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Entrepreneurship Is Our Revolution

Steve Blank
Tuesday, 15 Nov 2011 | 2:20 PM ET
Photo: Trevor Williams | Getty Images

This Thanksgiving season, it might seem there’s less to be thankful for. One out of eleven of Americans is out of work. Many pundits say the American dream is dead and see further decline of the West, particularly the United States.

My prediction: this decade may well be our country’s finest hour, the beginning of an economic revolution as important as the scientific revolution in the 16th century and the industrial revolution in the 18th century.

This entrepreneurial revolution will permanently reshape business as we know it and, more importantly, change the quality of life for all who come after us.

Barriers to Entrepreneurship

Startups’ rate of innovation was once constrained by limitations we only now understand. Startups faced long development cycles, high development costs, staggering failure rates and slow technology adoption curves. What’s more, they lacked expertise on how to build startups. Nearly all the limits to startups and innovation have been removed. Starting now.

The time to build a first product release was once measured in months or even years. But today’s startups launch with a minimum feature set in the shortest period of time. Today, on the web, a first product can be shipped in weeks rather than years, and built for thousands rather than millions of dollars. Open source software has slashed development costs. The cost of getting the first Internet commerce product out the door has dropped by a factor of a 10 or more in the last decade.

This rapid change has shaken up the venture capital industry. New groups of VC’s, super angels, smaller than the traditional large VC fund, today make small investments necessary to launch a consumer internet startup. They make lots of early bets and double-down when early results appear, often quickly. Incubators like Y Combinator, TechStars and 200-plus others worldwide have begun to formalize seed-investing. And VC and angel investing is no longer U.S. or Euro-centric. Risk capital has emerged in China, India, and other countries. In sum, the worldwide pool of startups has increased at least ten fold in a decade.

Entrepreneurs today understand that startups are not simply smaller versions of large companies. While companies execute business models, startups search for a business model. Instead of adopting the management techniques of large companies, which too often stifle innovation, entrepreneurs began to develop their own management tools. Using the business model / customer development / agile development solution stack, entrepreneurs first map their assumptions (their business model) and then test these hypotheses with customers outside in the field (customer development) and use an iterative and incremental development methodology (agile development) to build the product. When founders discover their assumptions are wrong, as they inevitably will, the result isn’t a crisis, it’s a learning event called a pivot — an opportunity to change the business model. The result: startups now search for customers far faster, reduce time to market, and slash the cost of development.

When It’s Darkest Men See the Stars

Our economic downturn has had an unexpected consequence for startups — it has created more of them. Young and old, innovators who are unemployed or underemployed now face less risk in starting a company.

It’s possible we’ll look back to this decade as the beginning of our own revolution. It may even be the dawn of a new era for a new American economy built on entrepreneurship and innovation. One our children will look back on and marvel that when it was the darkest, we saw the stars.

Steve Blank is an entrepreneurship professor at U.C. Berkeley and Stanford University, and authored "Four Steps to the Epiphany," about building early stage companies.