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Entrepreneurship is about extraordinary value creation and capture: Daniel Isenberg

Originally published on Business Standard, August 19 2013

A big challenge is to help entrepreneurs and investors ‘discover’ that it is mutually beneficial to engage, Isenberg tells Ankita Rai

You say, ‘Entrepreneurship and the process of betting on it are contrarian in nature’. Does that explain the scarcity of capital for new ventures? 

It depends on the environment. In general, however, it does not require much capital to scale in any given market. All the low-income markets that I have seen have sufficient liquidity to support the growth. The bigger challenge is to help entrepreneurs and investors ‘discover’ that it is mutually beneficial to engage. In many cases, the ecosystem (for example, exit or liquidity possibilities for investors) is also limited as to retard the flow of capital to entrepreneurial ventures. The role of the government is to make exits easier. The easier the exit, the more natural the entrance will be.

Entrepreneurs are often mistaken for inventors. Do entrepreneurs have to be innovators to succeed? Do imitators make good entrepreneurs?

Entrepreneurship is about extraordinary value creation and capture. In the book you will find many examples of successful entrepreneurship without any innovation at all. These two processes can be considered conceptually distinct. The copy cat ventures – see the section on Cinemex in the book – can also create a tremendous amount of value for consumers, investors and societies. Imitators can make good entrepreneurs. So can innovators. But both can fail.

Is the first mover advantage over-hyped? 

Even in technology-based enterprises, the technology per se only gives a temporary competitive advantage. If it is not supported by good leadership, organisation, marketing and finance it will be useless.

There are many times when being the first mover can be a disadvantage. The critical variable is not technology, but how much behaviour change is required to bring a product to market. In many cases, so many parties have to change their customer behaviour that the barrier to create a market is either too high or requires too much time and money to be effective.