Entrepreneurs: Not Who You Think They Are

07/23/2010 11:26 am ET | Updated May 25, 2011

If I say "entrepreneur," whose image flashes into your head? Is it Mark Zuckerberg, who founded Facebook barely out of his teens? Is it a bunch of brash twentysomethings coding madly on their way to Silicon Valley stardom? If you're a young mother, as I am, it might be that other working mom who just happened upon a million dollar idea while she was whipping up organic baby food in her kitchen. Guess what: none of these stereotypes fits the typical American entrepreneur.

The obsession with venture capital funded entrepreneurship, the big exit, the genius nerd working 24-7 on code is misplaced, and it's really holding women back. About 41% of U.S. private companies are female-owned, but only 3 to 5% of them get venture funding, according to the Center for Women's Business Research. But most successful businesses are not VC-funded, and they are not overnight sensations.

I recently started a small business. This is not a venture capital type of business. This is a business that I started to earn a decent living, enjoy the fruits and flexibility of being my own boss, and hopefully do some good in the world. I only hope it will be what people dismissively often call a "lifestyle" business. A lifestyle business, in VC terms, is a business that will not return the multiples a venture capitalist needs to justify an investment. It is a venture that might support its founder and staff, but is not going to be the next Google. This definition is perfectly reasonable if you are a venture capitalist: after all, you need to make money. And we need Google and Facebook. But we need other businesses too. And there is a meme out there in the business literature that women are hamstrung by the desire to create lifestyle businesses, that we're thinking too small. An investor recently said to me, "You see women starting lifestyle businesses. They are capable of growing large businesses, but they want to stay small. And if that's what they want, that's fine." The implied message is that women won't change the world by simply starting lifestyle businesses; new research shows that may not be true.

I was lucky enough to be at a small meeting at Harvard this week with Vivek Wadhwa, plus women entrepreneurs, VC's, and academics. Wadhwa, an entrepreneur turned academic who teaches at Duke and Harvard, shared work he has been doing with the Kauffman Foundation. The results show that entrepreneurs don't have to be born; they can be made. And they don't even have to be young!

Spending time with Wadhwa changed my thinking and I realized, perhaps it's our very image of an entrepreneur that holds women back.

Vivek has been researching what makes an entrepreneur. It turns out they mostly come from the workforce, they are older than we might expect--middle aged--they have families, and want to make it big before it's too late.

And here's the thing about women: Wadhwa's research finds that the profile of successful women entrepreneurs is the same as men. There are some differences: women are more conservative, women rely more on business partners, and need more encouragement than men do. But the life circumstances that lead them into entrepreneurship are not different. Wadhwa includes, "By almost every metric you look at, women-led companies do better than men do. And we're handicapping these women."

Wadhwa says too many decisions are guided by the stereotype that the ideal entrepreneur to invest in is Mark Zuckerberg. The people who get encouragement are those young brash white males. The vast majority of founders of companies that have made America what it is are not Zuckerberg. And, says Wadhwa, you end up leaving out half the population if you fund based on stereotypes.

On his blog A VC, Fred Wilson quotes entrepreneur Tereza, who provides a potential solution to the example of Y Combinator, a legendary tech incubator that has funded lots of successful (male) young tech entrepreneurs:

"Y Combinator participants are for the most part very young -- in their early 20's. This is not when women would be most inclined. Women who start businesses like to know what they're doing, and be trained and experienced in it. That takes up our 20's. We have kids in our 30's. Our entrepreneurial sweet spot is around age 40. Conventional tech investors are not really into this group and the metrics they look for are really hard for these people to hit. Most of the (few) women's businesses that go big were funded by friends & family or strategics, not traditional angels and VCs."

If most successful businesses started by women who are older and rely on the dollars of families and friends (or try to grow the business from revenue) why do we promote the mythology of the VC-funded firm? Wadhwa suggested that perhaps we should encourage "lifestyle" businesses that encourage women to give a piece of profits to investors over time: He says this would create more jobs over time and encourage long term investment and growth. Sounds like the American dream to me. Now we need to build media and social media energy around changing the VC myth; Rachel Sklar is helping to get this started with Change the Ratio here.

It all comes down to how you define a successful entrepreneur, in the culture, in the media, and among ourselves. Very few are multi-million dollar venture funded efforts, but they can grow to be multi-million dollar businesses. Or not, and that's fine too.