And you search for a year. And this is very popular with our students that are MBA students. They're maybe 30 years old or so. They've had a little bit of corporate experience. They have enough bearing, particularly military veterans.

44:46We have a fair number of veterans in our MBA population. And so they say, I've run stuff in the field and they have this great bearing because these investors who are going to support your search funds, they have to believe that you're going to be a great CEO in order to do this because the acquirer is going to purchase the business and then run it themselves as the CEO. Once you've found the target, usually the search fund investors will then provide funds for the acquisition of the business. So you're sharing all of the growth that you're going to create. with your investors, but it allows people who don't have a lot of resources to do that.

45:26Some people also will use small business association loans for the smaller sorts of acquisitions as well. How many investors usually participate in a search fund and how big is that search fund? Different entrepreneurs who wish to acquire might have different size targets. Some of our students who are coming out might say, I'm looking for a business that's doing one to five million dollars a year in revenue in, say, the med spa space, as an example. Charbel's Reich. He did graduate from our program, but then worked for a while as a consultant at McKinsey, helping others to be great leaders. And he decided he wanted to be a leader for himself.

46:05He has such an interesting backstory because he came with his family from Lebanon when he was eight years old. He didn't even speak English when he came here. He was able to get scholarships into school and then work the corporate jobs and the like, but he wanted to find a company that he could run himself. And so he was looking for something that was a bigger company, I think in 10 to 25 million dollar revenue range that he felt that he could double or triple in a short amount of time. And he wound up acquiring a company that provided Wi-Fi service in hotels. And they provided this for 800 hotels or so.

46:48And he bought this company and wound up building it out to cover 3 ,500 hotels. And so he was able to sell the company for triple after a short number of years. And interestingly, the company was acquired by a private equity firm that also had a business that did TVs in hotels. So, you know, they're very complimentary, right? It makes sense to put those together. And he was fortunate in that he was sort of tired of doing it by the end and wanted to go on and do something else. Usually you get locked up if you're acquired. You need to stay with the company for several years and run it. But Charbel was able to leave the company when he was acquired, which is not typical.

47:40That is rare. There is typically that lockup period. I know people who have sold companies and then have needed to work there for two to three years afterward. And they're generally very unhappy when they're not working for themselves anymore. Yeah, yeah, exactly. Particularly because it's the same company. It's the same brand. It's the same, largely the same work. but it's a weird mental shift when suddenly you're the founder, but now you're someone who got hired. And it's really something to keep in mind for people who are thinking about, should I be making an acquisition? Because if I'm advising students in our program who are 35 years old, the idea of 10 or even 15 years doing the same thing might not be something that bothers them.

48:27But people who are thinking about acquiring at a later stage of life, they can't assume they're going to have that Charbel story and be able to turn something around in five years, you know, a year of searching and then three years of running it and then you're kind of out. But rather, they have to think about this could be a very long tail in order to recognize the real gains from all the work you put in. Right. Yeah. Turnarounds take a lot of time. And it's not even always a turnaround. Like you're not usually trying to buy something that's so troubled that it's not going to start generating profits right away.

49:01But it really is about that mentality of value creation that you can build a machine that will generate more by thinking about ways to use technology in an interesting way by creating a portfolio of businesses that you roll in together in order to make the whole greater than the sum of the parts. when you're doing a roll-up, when you're building that portfolio? How big should that portfolio be? Are there any heuristics? Are there rules of thumb? When do you know that you've reached minimum viable economies of scale? That is such a personal question. I think that when we go back to the original definition of entrepreneurship being value creation through innovation, how much value do you want to create, right?

49:48And I think that there are some people who say, I'm going to buy this successful business and run it as a revenue stream and maybe build it out a little bit. But I don't want my life to be consumed by this for many, many years. And that might be enough for them. And they might be looking to flip it sooner or to just continue to run that and pass it on in their own family. Well, there are other people who are saying, how can I do more and more and more? Now, if you're in a search fund, you're going to have that pressure from your investors to create more and more and more, just like the pressure that someone who takes venture capital would have.

50:25But if you've been able to do this with less external financing, then you have the luxury of deciding how far you want to push yourself.

50:40This Friday, the NBA on Prime tips off with their debut doubleheader. First up, Boston brings the action to the Garden as the Celtics face the New York Knicks. Then out west, it's a battle of the superpowers as the Lakers try to poster the relentless pace of the Minnesota Timberwolves. Wolves. The Celtics and Knicks, who has the most hustle in defense? This game will come down to who wants it more. And the Timberwolves and the Lakers, it's two Western Conference heavyweights going toe-to-toe. Buckle up, folks. This one's going to be electric. Celtics, Knicks, T-Wolves and Lakers. Coverage starts Friday, 7 o 'clock Eastern, only on Prime.

51:24about this episode is brought to you by progressive insurance do you ever think about switching insurance companies to see if you could save some cash progressive makes it easy just drop in some details about yourself and see if you're eligible to save money when you bundle your home and auto policies the process only takes minutes and it could mean hundreds more in your pocket visit progressive.com after this episode to see if you could save progressive casualty insurance company and affiliates. Potential savings will vary. Not available in all states. So imagine it's midnight, you're on the couch, you're scrolling through this new website, hitting the add to cart button, and you decide to check out, but you remember that your wallet or your credit card is in the other room and you don't want to get off the couch.

52:10That's okay. You don't need to because there's that big iconic purple shop button. You know the one. With that shop button, that's Shopify. And there's a reason that so many businesses sell with it because it makes everything easier from checkout to creating your own storefront. Shopify is the commerce platform behind 10 % of all e-commerce in the US, from household names like Mattel and Gymshark to brands that are just getting started. Shopify will give you a leg up from the beginning with beautiful ready-to-go templates to express your brand. And you don't handle everything in one place from inventory to payments to analytics.

52:47And they've got built-in marketing and email tools and that iconic purple shop pay button used by millions of businesses around the world. If you want to see less carts being abandoned, it's time for you to head over to Shopify. Sign up for your one month,$1 per month trial period and start selling today at shopify.com slash Paula. Go to shopify.com slash Paula, shopify.com slash Paula.

53:19We were talking earlier about how when companies get acquired, oftentimes the founder or the CEO has to remain there and continue working there for a little while. Part of what is challenging about that, that lockup period, is the fact that someone who is wired to think very entrepreneurially is operating in a W-2 capacity. The flip side of that is that there are some people who thrive while working in a W-2 capacity and who also think very entrepreneurially. Yeah, that's the intrapreneur and that's the seventh path. And this is the person who is essentially building a business within an established company.

54:09But so they're building something different and there can be all sorts of corporate resistance, but there can also be all sorts of corporate support because you don't need to raise external funding. You're getting your resources from the company where you work. The story I tell is Jackie Rhesus and Jackie She founded a bank, Square Financial Services, within the company Square, which is now, of course, Block. So Square Financial Services is a wholly owned subsidiary of Block now. But to tell this story from the beginning, Jackie had had a successful career in private equity, and she decided she wanted to try tech maybe about 15 years ago.

54:53and she had a short stint at Yahoo, and then she wound up joining Square. And at the time, 2015, Square is a company that is making the little white Square point-of-sale terminals where you tap your credit card or swipe your credit card on someone's mobile phone. They are a hardware company. I should note Square is one of our podcast sponsors as well. Ah, okay. Jackie joins Square and she sees that these terminals are collecting an incredible amount of information about every transaction that is happening in a small business. And because Jackie is a banker, she sees that this information is really valuable.

55:36And so she says we could provide loans to these small businesses. Small businesses are notoriously hard to assess what are their revenues and whether they're good credit risks and the like. But she's saying we've created a device that is giving us this information. And I want to underscore this. She can only see this because she's a banker. Anybody else says this at Square, we should be a bank? They're talking crazy talk, right? But because Jackie's a banker, she really understands the implications of what this data can be. And so she gets the go ahead to pursue this. And it takes close to five years, but she's able to get a banking charter so that Square can indeed provide these loans.

56:19And during the pandemic, they are one of the major providers of the PPP loans. So this has a tremendous impact on small businesses and their ability to stay afloat during these times. That's the story of recombination because Jackie's previous experiences were what allowed her to see that this, in her mind, this was not risky. But to other people, it does sound a little bit out of the box, but she had a firm belief rooted from her prior experience that this could work. And she's very, very tenacious, very resilient. And they took multiple tries to get that charter from FDIC because they don't usually issue them to entities that aren't already banks in one form or another.

57:05But Square Financial Services still exist. Jackie has gone on, this is a great postscript to her story, she's gone on now from there to acquire a bank, a more traditional bank in the Midwest that she is converting into a bank that is really supporting fintechs. Because she's saying, this is the bank that I needed and wanted when I was working at Square. So now her company now is called Lead Bank. So that's just a great example of how people can follow more than one path over time. Wow. Can you elaborate actually a little bit more on people following more than one path over time? Because as you talk through these seven different archetypes of different types of entrepreneurs, I'm drawing a connection in my head between being a funder, being an acquirer.

57:52That's right. It's kind of easy to see how those two might be related, but then that actually also links a lot to being a bootstrapper, particularly if you're, you can really see how many of these tie in with one another. Yeah, the seven pathways are not mutually exclusive. And they're also not mutually exhaustive. Caitlin is my social entrepreneur, but she was also a bootstrapper. Jackie, as I just mentioned, was an intrapreneur. And we should talk more about how people can be intrapreneurial as well. But then she becomes an acquirer who's now trying to disrupt the way that Banks serve FinTechs.

58:31She's been named to the CNBC Disruptor 50 the last two years. So she's doing a fabulous job on that front. Jared, who's the funder, he also has a social mission that's really paramount in his thesis. So many people are following multiple pathways, sometimes simultaneously, but also over the space of a career. So they're really meant to just highlight different aspects of ways that you can take your talents and apply it to an entrepreneurial domain. Right. And these seven types of entrepreneurs, it's an interesting framework for understanding the landscape of entrepreneurship. Well, it gives people a sense of the many ways that people can create value and the many different ways in which you can do something where you have a fair amount of control, where you're able to capture more of that value for yourself, as well as create it for others who might be investing in you or others who depend on you in society.

59:35We didn't quite elaborate on intrapreneurship. So for someone who's listening to this, who works at a company and wants to continue working at that company, but wants to be more intrapreneurial within the scope of their current role, what can they do? How can they approach that? Yeah. I think the first thing a person needs to do is take a good, hard look at that company and say, are they encouraging innovation and building structures that are really allowing for entrepreneurship to happen? Or are they pretty discouraging and inertial about it? Some companies will create places, and I say places, it might be a physical place or it might be more of just an organizational unit where people are pursuing new ideas for the company.

1:00:29If it's a very big company, it might have a corporate venturing arm where you're investing in other companies and looking at them and seeding new business. It might be more of a skunkworks where you're trying to build out new competing products or services that might someday supersede what the company is currently providing. Some companies will have hackathons to celebrate big in AI right now, you know, who can come up with a great application. And so they'll have those sorts of competitions and prizes. I'm thinking of Sundar Pichai giving out the golden jacket in his competitions. Companies have set aside time.

1:01:08People talk about, again, to cite Google, 20 % time. That comes from 3M way back when, having 15 % time that people were encouraged to spend 15 % of their time thinking about new businesses for the future. And not that everyone would say, well, it's a 40-hour week, so I'm going to spend six hours a week doing that. But if somebody was chasing a new idea, if anyone gave them grief, they could say, hey, that's my 15 % time. I'm allowed to do some of that. So some companies are very encouraging of that. And if that's true, taking advantage of these opportunities, some companies even offer sabbaticals.

1:01:43But coming up with ideas and setting aside, even just personally yourself, some time to think about what might disrupt us, what are the new opportunities for us, how can I take any of my unique expertise and experiences to identify these ideas and start to share them and tell them to people to see if I can get any traction is going to be helpful as well. There are some settings, however, where I think it's just super hard to innovate. Consumer packaged goods, I think, is one of these spaces where you tend to see most of the new brands that are coming into the big multinational, you know, food, beverage, personal products are being developed somewhere else and then being acquired in.

1:02:30And what frequently happens is that the employees of these big CPG firms, they get frustrated over time because they have great ideas and the margins are not good enough for a company of that size. So they leave and they pursue these options and then the company acquires back the things that are indeed successful. My own daughter works in CPG right now. So I keep saying to her, there's going to be a moment where you might want to take some of these ideas and run with some of them. And if they're good ideas, you're going to find yourself very, very valuable later on. What would a person do if they're working for a very small business?

1:03:13You've talked about 20 % time. You've talked about some companies even offer sabbaticals. I can see in very large companies that have a lot of resources and that have a lot of structure and that have an HR department, how that can be the case. But let's say you're working at a company that has a total of 10 employees. You may be highly entrepreneurial. In fact, I think a lot of people who are drawn to working for small business are, but there's also just not a lot of bandwidth. Yeah. Yeah. Well, that's super interesting because in that setting, you're probably an earlier stage company. And so part of your effort is trying to understand what is our market?

1:03:52How can we find product market fit? How can we deal with all of the negative feedback that we're getting in addition to positive feedback and use that to adjust our product, our service in a way that's going to make it attractive to more folks? And as you're starting to get that traction, then to start to think about adjacencies to say, well, OK, if we're serving teenage boys right now, is the next step teenage girls or is the next stage, you know, those post teenage boys, those 20 year olds that aren't quite adult yet, but aren't teenagers anymore. But so do we go that way or do we say, you know what, we've been serving the U.S.

1:04:35market and can we take this to another country? thinking about the nearby opportunities and looking and assessing which of those can be the best next space is a recipe for growth. On that topic, how do you know when you're being strategic versus when you're just throwing spaghetti at a wall? It's easy to know in hindsight and perhaps not so easy to know when you're doing that. I think this is where some of the brainstorming capabilities and the assessment capabilities that we are starting to see emerge from large learning models can be really, really helpful because you can develop all sorts of synthetic customer personas and get their reaction to a series of approaches.

1:05:19It's not going to be perfect, but you might be able to identify of 100 to say, here are the five or so we should really push and follow up on, and here are the 50 or so that we could just throw out right now. So I think that those capabilities are really a great way for testing and learning right now. As we sit here talking about intrapreneurs, it strikes me that there are probably a lot of people who are listening to this who don't know, maybe they have a bit of an entrepreneurial spirit, but they don't know if they want to be, for the remainder of their career, an intrapreneur working at a company, but with an entrepreneurial vibe, or if they want to go off on their own and actually become an entrepreneur themselves.

1:06:05In all of the entrepreneurs that you work with, how do people know that this is the path for them or that this is their calling? Reason is one of the six R's of the entrepreneurial mindset. And what was fascinating to me as we really dug in on these stories, about half of them had this burning passion that they wanted to pursue. Those people were driven by wanting to solve a problem. Also, Joan is there, you know, creating life changing hures for diseases. You can pursue that reason inside a company or beyond a company, but that reason just gives you a North Star that makes you keep pushing and pivoting when something isn't working, you wanna still solve the problem, so you're gonna pivot.

1:06:55The other half of my subjects, they just wanna be entrepreneurs. These are the people who would tell you, when I was in middle school, I brought my Halloween candy in and started selling it at a markup and the principal suspended me or I was the best paper boy or the best Girl Scout cookie seller. These are folks who are just saying, I just want to be in business for myself. I want to make money. I want to have this responsibility. And that passion comes later. Amy Aritt was not an eight year old girl saying, I want to be a hair color baroness. But now that she's found this space where she can be a fabulous entrepreneur.

1:07:35I would just encourage people to really double down on their thinking about what is the reason that's important to me? Is there a problem that has come out of my personal experiences? And whether that is as a member of a particular group that you feel has a disadvantage that you're trying to rectify, or whether it's because you've been deeply working in a particular space like pharmaceuticals and you see here's a problem that needs solving, figure out what that is. And if your only reason right now is, I just wanna be an entrepreneur because I wanna make a lot of money, start thinking about how you can find that space.

1:08:14If you've had some length to your career, you can look across the different experiences you've had and think about how they might intertwine in an interesting way. That's why Jackie, a former banker, sees that Square can become a provider of loans rather than just a hardware company. Think about, are you the person who's lived in multiple countries and could bring something from one country to another? I've had some sinus problems lately, so I think of the neti pot. It's so obvious if you come from a culture like that, but here are Americans spraying all these chemicals in their noses, and now finally there are Americanized versions of that.

1:08:55So like that recombination is another one of my R's. But look for those interesting mixes. Maybe you're the person who's been in a corporation, but you've had jobs in four different parts of the company. How do you see the different pieces mixing together? Things that are obvious insights to you are not obvious to other people who haven't had that set of experiences. And just to take the counter of that, when we have the young students who say, I don't know what problem I want to work on yet. I say, go out there and do something interesting. think. Go take a job for a while. You don't have to be an entrepreneur right away.

1:09:27Take a job, learn an industry vertical. Or if you're just starting your college career, take an interesting course. Don't take the same 15 courses everybody else takes. Take a course in cinema studies and see if that gets you excited about opportunities in the film industry. Think about how you spend your summer internships and don't just go to the same company and work there three times over your three undergraduate summers, but spend a summer abroad. Do research somewhere. Do something that gives you a unique mix because many of our entrepreneurs, like they saw their opportunities because of the mix of things that they've had.

1:10:05Since you mentioned the six R's, I of course now have to ask about it. So reason is one, and you also talked about recombination. Reason and recombination are two out of the six. I know another one is resilience. Can you talk about that? This is probably the most important characteristic. Every single one of my entrepreneurs tells the stories of the moments where many people might have walked away and said, this is impossible. You're getting negative feedback on the product that you've designed. Maybe you say this isn't any good, or do you start to sit with that negative feedback and treat that as a gift and a learning experience when you get a customer who will say, here's why I won't buy this for you.

1:10:49Yeah, I'll take it for free, but you want me to pay? I'm not paying for this. But to be able to sit with that and ask why and to get that ability to solve a problem in a different way, you know, understanding that problem is solving in a different way. They're resilient because things happen that you can't control, right? COVID happens. So what are you going to do differently? Are you going to walk away and say, I don't have a business anymore? Are you going to find a way to do it differently? I mean, now tariffs happen. That's been an incredible source of uncertainty for so many, particularly in the retail space.

1:11:23How do you work through that? And entrepreneurs really have the ability to say, this is a part of the story. I'm trained originally as an engineer. And so I have a little plaque on my desk that says, everything is figureoutable. And it's just a very engineering mindset. There's lots of different ways to solve a problem. And I think it's also the entrepreneur's mindset that, okay, this didn't work, but the problem's still here and I have to figure out a different way to solve it. And there are lots of clues coming at me if I'm willing to listen to those that's incredibly important. And it's also the part, whenever I'm sitting with an entrepreneur and interviewing them, our panel at an event.

1:12:10When people talk about when it was hard, that's when everyone in the audience is the most wrapped because it's easy to hear those success stories as if this all came together. But everyone has these crisis moments, these moments where they say, is this really worth it? Can I really do it? How am I going to do it? And being able to get themselves through it is an important part. So of the six R's then, we've talked about reason. We've talked about recombination. We've talked about resilience. What are the other three R's associated? Yeah, so I kind of think of them as pairs. So reason and recombination is more the ideation phase.

1:12:49Like how do I figure out what I'm going to do? And then in the middle are relationships and resources, which for me, they're sort of twins. Because relationships are just incredibly important to access resources. All entrepreneurs have to be thinking about how am I getting the talent, the advice, the funding, the customers and the like. And much of that does come through relationships. And the advice that I like to give people at any stage is keep building those relationships and build them before you need them. Invest in relationships. You know, you're in college, where better time is there to create a set of people who will have your back in any situation?

1:13:35Because it's a lot harder down the road if you don't have relationships to suddenly create them and activate them when you're at a point where you need to be instrumental. But having said that, most of us have a tremendous stock of resources to draw on. I'm not talking about the people who you're connected to and, you know, whatever social networks you're doing, but the people you've worked with over the years, the people in your community who you've done all sorts of social events with, the families of the kids who your kids are going to school with. And so thinking about those networks and thinking about ways to be really helpful to people who you interact with, that pays back over the long haul.

1:14:20So that's relationship and resources. And then on the far side, resilience and then results. Getting back to this issue of what results are important for you. What value do you want to create? How much is enough for you to feel personally fulfilled on this path? How do you measure your outputs, particularly in the early stages where you don't have a lot of profits or revenues yet? That is this going to be about how many sales calls you've gotten your team to make in a given time? Or if you're a social entrepreneur, how many lives are you changing? And how many young women are reporting that they feel more excited about a STEM career?

1:15:00There's so many ways to think about how you measure your results. But being really thoughtful and articulate about that, I think, is incredibly important for people to develop their resilience. Well, thank you for spending this time with us. Where can people find you if they'd like to know more? Well, the best place to find me is LinkedIn. It's Lori Rosenkopf. I always have to spell this for folks because I'm an L-O-R-I, Lori. And then Rosenkopf, R-O-S-E-N-K-O-P, like Peter, F, like Frank. and the book is of course available wherever books are sold. I'd love it if people are able to read it and give it a review because that gets it in the attention of even more folks who can benefit from an inspiration to be more entrepreneurial.

1:15:48Wonderful. Thank you to Lori Rosenkopf, professor of management at Wharton Business School, head of Venture Labs, and the author of a book called Unstoppable Entrepreneurs. published by Wharton School Press. What are three key takeaways that we got from this conversation? Key takeaway number one, the real face of entrepreneurship is not what you think. Because there's this myth about college dropouts. We have this myth that the most successful entrepreneurs dropped out of college when they were 19 and they went to start this big, crazy unicorn company that blows up and is worth billions of dollars.

1:16:24It's this very popular story in the media, and there are a handful of outliers that really grab our attention. The most successful entrepreneurs are actually experienced professionals who are in their 40s or 50s or older. The data actually shows that top-performing venture-backed founders are in their late 30s to early 40s, with many also in their 50s and 60s. and that means that your age and your experience is not holding you back. It's actually a huge benefit. One of my colleagues, Danny Kim, who's a young professor in our management department, worked with several other folks and they did study venture-backed firms.

1:17:08The top 0.1%, they looked at the age of the founders. So these are incredibly successful firms. On average, the founders were late 30s, early 40s, many of them going into their 50s and 60s. So again, that myth that we see, I shouldn't say myth, but those anecdotes, those stories that we see, like a Snapchat founder, are exceedingly rare. So that is the first key takeaway. Key takeaway number two, the majority of entrepreneurs are bootstrappers. So I mentioned just a couple of seconds ago that venture-backed entrepreneurs are often in their 40s, 50s, 60s, but only about 20 % of businesses get outside funding.

1:17:5380 % of entrepreneurs are actually bootstrappers who build businesses using their own resources. They use their own savings. Maybe they go into business part-time or on the side at first before they're able to scale it up to full-time. Maybe they save up for a while and they've got some savings that they can live on while they're beginning. Maybe they borrow small amounts from friends or family. But for the most part, it's the revenue that comes into the business that fuels the operations and eventually the growth. And so this bootstrap model offers more control and actually, maybe contrary to what we see in the mass media, it offers higher odds of success as compared to high growth, high risk, winner take all, venture capital backed routes.

1:18:42What that means for you, particularly for knowledge workers, is that you can start that side hustle today without having to pitch a bunch of investors. That is right. And it sounds ridiculously high, doesn't it? Because it's not the model that we're used to. There are close to 35 million small businesses in the U.S. I shouldn't say small businesses, I should say enterprises. And the vast majority of them are small, less than 500 employees. And now with AI, that number is going to be even a bigger majority. Many, many entrepreneurs are people who have sold their own services. You might have a person who comes and mows your lawn, or you might go to a nail salon.

1:19:25There are all kinds of small businesses that exist, accountants that are in business for themselves. Finally, key takeaway number three, you're already more entrepreneurial than you realize. Because entrepreneurship isn't just about starting companies. It's about creating value through innovation. And that means figuring out better ways to do things, figuring out innovative improvements or iterative improvements. So maybe you're a stay-at-home parent and you're figuring out how to optimize your family's routine. That is value creation through innovation. That means that you're also an entrepreneur.

1:20:06Or maybe you work as a W-2 employee inside of a company, but you are innovating within the scope of your role. You are also an entrepreneur or an intrapreneur. So if we define entrepreneurship as value creation through innovation, then anyone who's being innovative, who's looking for ways to improve things, who's looking for ways to create more value or new value where it didn't exist before, anyone with that spirit and that mindset is entrepreneurial. Anyone who's creating value in any of those ways has to do it by doing something different than they've done it or it's been done in the past. And so innovation, it might be a new product or service.

1:20:48It might just be a new process, a way of doing something differently, could be a new business model. But by that definition, even the stay-at-home parents who is figuring out a routine that's working more effectively for their family is doing something entrepreneurial. And at the end of it, that's what I want everyone to see. I'm already doing entrepreneurial things. Those are three key takeaways from this conversation with Lori Rosenkopf. Thank you so much for tuning in. If you enjoyed today's episode, please do three things. First and foremost, share this with your friends, family, with the entrepreneurs and intrapreneurs, with the W2 employees, with the stay-at-home parents, with the people who mow your lawn, the people at the nail salon, the accountants who are in business for themselves.

1:21:31Share this with all of the people in your life. That is the single most important way that you spread the message of F-I-I-R-E. Sign up for our newsletter, affordanything.com slash newsletter, where we send all kinds of insights that you won't read anywhere else. Again, that's affordanything.com slash newsletter. absolutely free. Join our community, affordanything.com slash community, where you can meet like-minded people who want to talk about paying off debt, saving for retirement, starting a side hustle, moving your side hustle into a full-time business. Any topic that is on your mind, you will find people there, affordanything.com slash community.

1:22:15And please, please remember to open your favorite podcast playing app, hit the follow button. And while you're there, leave us up to a five-star review and write a few words that talk about what you enjoy from the show, what you get from it, what you learn from it, how it has helped you in your life. These reviews are incredibly valuable and they're instrumental in helping us bring on great guests for you. The more reviews we have, the bigger of guests that we are able to attract. So please open up that podcast playing app, leave us a review. If you're on Spotify, you can leave a comment about this particular episode in addition to reviewing the entire show as a whole globally.

1:23:00Thank you again for tuning in. I'm Paula Pant. This is the Afford Anything Podcast, and I'll meet you in the next episode.