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Former Yahoo CEO Jerry Yang in happier days at the Las Vegas Consumer Electronics Show in 2008. Mr. Yang announced Jan. 17, 2012, that he is leaving Yahoo. The surprise departure comes just two weeks after Yahoo Inc. hired former PayPal executive Scott Thomson as its CEO. (Paul Sakuma/AP/Paul Sakuma/AP)
Former Yahoo CEO Jerry Yang in happier days at the Las Vegas Consumer Electronics Show in 2008. Mr. Yang announced Jan. 17, 2012, that he is leaving Yahoo. The surprise departure comes just two weeks after Yahoo Inc. hired former PayPal executive Scott Thomson as its CEO. (Paul Sakuma/AP/Paul Sakuma/AP)

Small Business Briefing

'User entrepreneurs' behind many innovative companies: study Add to ...

The latest news and information for entrepreneurs from across the web universe, brought to you by the Report on Small Business team. Follow us on Twitter @GlobeSmallBiz. Download our app here.

Nearly half of most innovative firms founded by those who create products for own use first

Entrepreneurs who create innovative products or services to answer to their own needs first then go on to build some of the most innovative companies, a study suggests.

More than 46 per cent of innovative startups that have lasted five years or more were created by "user entrepreneurs" -- those who developed products or services for their own use, then founded firms to commercialize them, even though they account for just 10.7 per cent of all U.S. startups, a study by the Ewing Marion Kauffman Foundation finds. "Innovative" startups were those that had performed R&D during their first year of operation.

Such companies have "ignited technological change in industries ranging from medical devices to sports equipment to juvenile products," said Sonali Shah, assistant professor and Buerk Fellow at Foster School of Business, University of Washington, and co-author of the report in a release about the study.

"Their incentive is to build something better for their own use. As a result, they are able to create truly novel innovations. When they commercialize these innovations, we all benefit," Prof. Shah wrote.

The user entrepreneurs studied were split into three categories: "end-user entrepreneurs" who developed products or services for personal use; "professional-user entrepreneurs" who developed products or services for business use; and hybrids. The report's authors looked at nearly 5,000 firms founded in 2004.

Among well-known firms cited by the study as having been founded by user-entrepreneurs was Yahoo, co-founded by Jerry Yang and David Filo.

"User entrepreneurs are different from other entrepreneurs," added co-author E.J. Reedy, Kauffman Foundation research and policy fellow. "It is clear that these entrepreneurs are coming into their businesses with more tangible ideas, innovations or customers to build a successful firm."

Crowdfunding dissension

While crowdfunding is getting a lot of attention as a new way for companies to raise money, and U.S. legislators are working to make it easier, at least one voice of dissent has raised a warning: Companies that later want to raise large chunks of money may face obstacles if they already have a lot of investors who own tiny chunks, according to this piece in Bloomberg Business Week.

Catherine Mott, chair of the Angel Capital Association who sits on a U.S. Securities and Exchange Commission advisory council for small businesses, says crowdfunding might work for companies that don't intend to go back for more funding. But for startups that will need to raise large amounts, she contends that venture capitalists "will just move on to the next big deal" rather than have to deal with the complications caused by crowdfunding, such as having to get a bunch of small investors to approve new funding. “It can have a very perverse impact on high-growth companies,” she is quoted in the story as saying.

Must-see movies for entrepreneurs

The National Federation of Independent Business -- the "voice of small business" -- has created a top 10 list of movies it believes every entrepreneur should see. It says entrepreneurs can learn from its flick picks, which "can actually help them think like better business owners."


Cracking the U.S. market

For companies that would like to crack the big U.S. market, Small Business BC is hosting a seminar called "small business strategies for USA marketing and trade initiatives. The seminar will help participants define their U.S. market and introduce basic esssentials of marketing and logistics. It takes place on March 13 in Vancouver and will be sent via videoconference to other locations. For more information, click here.

Boot camp for small business

For small business owners looking to boost their business, the Greater Victoria Chamber of Commerce is offering a boot camp, offering informative sessions on everything from writing a business plan to creating an online presence that can help to run a business better. The event, sponsored by KPMG, takes place in Victoria, B.C., on March 29 and March 30. For more information, click here.


More pro athletes play franchisees in sports afterlife

Phoenix Suns points guard Steve Nash is among a growing number of pro athletes who are moving into franchising in preparation for life after their sports careers end. Some may look to franchising as a way to provide a future living, others who are financially set for life may want to continue a legacy and compete on a different stage.


Dealers or franchisees: how to choose

Dealerships aren’t a new concept, but the model often takes a back seat to franchising, a more popular way of expanding a business, a story recounted last July. Deciding whether to expand via a dealer network or franchise model depends on a number of factors that were examined in the story.

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