2015 will be the time to start a business. Here’s why and how.
Around the world we are facing unprecedented unemployment – even in the developed world. Youth are particularly hard hit. In 2014 more than 1.6 million students graduated from American colleges and universities. Many moved directly into the swollen ranks of the unemployed. After taking on enormous debt to finance their studies, they ended up competing for unpaid internships or low-paying jobs for which their education is irrelevant. This violates the tacit pact made with them: If they were industrious, law-abiding and diligent students, their lives would be prosperous.
The U.S. isn’t alone. According to the International Labor Organization, youth unemployment in most of the world is stuck at about 20 percent. “Young people [are] nearly three times as likely as adults to be unemployed,” says the ILO. In Spain more than 50 percent of young people are unemployed, in Italy it’s 35 percent, and in France the rate is more than 25 percent. When considering under-employment, these numbers could be doubled.
Such unemployment is corrosive to all societies, no matter what their level of development. All citizens want to play a productive role and contribute to their community. Unemployment gnaws at an individual’s well-being, and makes them feel surplus to society’s needs.
But traditional methods of job creation are stalled.
One of the keys to solving this problem is entrepreneurship. Research shows that 80 percent of new jobs come from companies 5 years old or less. So the need for entrepreneurs has never been greater, in both developing and developed countries. When given the right conditions to flourish, entrepreneurs are the foundation of growth, prosperity and even innovation. They bring fresh thinking to the marketplace and fuel the creative destruction that makes market economies prosper.
In addition to creating jobs, new companies are the foundation of the economy and the source of much innovation. They also create the new goods and services on which our standard of living is based. The Internet slashes transaction and collaboration costs for almost every institution in an economy. This is leading to a change in how societies orchestrate capability to innovate, create goods, services and public value. With such costs falling precipitously, companies can increasingly source ideas, innovations and uniquely qualified minds from a vast global pool of talent.
Many big companies benefit from startup entrepreneurship. They acquire small companies with great innovations rather than relying solely on their research and development departments. As the new saying goes, M&A is the new R&D. Entrepreneurship is also critical to social cohesion and avoiding the radicalization of youth and their recruitment to anti-social and dangerous causes.
Waiting for governments or big companies to solve the problem is not the answer. Necessity is the mother of invention. Is it time to take the bull by the horns and make your own job?
The best thing I ever did in my professional life was to become an entrepreneur. It was tough, but it worked out well for me and I have a life of influence, prosperity and fun beyond anything I ever dreamed. Here’s my advice to you.
- Create a business with customers. This may sound silly but so many startups are focused on getting traffic to their site, going viral or getting traffic to their website. Peter Drucker said years ago: “The purpose of any business should be to create a customer.” Create some value that a customer would want to pay you for. As for funding listen to Tony Hsieh the CEO of Zappos, who said: “Chase the vision, not the money; the money will end up following you.”
- Don’t seek venture capital. These days virtually no venture capitalist invest in a business plans or even early-stage companies. Besides, you don’t need them. Fortunately, it is less costly than ever to create a company. Thanks to the Internet, little companies can now have all the capabilities of big companies, without the main liabilities: stifling bureaucracy, legacy culture and processes. Talent can be outside enterprise boundaries and companies can use the new media to market and engage stakeholders in radically new, low-cost ways. One study found that readily available resources such as open-source software, cloud computing, and the rise of virtual office infrastructure has driven the cost of launching an Internet venture down from $5 million in 1997 to less than $50,000 in 2008. The best is to have a product or service that generates initial revenue so you don’t have to borrow money or give away equity. Or get a loan or small investment from your family or friends.
- Consider crowdfunding. The Internet offers a new solution for companies seeking capital, based on peer-to-peer networks that bring people together to achieve a common goal. New firms can source capital in new ways, and it should be no surprise that a young business builders are harnessing the power of mass collaboration to fund their companies. Individuals and new companies have used crowdfunding to raise billions of dollars in debt and equity during the past five years. In 2012, crowdfunding raised almost US $2.7 billion around the world, an 80 percent increase over the year before. Since 2009, Kickstarter has channeled more than US $815 million to nearly 50,000 projects. The early success of crowdfunding in the developed world shows how much potential this new way of raising capital has for aspiring entrepreneurs in the developing world. No jobs? Take a page from my daughter and her best friend who created Knixwear, a company that makes high-performing underwear for women. (“Women are multi-taskers, their underwear should be too”). Their crowdfunding campaign not only raised capital, it lead to a big deal with one of their most important target retailers. A year later, the company is a rocket.
- Consider being a social entrepreneur. With the rise of social entrepreneurship – businesses that seek to create social good – there are vast new opportunities to advance social development, sustainability and justice that supplement the efforts of traditional government and civil society institutions. Governments are increasingly inept at solving societal problems. So increasingly it’s up to us. I’m constantly inspired as I travel around the world by the new generation who want to do well by doing good.
- The Internet enables startups to focus on what you do best. Partner to do the rest. Companies such as Amazon are opening up their technology infrastructures to create an open stage where large communities of partners can create value, and in many cases, create new businesses. They set a context for innovation and then invite their customers, partners and other third parties to co-create their products and services.
- Don’t give up. From my experience, the conventional wisdom is correct — not banal. “Ninety percent of everything is just showing up.” “Success is 90 percent perspiration and 10 percent inspiration.” Or as Winston Churchill said, “If you’re going through Hell, keep going.”It’s a lot of hard work to build a business. But if you’re like me or the women at Knixwear, it’s worth it.
This Influencer post originally appeared on LinkedIn. Don Tapscott shares his thoughts as part of LinkedIn’s Influencer series, “Big Ideas 2015” in which the brightest minds in business blog on LinkedIn about their predictions on ideas and trends that will shape 2015. LinkedIn Editor Amy Chen provides an overview of the 70+ Influencers that tackled this subject as part of the package. Follow Don Tapscott and insights from other top minds in business on LinkedIn.