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their markets are too small or the pace of growth is too slow. Nonetheless, the entire entrepreneurship ecosystem and its resources are focused on the 1 percent that is “fundable.” Incubators take pride in how exclusive they are and how many entrepreneurs they reject. Star angel investors like Mike Maples in Silicon Valley get more than 7,000 deals a year and invest in 10 to 12 at most.
In the process, these naïve entrepreneurs ignore the constituency of greatest significance: their customers. They fail to understand that customer money equals revenue, something that helps them become self-sustaining rather than dependent on investors.
The prevailing ecosystem fails to appreciate that entrepreneurship = (customer + revenue + profits); financing is optional.
In the next stage of capitalism’s evolution, we need to dispel this myth. We need to educate millions of entrepreneurs on how to become successful and understand what are the dynamics of “capital,” what is “fundable” and what is not. We need to help them understand that rejection from a venture capitalist does not equate to failure and that there are other ways of building successful, viable, self-sustaining businesses. We need to re-establish that the fundamental commercial transaction in capitalism should be between the producer of value (entrepreneur) and the consumer of value (customer).
We need to democratize entrepreneurship education and incubation in an inclusive manner so that much larger masses of entrepreneurs around the world can tap into the most powerful force of capitalism: how to create value and get compensated for it by customers.
Regardless of how large the opportunity that faces them, entrepreneurs need to be taught how to build profitable businesses. There are many more $5 million, $10 million, and $25 million ideas out there than there are $10 billion ideas. The latter is the domain of venture capital, but the former is still very much in the domain of capitalism and of entrepreneurship.
If we can teach millions of entrepreneurs to build sustainable businesses, the Western world’s current struggle with unemployment can be tackled, just as the emerging markets’ efforts at development can also be tackled.
With this premise in mind, I have started the One Million by One Million (1M/1M) initiative, a virtual incubator whose goal is to help a million entrepreneurs reach a million dollars in annual revenue and beyond, create a trillion dollars of global GDP, and create at least 10 million jobs by 2020. At scale, we believe this will establish the framework for capitalism 2.0: a distributed, democratic capitalism around the world.
A distributed, democratic capitalism as described above would solve the problem of rampant speculation in a simple, elegant fashion. Most of these companies will never go public or be acquired. They will continue to exist as small cash-generating businesses, supporting small but stable workforces in diverse and distributed communities far from the reach of the speculators.
This, coupled with policy changes, including regulation to check the speculators from taking undue risks, as well as tax policies that favor entrepreneurs and penalize excessive speculation, would help to marginalize the dark forces clouding capitalism. It would sharpen our focus on value creation and entrepreneurship, and, I believe, usher in an era of prosperity and stability throughout the world.