Investopedia: What is an 'Entrepreneur'?

Academy
Entrepreneur

What is an 'Entrepreneur'

An entrepreneur is an individual who, rather than working as an employee, runs a small business and assumes all the risks and rewards of a given business venture, idea, or good or service offered for sale. The entrepreneur is commonly seen as a business leader and innovator of new ideas and business processes.

Entrepreneurs play a key role in any economy. These are the people who have the skills and initiative necessary to take good new ideas to market and to make the right decisions that lead to profitability. The reward for taking the risk is the potential economic profits the entrepreneur could earn.
VIDEO
Loading the player...
BREAKING DOWN 'Entrepreneur'

Economists categorize the resources that go into production as either land (natural resources), labor, capital or entrepreneurship. An entrepreneur combines the first three of these to create goods or provide services. An entrepreneur typically creates a business plan, hires labor, acquires resources and financing, and provides leadership and management for the business.

Entrepreneurs commonly face many obstacles when building a business. Three common obstacles that many of them cite as the most challenging are: overcoming bureaucracy, hiring talent and acquiring financing.
Financing New Ventures

Given the riskiness of a new venture, the acquisition of financing is particularly challenging, and many entrepreneurs overcome this obstacle by bootstrapping. Bootstrapping refers to financing a business using methods such as owner funding, providing sweat equity to reduce labor costs, minimizing inventory and factoring receivables.

While some entrepreneurs are lone actors struggling to get small businesses off the ground on a shoestring, others work with additional founders, armed with greater access to capital and other resources. In these situations, businesses may acquire financing from venture capitalists, angel investors, hedge funds, crowdsourcing or through more traditional sources such as bank loans.
Entrepreneurial Ecosystems

Entrepreneurship is a critical driver of innovation and economic growth. Therefore, fostering entrepreneurship is an important part of the economic growth strategies of many local and national governments around the world. To this end, governments commonly assist in the development of entrepreneurial ecosystems, which may include entrepreneurs, venture capitalists, and government-sponsored programs to assist entrepreneurs, These may also include non-government organizations, such as entrepreneurs' associations and education programs.

For example, California's Silicon Valley is often cited as an example of a well-functioning entrepreneurial ecosystem. The region has a well-developed venture capital base, a large pool of well-educated talent, especially in technical fields, and a wide range of government and non-government programs fostering new ventures and providing information and support to entrepreneurs.
Bootstrap
Share
Video Definition

Bootstrap is a situation in which an entrepreneur starts a company with little capital. An individual is said to be boot strapping when he or she attempts to found and build a company from personal finances or from the operating revenues of the new company.

Compared to using venture capital, boot strapping can be beneficial, as the entrepreneur is able to maintain control over all decisions. On the downside, however, this form of financing may place unnecessary financial risk on the entrepreneur. Furthermore, boot strapping may not provide enough investment for the company to become successful at a reasonable rate.
BREAKING DOWN 'Bootstrap'

The term itself originates from the phrase "pulling oneself up by one's bootstraps," and professionals who engage in bootstrapping are known as bootstrappers. These individuals typically rely on personal savings and the earliest instances of revenue to begin funding their own startup companies. This contrasts with other entrepreneurial actions, which may include contacting external investors and other business professionals to begin funding their operations.
Read More +

    Work With Investopedia
    About Us Advertise With Us Write For Us Contact Us Careers

© 2017, Investopedia, LLC. Feedback All Rights Reserved Terms Of Use Privacy Policy