Is American Entrepreneurship In Trouble?

Brandon Busteed, Executive Director of Gallup Education, believes our entrepreneurial spirit needs fixing--and has ideas on how to do it.

America wants entrepreneurs and successful businesses. Unless it doesn't.

I am reminded of this through my own entrepreneurial experiences, and most recently thanks to a Gallup survey of K-12 superintendents, who I think of as the leaders of America’s talent development machine. Turns out, a mere 4% strongly agreed their school district does a good job of teaching students about entrepreneurship. That is an absolute showstopper for the American economy.

This data and my personal experiences leave me terribly worried about the state of entrepreneurship in America right now. In 2012, fewer new businesses were started than in any other year in U.S. history. And yet, nearly all net new job creation comes from small and medium-size businesses less than five years old--in other words, from startups and entrepreneurs. Not Fortune 500 companies. And not the government. This country was built by entrepreneurs and by everyone who embraced the entrepreneurial spirit, whether they started a business themselves or not. My fear is that our country’s attitude about entrepreneurship has shifted. I have two personal stories that illustrate this:

Story No. 1: I started a venture-backed Ed Tech company called Outside the Classroom. We managed to grow revenue every consecutive year between 2000 and 2011--a remarkable feat during that stretch of time. And it was acquired for millions of dollars in 2011.

Story No. 2: I started an organization that raised millions of dollars to build an online intervention to prevent alcohol abuse and sexual assault among college and high school students--one of the largest public health issues of our time. The organization’s flagship intervention, AlcoholEdu, has now been taken by more than 5 million students and was proven effective at reducing binge drinking, drunk driving, and alcohol-related sexual assaults, according to a federally funded national control study.

Both stories are true. They are actually the same story, just summarized in different ways. Here’s what’s also true:

In story No. 1, everyone assumes that it was an outrageous success, until they hear that I never made any money on the transaction and that many investors--so far (they still hold equity in the acquiring company--have lost some of their money, too. When the company was acquired, I received a check for $6,532 (not a typo), which was the remaining value of Series C stock I had received in lieu of voluntarily reducing my salary by 20% for two years. The Series A and B stock that I purchased with money I inherited from my grandmother (a legendary figure of frugality and hard work who, for 23 years, lived off the interest on the principal of her small nest egg left by my Nebraskan cattle-farming grandfather, and who was known to melt down small pieces of hand soap to make new bars) was almost an entire loss. I leveraged everything I had, toiling for more than a decade, and it resulted in a big fat zero of personal financial wealth. If you read story No. 1 in this light, you could fairly say it was a failure.

In story No. 2, everyone assumes it was an outrageous success, too. But when you realize the story was about a for-profit company and not a “pure” and “mission driven” nonprofit, it changes the tone. If I had a nickel for every time we were doubted, questioned, or treated with ill will because of our tax status, I actually may have achieved that elusive personal financial windfall. If we had been a nonprofit, though, I’m convinced the team behind it and the organization itself would win lifetime achievement awards. But because it was a for-profit company, people treated it with mild respect at best and contempt at worst. How dare we make money doing something good, like preventing alcohol abuse?

If you are down about the reality of the outcomes in my stories, don’t be. I’d do it all over again in a heartbeat. It would have been nice, for sure, to make a personal financial windfall from my efforts. But that’s not the primary motivator for why I started my company--nor will it ever be a motivator for me. And for most great entrepreneurs in the world, it was never their primary motivator, either. I didn’t care if I started a company or nonprofit; I simply chose the only viable path to achieve an outcome I was after--in this case, tackling a massive public health issue. Turns out I went 0-for-17 writing grants to fund it as a nonprofit. When that failed, I wrote a business plan, came up with a viable revenue model, and raised capital from investors. It was not a coincidence that our for-profit model was what made for a successful social mission outcome. Our bottom line was the same, though. If we didn’t reduce binge drinking (social mission) for our clients, they didn’t pay us (profit motive).

Today, we mainly think of entrepreneurs as business people who make lots of money. Many school leaders and educators I meet with, for example, love the idea of infusing an “entrepreneurial spirit” in all kids, but most resist the idea of encouraging business entrepreneurs. That’s ironic, because most of the transformative gifts to schools and colleges come from business entrepreneurs. First, it’s important to acknowledge there are all kinds of entrepreneurs out there, and most of them don’t make millions. In fact, most of them probably sacrifice a lot to everything in the process of starting an organization. A growing number are “social entrepreneurs,” who start nonprofit organizations. And many are doing what I did--starting for-profit companies with deep social missions. But we have managed to draw lines in the sand on all this. Success for a business is how much money you make. And success for a nonprofit is how much good you do. But if one does the other, there is virtually no respect for that in this country right now. And that needs to change in a hurry.

We have always been taught in school about the notion of “three sectors of society”--government, businesses, and nonprofits. And we assume that government is about making policy, business is about making money, and nonprofits are about doing good. We are all failing miserably right now, because we continue to buy this antiquated vision of society. The organization of the future--at least, the world-class organization of the future--will make no distinction between these sectors and functions. You won’t be able to tell what their tax status is. They will be involved in thoughtfully contributing to public policy, generating their own self-sustaining revenue, and doing good--all at the same time. I am proud to have built one of these kinds of organizations, and I’m proud to work for one now.

Entrepreneurs are the fuel behind everything great this country has and will accomplish. If our attitude about entrepreneurs is linked solely to the idea of business people making money, we fail. If we think that government can’t be entrepreneurial or that nonprofits can’t make money, we fail. And if education leaders are reticent to embrace the identification and cultivation of entrepreneurial talent in our schools, we fail miserably. Gallup has found that 43% of all U.S. students in grades five through 12 plan to start their own business someday. Yet, only 7% of them have any kind of mentor, internship, or real job experience to help them to do so.

Whether they achieve personal wealth or not, entrepreneurs create jobs, change paradigms, inspire new thinking, and contribute more good to society than we can possibly measure. Let’s not give entrepreneurship a bad name by thinking it’s only about money. And let’s not allow ourselves to assume that only nonprofits can do good. Nor that only government can shape public policy. One of Thomas Jefferson’s most profound thoughts was that democracy’s success hinges on the concept of “self-interest, rightly understood”--the idea that maximizing for oneself is connected to maximizing the common good. If we want to revitalize the American economy, our country and school systems need to embrace entrepreneurship, rightly understood.

We all need a new bottom line: to do well and do good.

--Brandon Busteed is the Executive Director of Gallup Education.

[Image: Flickr user Ayolt de Roos]

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2 Comments

  • Bruce Cichowlas

    I agree with most of your points based on my own experience as a serial entrepreneur, not always financially successful.  I don't know that the nature of entrepreneurship is represented more inaccurately now than it has been in the past.  When I started my first tech company, I felt I had no real model.  Perhaps if I had gone to a business school, I would have had one, but in my tech schooling no one had talked about when it might be a good idea to start your own company and how you might do it.

    My mother wondered whether it was even legal.  "Will IBM be alright with you doing that?"  Later, it was a continual source of friction from some relatives wondering with my talent, why didn't I take a legitimate job where I could probably do well.  When one of my business endeavors failed and I went to "working for someone else", I got calls from relatives of how relieved they were, how they had not wanted to say anything and that they knew I would "see the light" after working for some larger company.

    But I think it is important to enable kids in technology, whether in computers or music.  I want them to look at a computer or a musical keyboard and not be intimated by its apparent complexity, but rather say "This is something I know how to use."  Or in fact, "I can express my creativity through this."  I teach technology to elementary school kids two mornings a week.  But other that that I am trying to achieve those goals through "for profit" enterprises.  My current one is called "Real Keys Music".