This study explores an emerging debate regarding different types of entrepreneurs – novice, serial, and portfolio. Business performance differences among them are examined before discussing policy and practice implications.
Our research indicates that novice entrepreneurs place greater emphasis on cognitive naming when discussing their products; this has significant ramifications for venture capitalists when conducting funding negotiations.
What is a Novice entrepreneur?
Novice entrepreneurs tend to believe they will succeed with their project by basing their decisions on the information available, the beliefs or opinions of friends or acquaintances, and what others say about it. Unfortunately, these assumptions can often prove incorrect, leading to mistakes such as underestimating market sizes, overestimating profits potentials, or overlooking essential figures and analyses.
Beginner entrepreneurs may make the mistake of lying either intentionally or unintentionally when embarking on their venture. Such lies could involve leaving out key details, falsifying economic models or laws in effect and mislead others into undertaking projects they should not. Even innocent lies can have serious repercussions that ultimately end in project failure.
This paper compares the performance of new independent owner-managed businesses established by novice, chronic, and portfolio entrepreneurs in Scotland. Statistical tests reveal that novice entrepreneurs with no previous business founding experience are at an initial disadvantage; furthermore, targeting scarce entrepreneurial resources toward habitual and serial entrepreneurs may be problematic.
What is a Portfolio entrepreneur?
Portfolio entrepreneurs are an uncommon type of entrepreneur who runs multiple businesses simultaneously, distinct from serial and novice entrepreneurs in that they operate multiple businesses simultaneously and possess the capability to recognize multiple opportunities on a strategic level. Although portfolio entrepreneurs represent an integral component of small business enterprises, their role remains academically and practically understudied.
With qualitative interviews conducted on 11 portfolio entrepreneurs, we conducted in-depth investigations to gain an understanding of their activities. Our findings revealed that they operate in closely knit teams with delegated day-to-day management delegated to select employees; while realizing their portfolios may not always be profitable and being willing to exit underperforming businesses.
While business entrepreneurship experience plays a role in becoming a portfolio entrepreneur, it does not correlate to a more remarkable ability to identify and exploit multiple opportunities. However, it impacts whether and how quickly a portfolio entrepreneur starts their first venture.
What is a Serial entrepreneur?
Entrepreneurs with multiple businesses tend to start multiple ventures simultaneously, giving each business the best chance at succeeding independently. They tend to be highly creative and enjoy exploring various business ideas; their drive can often get them closer to achieving their goals; but managing all their ventures simultaneously can become overwhelming.
Problem solvers who possess an acute understanding of their markets tend to select industries they possess in-depth knowledge about and search for gaps they can fill to fill. Furthermore, these individuals remain optimistic while quickly adapting to market changes.
Elon Musk is an iconic example of serial or portfolio entrepreneurship. After founding Zip2 in 1995 and selling it later for $341 million, he quickly expanded into other industries with companies like X.com, PayPal, SpaceX, and Tesla Motors, later purchasing Twitter as well. A study concluded that novice entrepreneurs with solid entrepreneurial skills transition more easily into serial or portfolio entrepreneurs.
What is a Habitual entrepreneur?
This thesis centers around the concept of habitual entrepreneurs as its central theme. Multiple definitions exist within literature that often leads to apparent contradictions and inconsistencies. Therefore, an improved nomenclature should encompass various subgroups; this study provides this basis.
Additionally, portfolio and serial entrepreneurs are distinguished by examining their motivations for starting new businesses, their attitudes toward entrepreneurship, and how they utilize financial resources to launch these ventures.
Results show that inexperienced novices, portfolio entrepreneurs, and serial entrepreneurs each act differently when taking on new ventures, with policy-makers taking note. This has implications for policy-makers when targeting scarce entrepreneurial resources, yet its implications remain open to further investigation; furthermore, it remains to be investigated whether perceived stringency of labor market regulations differs between novice and habitual entrepreneurs as discussed by Moog and Backes-Gellner who noted how misperceptions regarding labor market regulations greatly affected student willingness to become self-employed.