Entrepreneurs who build a product for their own use are also likely to build a successful company around it, according to a study out from the Kauffman Foundation. Maybe the idea is for an app to help avoid speeding tickets or litmus-style test strips for nursing moms to see if they can feed their baby without getting them drunk, but the Kauffman survey found that what it calls “user entrepreneurs” have created more than 46 percent of innovative startups that have lasted five years or more, even though this group has founded only 10.7 percent of U.S. startups overall.
Many of these startups might be lifestyle businesses and bootstrapped, but the survey did find that almost 6 percent of end-user entrepreneurs across all industries reported receiving venture capital in their first six years of operations. And in general these firms seem to be a viable and attractive path for women and minority entrepreneurs. From the release announcing the report:
“User entrepreneurs are different from other entrepreneurs,” said E.J. Reedy, Kauffman Foundation research and policy fellow and co-author of the report. “It is clear that these entrepreneurs are coming into their businesses with more tangible ideas, innovations or customers to build a successful firm. This was a first pass at analysis, and we will be going back to look at them in more depth.”
The report divides user entrepreneurs into professional users (people using business products) and end users (consumers), and it notes that 48 percent of the end-user entrepreneurs are women, while about a fifth of the professional-user founders are women. So it’s likely women have a greater willingness or opportunity to start consumer-facing businesses based on their experience. There is a similar jump in end-user entrepreneurs from the African American community starting businesses, with 16.9 percent of consumer-facing firms founded by user entrepreneurs started by blacks. African Americans also started 5 percent of the business-facing user-inspired startups.
The data here is encouraging for those of us who have a vision for a product. Plus, breakthroughs in 3-D printing and platforms such as Quirky or Kickstarter make it that much easier for anyone to think up a product and try to start a business selling it.