The Two Types of Entrepreneurs

Will Silverman Entrepreneurship, Founders Leave a Comment

We’ve all heard it before… “The world is filled with two types of people.” Dog people or cat people, vanilla people or chocolate people, Apple® people or Android® people (let’s just admit that Blackberry® people are too small to measure).  As it turns out, entrepreneurs can also be classified as two types of people:  replicative entrepreneurs, and innovative entrepreneurs.

The vast majority of founders you meet daily are replicative entrepreneurs. If your goal is to start a business that allows you to “make a living” then you are most likely a replicative entrepreneur.  If you plan to start a flower shop, a public relations firm, a store (brick & mortar or online), a law firm… anything that has already been done before, then let’s face it, you are replicating an already existing concept.  That being said, it doesn’t mean that you cannot introduce elements of innovation into your business.  It’s generally a good idea to incorporate innovation into any business to ensure that you have a differentiator against your competition.

Replicative entrepreneurs benefit by having well-established markets for their products and services, but clearly have competition for customers.  They may rely on advertising, public relations, local networking, word-of-mouth, or even their local chamber of commerce in their quest to secure customers.  They may need a source of start-up capital, especially if they use a physical location for their services, or have to buy inventory.  But, once they have been operating for some time, they can look to traditional sources of bank capital for loans to help them expand.

In sharp contrast, innovative entrepreneurs live in a very different world.  These individuals embrace and launch high-risk/high-reward ventures dependent on exponential customer growth, highly technological solutions to problems, and equity financing.  Most of us know the stories of many of these individuals, such as Steve Jobs (Apple), Mark Zuckerberg (Facebook), Elon Musk (Tesla, SpaceX), Travis Kalanick (Uber), or Jack Dorsey (Twitter, Square).

Innovative entrepreneurs live by the seat of their pants.  They start with a new idea, and may begin by building a prototype or MVP (minimal viable product) and try to get either seed funding or a small group of initial users.  Then, they iterate, and grow, while searching for the next round of funding, which comes at a higher company valuation.  At each stage of funding, the founder retains a smaller and smaller percentage of ownership in the company, with the goal being that their share is still worth more than after the previous round due to the explosive growth in customers.

Innovative entrepreneurs are attempting to build value in the company itself so that they can eventually achieve an “exit” by selling the company, or by going public in an IPO.  As they grow, profitability is not always a good thing, as they could invest that money back into growth, thereby achieving a higher valuation. As one innovative entrepreneur from The Launch Pad said, “If I fail to raise the next round of capital, my company is dead.” Fund and grow, or die.

In the end, there is no right or wrong to which type of entrepreneur you think you are.  You are who you are.  One other thing to recognize is that your business will naturally follow the course of either “replicative” or “innovative.”  When you are launching your venture, it’s always a good idea to ask yourself whether your venture matches who you are.  If you desire to be a replicative entrepreneur, you probably don’t want to start a company that by necessity puts you on the path of an “innovative” entrepreneur and vice-versa.  If you follow your type, you’ll likely be happier with the choices you make and the business you run.

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