A quick Q&A with a distinguished professor of entrepreneurship...
Bart Hamilton is the Robert Brookings Smith Distinguished Professor of Entrepreneurship in the Olin School of Business at Washington University in St. Louis. Widely published, his areas of expertise include health economics, microeconomics, industrial organization, entrepreneurship, human resource management, industrial relations and statistics/econometrics. He did his undergraduate work at the University of California – Berkeley and received his PhD from Stanford University.
Professor Hamilton was one of my favorite professors during my time as an undergraduate at Washington University. He made an effort to get to know each student, and that dedication has not gone unnoticed. He received the Reid Award for Olin MBA Teacher of the Year in 1999 and the Reid Award for Olin BSBA Teacher of the Year in 2008, as well as the Distinguished Faculty Award in 2011. He has worked with a wide variety of student entrepreneurs and real-world entrepreneurs, and is recognized as a true leader in the field. Professor Hamilton graciously agreed to share his experiences and answer some questions for iBi readers on this issue’s topic of entrepreneurship.
How did you become interested in entrepreneurship?
Both my grandfathers were highly successful entrepreneurs, and I have always been interested in what drove their success. How much of their success was their ideas, and how much was them? It is still hard to answer that question, but we often think the entrepreneur is perhaps more important than the idea, since ideas can be changed during the startup process, but the entrepreneur cannot!
What are some of the biggest challenges facing entrepreneurs in this day and age?
The usual challenge is finding capital to both start and grow the business. I also think a key issue is how to build the entrepreneurial team for an investible business. This is less important for a lifestyle business that does not seek outside funding. For a high-potential startup, a major challenge that I have observed is finding partners/team members that work well together and share similar objectives.
How has the development of the Internet and social media impacted entrepreneurs?
The Internet and social media have lowered the cost of entry to entrepreneurs. It is now much easier for new startups to reach their customers, both locally and globally. The problem startups then face is how to gain traction. While the Internet and social media has lowered the barrier to entry for them, it has also lowered the barrier for everyone else, so the entrepreneur has to be strongly differentiated from his or her rivals in order to attract customers.
What are the most common sources of funding?
The most common sources of funding are friends and family. In addition, many entrepreneurs “self-fund” their businesses, i.e., they use their accumulated profits to expand their business. Only a handful of businesses have angel investors or venture capital. These are high-potential businesses that show the potential to be acquired or have an IPO. Lifestyle businesses typically do not attract outside investors.
Have you seen common themes or characteristics in those entrepreneurs who have succeeded versus those who have failed?
Successful entrepreneurs generally solve a pain that is felt by many customers. The key factor for any startup is change. Customers have to change their current purchasing behavior to buy the new startup’s product. The entrepreneur has to have a product/service with such a strong value proposition that customers are willing to change to buy their product.
What are some resources that you recommend or find useful?
I really like a blog called “Anatomy of Failure,” since I think you learn a great deal by seeing what has not worked. Most startups fail, unfortunately, and there is a lot to be learned from those failures. iBi
Timothy Gronewold of Howard & Howard Attorneys concentrates his practice in commercial litigation as well as labor and employment law.