Entrepreneurs: How to pick a winner

Luke Johnson
Risk Capital Partners

ENTREPRENEURS ARE a poorly understood breed. If academics, investors, civil servants and politicians were more familiar with the entrepreneur tribe, returns on capital would improve and industrial policy would be more effective. Founders are by nature individualistic and hard to analyse. Literature on the subject is neither extensive nor profound; given the importance of entrepreneurs to job and wealth creation, it is a costly omission. Academics have tried over the decades to categorise entrepreneurs to provide insight into their motivations and likelihood of success.

For example, Robert Hornaday proposed a simple division between ‘craftsmen’, ‘promoters’ and ‘professional managers’. The first type take great pride in the technical aspects of their products; the second are ‘wheeler dealers’ who concentrate on making money; the final sub-species have a structured approach to their trade, adopting many of the habits of large corporations. Craftsmen are passionate about quality, but often insufficiently ambitious. Promoters lack a long-term perspective. Professional managers can build scale, but may be too inflexible.