The average lifespan of companies is shrinking alarmingly; it is currently just under 10 years, with up to 80 per cent of start-ups failing within five. This is worrying because entrepreneurship is the backbone of our economy and prosperity.
The main reason for this negative development is that there are fewer and fewer destined entrepreneurs! Instead, neo-managers are increasingly occupying this field, driven by the supposedly great fad of founding start-ups. Many start-ups are only founded because of subsidies or funding from yield-hungry investors. The majority of them are not set up for the long term.
The millennia-old classic idea of the entrepreneur planning for a family business that will last for generations, which made the European economy so robust, is increasingly going to the dogs.
This new-fangled, locust-plague-like culture of entrepreneurship is not sustainable. It causes long-term damage to our economy and resilience of competitiveness. Unfortunately, politics and the education sector are also fuelling this aberration.
Neo-managers, prestigiously often referred to as “co-founders” or, erroneously, even as “entrepreneurs”, usually bear only an asymmetric risk because they hardly assume any liability or responsibility. They work predominantly with OPM (other people’s money), which is why their share in the company gets diluted with each round of financing. Soon they will no longer own the majority of the company and can’t call the shots, nor will they in the future. Their family is not involved, so there is little emotional long-term commitment there.
In the case of the classic vocational entrepreneur, on the other hand, he is ultimately liable as the majority owner, takes an entirely different kind of risk and, therefore, puts his heart and soul into ensuring that his company is successful. Otherwise, he will go under with all his might.
With neo-managers, the self-image is entirely different. Whether they do well or not, they get handsome salaries and bonuses whatever they achieve. Should things work out well, they get exit payouts or gratuities on top, then they disappear and move on.
Steve Jobs, the father of the world’s most valuable company to date, Apple ($3 trillion), was unequivocal about this in his biography: “I hate it when people call themselves ‘entrepreneurs’ when what they’re really trying to do is launch a start-up and then sell or go public, so they can cash in and move on. They’re unwilling to do the work it takes to build a real company, which is the hardest work in business”.
“Sustainable, robust development needs nurturing and care, a constant unfolding”
The sustainable basic idea of classical entrepreneurship is based on organic growth and means starting small, with a few people, small structures and a manageable financial volume and commitment.
Organic growth takes time. You cannot accelerate the growth of a blade of grass or a tree to a few seconds. Sustainable, robust development needs nurturing and care, a constant unfolding. Everything artificially hyped, pushed and accelerated overtaxes the market or entrepreneur.
This is most evident with influencers: they start alone, then rapidly do numerous things with a team on five channels; they are broadcasting online every two hours. In five years, they have burnout or interest in them burns out and the business collapses. It makes little sense for Europeans to go the American way or turn some countries into a new China, Singapore or South Korea. In the end, everything copied is never as unique as the original.
Meanwhile, many high streets in cities look the same, have the same restaurant chains, shops, brands, lettering and shop windows. Is that better than before? Do we want a New York, Shanghai or London everywhere? No!
Let’s remember what makes us special: for ‘good old Europe’, the ‘good old European way’ is just right. In Europe, we build solid houses for generations that can withstand storms. An American builds his house within weeks but a tornado also mows it down in an hour.
These are simply different cultures, different understandings. We as Europeans have many strengths, competencies, talents and rich history. We should also urgently strengthen the regional component again.
The pandemic has shown us how quickly globalisation stutters. More regionality does not make us completely self-sufficient, however, it promotes our economy’s resilience and reduces dependency.
It is time to make our ecology and economy sustainable: perhaps the good, beautiful old days were such after all and many good things could be re-embedded in the modern world. This also applies to the tried and tested classic, resilient entrepreneurship. Because what is called modern is not always an improvement.
Reinhold M. Karner, FRSA, is an entrepreneurship and start-up evangelist, multiple chairman (e.g. AP Valletta), entrepreneur, author, university lecturer and fellowship connector of the Royal Society for Arts, Manufactures and Commerce (RSA) for Malta and Austria.