money requires careful market research, well
thought-out business plans, top-notch founding
teams, sagacious boards, quarterly performance
reviews, and devilishly complex financial structures. It is an environment in which analytical, buttoned-down professionals can make a seamless
transition from the corporate world to the world of
entrepreneurship. It is not the real world of the
Without question, some start-ups powered by
other people’s money have rocketed to success.
Mitch Kapor raised nearly $5 million of venture capital in 1982, enabling Lotus to launch 1-2-3 with the
software industry’s first serious advertising campaign. Significant initial capital is indeed a must in
industries such as biotechnology or supercomputers
where tens of millions of dollars have to be spent on
R&D before any revenue is realized. But the fact is
that the odds against raising big money are daunting.
In 1987—a banner year—venture capitalists
financed a grand total of 1,729 companies, of which
112 were seed financings and 232 were start-ups. In
that same year, 631,000 new business incorporations were recorded.
Does this disparity mean that the United States
needs more tax breaks, aggressive investors, and
financially sophisticated entrepreneurs to channel
venture capital to more start-up companies? Not at
Entrepreneurship is more celebrated, studied, and
desirable than ever. Business school students flock
to courses on entrepreneurship. Managers, fearful of
losing their step on the corporate ladder, yearn to
step off on their own. Policymakers pin their hopes
for job creation and economic growth on start-ups
rather than on the once-preeminent corporate
Belief in a “big money”...