Go to the Globe and Mail homepage

Jump to main navigationJump to main content

There’s a new breed of entrepreneurs who were pushed into creating a company to replace their paycheque. And they’re driven by profits. (Carey Hope/Getty Images/iStockphoto)
There’s a new breed of entrepreneurs who were pushed into creating a company to replace their paycheque. And they’re driven by profits. (Carey Hope/Getty Images/iStockphoto)

Leah Eichler

Welcome a new breed of small entrepreneurs Add to ...

I love change. Honestly. Two years ago, when I realized that my division at work was slated for the chopping block, I turned to my boss and said, “Great. How can I help wind us down?” I needed the push to launch my own venture and although I felt incredibly passionate about my new company, I can now admit that I had another motivating reason – money.

More Related to this Story

Unlike previous generations, launching a company now seems no riskier than accepting a new job.

When was the last time we used the term “job security” without snickering? Fostering entrepreneurship has become a mantra for those looking for solutions to speed up the economic recovery. According to U.S. data from 2010, job growth is entirely driven by start-up companies.

There’s good reason to pay close attention to this new breed of accidental entrepreneurs spawned by the downturn – white-collar workers who lost their lucrative paycheque.

They aren’t motivated by the traditional reasons, which are usually a passion to solve a problem or to turn a hobby into a paying job. These accidental entrepreneurs are hungry for profits – and that’s a good thing.

“In the pursuit of entrepreneurship, these companies born of the recession can be described as the ‘absolutely, positively, trying to get rich’ crowd,” said Brian Burch, vice-president of consumer and small business segment marketing at Symantec, a security software company based in Mountain View, Calif.

Mr. Burch recognized that a major shift was under way when the net number of new companies launched in the United States each year skyrocketed from the traditional average of 600,000 to six million in 2010.

Between 2009 and 2011, more than 10 million new companies launched in the United States, according to proprietary research conducted for Symantec, he said.

Symantec then commissioned a study by Forrester Consulting, which found that these new entrepreneurs are more profit-driven than their predecessors were before the recession, partly because they were launched out of the necessity to pay the bills, rather than for lifestyle or other reasons.

“This new crop of start-ups born of the great recession was increasingly or primarily about replacing white-collar income or rebuilding someone’s retirement nest or helping paying off a graduate school debt,” Mr. Burch said in an interview.

“These companies act very differently than traditional entrepreneurs because they are built for profit and they are built for scale.”

Unlike pre-recession entrepreneurs, Mr. Burch said, these companies were trying to hire more rapidly, were more focused on growth and were more likely to have an exit strategy. As an example, he cites data that shows job creation in Silicon Valley from December, 2011, to December, 2012, was the equivalent to the dot-com boom in the 1990s.

He calls these start-ups “profit machines.” He likens them to the Velociraptors in the film Jurassic Park: They seem small, but when released into the wild, they remain highly adaptive and designed to compete.

He predicts they will defeat some of their more traditional small business competitors and enjoy “disproportionate success.”

The question is, how can we foster this new breed of money-hungry entrepreneurs and especially tap into female entrepreneurs, whose businesses tend to show slower growth, in terms of revenue, than start-ups led by their male counterparts?

According to Dell Inc.’s global entrepreneurship and development index (GEDI), the United States ranks as the top place for female entrepreneurs. Canada wasn’t included the index, but the assumption by Dell is that results would be similar. Statistically speaking, however, men are more likely to start a business than women, and that entrepreneurial gender gap persists in Canada as well.

Some of the variations in the numbers and success rates of male versus female entrepreneurs can be explained by motivation. According to a 2012 TD Economics report, the desire to be their own boss and earn more money motivated 71 per cent of men, compared with 53 per cent of women. The desire for better work-life balance motivated 25 per cent of women to launch their own companies, but only 7 per cent of men.

The report does anticipate a change for female entrepreneurs and noted that the percentage of female-owned businesses intending to expand is on the rise and now surpasses the percentage of male-owned business aiming to do the same. The willingness of these female entrepreneurs to seek financing also suggests better growth in the future.

“There is definitely a phenomenon of female entrepreneurship happening,” said Susan Kates, professor and internship co-ordinator at Centennial College in Toronto. She said this trend serves women who want to be in control of their lives, and better balance family life with their business, but sees a number turning to entrepreneurship out of necessity.

“As women get older, they start businesses as they have lost jobs and being hired on as they get older becomes so much more difficult,” she added.

Even among her students, Ms. Kates said an increasing number of them are choosing the entrepreneurial route, often because they come from entrepreneurial families. But she cautions against focusing singularly on profits.

“Making money, of course, is important, but I don’t think it is really the only thing that drives a true entrepreneur; it is the excitement, the creative challenge, the sense of achievement, which really is the driving force,” Ms. Kates said.

Leah Eichler is founder of Femme-o-Nomics, a networking and content portal for professional women and r/ally, a mobile collaboration app.

E-mail: leah.eichler@femme-o-nomics.com Twitter: @femmeonomics

In the know

Most popular video »

Highlights

More from The Globe and Mail

Most Popular Stories