72% of millennials hold the opinion that startups are essential for innovation and the creation of jobs in various industries, according to a survey by EY(formerly Ernst and Young) that got responses from about 1,200 people. Sixty-two percent of them also stated that they had considered starting their own businesses at one point in time or another.
Those statistics reflect the surge in the entrepreneurial spirit among young people, giving them the name “millennipreneurs” in some quarters. The 2016 BNP Paribas Global Entrepreneur Report ascribed some of the increase in millennial entrepreneurship to shifting societal attitudes that no longer expect a person to be in their 30s or 40s to be successful. The increased access to information and ease of acquiring new skills were also identified as crucial factors in the growth trends.
Unfortunately though, the success rates of these millennial-driven businesses do not always match up with the enthusiasm of their founders, with only about 99% of them getting the funding they need, and only one out of four of those being able to pay back the investment, according to Forbes.
The Rise of the Millennial Entrepreneur
The reasons for the rise of millennial entrepreneurship vary widely depending on whom you ask, but one of the most important ones is simply that many millennials really have no choice but to start their own business. They often graduate from college only to see their dreams of a cushy job in a big consulting firm disappear into the vacuum of the high unemployment rate. In such cases, necessity often drives the creativity that leads to innovation and ultimately, the launch of a new startup.
The convenience of starting a business has also contributed in no small way, since the digitally-native millennials are now able to bring their ideas to life without going through all the red tape that previous generations had to deal with. For instance, incorporating a company can be as easy as getting in touch with a company that provides that service via the internet. All would-be CEOs have to do is provide them with the information and documents they require and then wait to receive the documents of incorporation within a few days.
Apart from external factors, the inherent nature of the millennials themselves is well-suited to the entrepreneur lifestyle: Millennials are generally not lovers of the corporate workplace and all its rules and restrictions. They prefer to work in a decentralized environment where innovation is prioritized and there is room for individual flair to shine through. They prioritize creativity and are very passionate about the things they believe in, which makes them able to put in the amount of devoted work that new startups need to flourish.
Why Millennial-run Startups Fail
There have been many attempts to understand the dynamics of startup failure among millennials. To this end, many studies have been carried out by different organizations. A number of factors stood out as being precursors of startup failure:
1. Bad strategy – With the idea of being an entrepreneur having been so romanticized, it is very common to see startups that have very interesting, but not very commercially viable ideas. Millennials, driven by their passions as they are, often pursue ideas without putting enough effort into answering questions like "Who's going to buy this?", subsequently ending up with a product that just too few people are interested in paying for.
2. The lone-wolf attitude – The independent mindset that is a characteristic of millennials is often a big stumbling block on the path to startup success. While being in charge of a company by oneself might seem to be a good things, the stress of managing a startup is often too heavy a burden for one person to bear alone.
The media attention that is often given to entrepreneurs like Mark Zuckerberg, Steve Jobs and Larry Page often serves to obscure the important roles that their co-founders played in making their companies as successful as they became.
3. Capital – This is the main reason why many startups don’t get off the ground in the first place, and why many that manage to do so are not able to fulfill their potential.
It is much easier to get through to angel investors and venture capital companies now than it was in the past. Nevertheless, being able to deliver a pitch convincing enough to get funds is still as difficult as ever, if not even more so, with the amount of competition there is.
For those startups that are able to get investments, it often happens that they underestimate the amount of money they require to bring their plans to fruition, and then find difficulty in getting a second round of funding after the disappointment from the first.
4. Lack of experience – Many millennials who start or are intending to start businesses are highly qualified for the work they intend to do. Those in tech for instance, are likely to have taken advanced courses in their fields
Unfortunately, scientific knowledge doesn’t necessarily translate to business acumen, which is as important for a startup to succeed. Many consultancies are beginning to target new startups, offering expertise to bridge the gap, and that has had the effect of increasing the viability of many startups.
In spite of the many pitfalls, there has been a consistent increase in the profitability of those startups that make it out of the woods, thus making the trend of millennials founding their businesses something that is likely to continue for the foreseeable future. With information about the common problems and proactive steps taken to avoid them, millennial-driven businesses have a bright and profitable future ahead of them.