What Kind of Entrepreneurship?

What is entrepreneurship? That depends on what kind you are talking about.

Yes, there’s more than one type of entrepreneurship, and each has unique implications regarding the skills, resources, and time it will take to meet your goals. Often times, the size and ambition of your goals will determine the type on which you choose to embark.

There are three main types of entrepreneurship: Rocketship, Lifestyle, and Intrapreneurship (Entrepreneurship Within the Corporation).

In this post, I am going to outline Rocketship Entrepreneurship and Lifestyle Entrepreneurship. Although there are several subtypes under these two, I will just give you an overview to get your cogs turning.

When I studied entrepreneurship in grad school and when I embarked on my most recent entrepreneurial venture, I was focused on the most visible, scalable, and most idolized form of entrepreneurship, something I like to call “rocketship entrepreneurship”.

I want you to sit back for a moment and think about the early space programs of the U.S. and Russia. If you are too young to remember this era, do what I did, and watch some documentaries about it on Netflix. To reach the goal of getting a rocket into outer space, the program teams invest millions of man-hours and billions of dollars planning, engineering, building, and testing every crevice of the rockets, engines, and support systems. Because of this, the barrier to entry into a a space program is very high. Not just any country has the resources and technical know-how to get to space. A big-time investor called the U.S. or Russian Government funds the program teams. Years go by without the world ever witnessing anything significant come out of the program, until finally, the rocket is ready to launch. It is heralded in the news and millions of people watch the magnificent, accelerating rise of the precision-built, high-dollar contraption. Some of them break the pull of the earth’s gravity, and some crash and burn (in this case, it’s more like explode, burn, crash, then burn some more).

Now that you have pictured this scenario, you have a good idea of what rocketship entrepreneurship is like. It’s what you see happen in grand fashion in Silicon Valley, and it’s the type of entrepreneurship that get’s funded by venture capital (well, about 1% of the time) and angel investors. As a rocketship entrepreneur, you have a big vision. Your product is something new and innovative, it’s not easy to do or build, and it must be scalable. In other words, you will need to invest a lot of time and money up front, planning, engineering, building, and testing every crevice of the product/service, business model, and support systems. At first, you will need one or more, smaller “seed rounds” of investment to get a minimum viable prototype of your product built. You will show this to a select group of customers for validation testing, but for the most part, the world will not see the magnificent rise of your business until hundreds of thousands or millions of dollars have been invested in your project team to get it ready. In this case, substitute the governments with venture capitalists. Just as it was with the early space programs, many rocketship startups crash and burn. The failure rate of these types of startups is very high, with about 3 out of 4 VC-funded companies failing, not to mention all of the companies who fail to obtain VC funding. Rocketship entrepreneurship can be extremely lucrative, but it is very risky because you can do everything right, but if you can’t get the proper funding, you will fail. After personally meeting this exact fate as a rocketship entrepreneur, I can tell you that this type of entrepreneurship is fun and exciting, but it comes with a heavy burden of responsibility – that of other people’s money. I can also tell you that if you absorb everything out of the experience you will learn more in a year about business and leadership than you would in five years climbing the corporate ladder.

Now, before you go to the basement to draw up plans for your rocketship, consider what I am about to tell you about lifestyle entrepreneurship as an option.

I used to scoff at the idea of lifestyle entrepreneurship. Why? Because I wanted to change the world, scale up, and exit for tens or hundreds of millions of dollars. I thought lifestyle entrepreneurship was for the less-sophisticated, small-time, and mom and pop shop type of operations, with owners who had unoriginal, unscaleable businesses. After two years of extremely hard grinding rocketship entrepreneurship and hearing many lifestyle entrepreneurs speak about what they have done and are doing, I have drastically changed my opinion.

Some of the most successful people in the world are lifestyle entrepreneurs. Many are millionaires, and also tend to live their lives according to their own terms. Many are extremely sophisticated and educated, and they offer innovative, groundbreaking value to the world. The selling point of lifestyle entrepreneurship is making modest to excellent money and having ultimate flexibility with your time, which is truly our most precious resource in life.

Lifestyle ventures typically don’t require much up-front capital to get your product or service to market and start making revenue. What that does mean is that there are lower barriers to entry, so there will be competitors – possibly many of them in whatever space you choose to enter. The really great part about it is that if you are creative and innovative, and if you know how to deliver exceptional value, you can beat the competition or even avoid them altogether. If there is a product or service that has remained unchanged for years or if customers tend to a pain with the current offerings, you can offer a better experience or change the business model to solve the current market’s pain. You can find a niche which is underserved and enter that market. You can also start an online business and reach hundreds of thousands or even millions of people with very little monetary investment up front. Many start a business on the side that offers passive income or run several ventures simultaneously. This type of entrepreneurship does require a lot of hard work, especially up front, but it does offer a flexibility that may not be present in a weighty multi-partner rocketship venture.

One of my professors and business advisors once told me a story about a guy who found an underserved niche market in making and selling custom window shades for private aircraft. He was never going to grow revenues into the hundreds of millions of dollars and have a grand exit, but he took home around a million dollars a year in his own pocket, and he took vacations as he pleased. He had the time to be involved in his community, and he never had to miss his grandkids’ baseball games. World-changer? Maybe not in the sense that I used to think of it, but how many people has he blessed with his time and energy or with his volunteerism and his monetary donations? He actually does make quite an impact on the world, and there are so many other lifestyle entrepreneurs who impact the lives of millions every day. Is it as exciting or grandiose as rocketship entrepreneurship? Perhaps not, but it certainly is not what I perceived it to be a few years ago. Lifestyle entrepreneurship builds more than monetary wealth. It also allows the time and flexibility to build relational and experiential wealth, the type of wealth money can’t buy.

If you aren’t quite sold on lifestyle entrepreneurship because it seems like a play in saturated or non-innovative markets, consider the fact that many small businesses and lifestyle ventures are riddled with mediocrity, with owners who are very comfortable and set in their ways, even if that means their customers are not getting the best possible service or solution. You can always find a way to provide better service, or operate more efficiently, or innovate, all of which will gain you market share and delight your competitors [former] customers.

So whichever route you choose for your next venture, keep these pictures of entrepreneurship in your mind when thinking through your next life-altering decision. Rocketships can fly high, but many explode, and they require loads of up-front resources before they will fly. Lifestyle businesses won’t reach outer space, but they can fly you to exotic places and can offer enough free time and flexibility to enjoy the scenery or work hard on other lifestyle businesses.

-Matt