Loading the player...

What is an 'Entrepreneur'

An entrepreneur is an individual who, rather than working as an employee, runs a small business and assumes all the risks and rewards of a given business venture, idea, or good or service offered for sale. The entrepreneur is commonly seen as a business leader and innovator of new ideas and business processes.

Entrepreneurs play a key role in any economy. These are the people who have the skills and initiative necessary to take good new ideas to market and to make the right decisions that lead to profitability. The reward for taking the risk is the potential economic profits the entrepreneur could earn.

BREAKING DOWN 'Entrepreneur'

Economists categorize the resources that go into production as either land (natural resources), labor, capital or entrepreneurship. An entrepreneur combines the first three of these to create goods or provide services. An entrepreneur typically creates a business plan, hires labor, acquires resources and financing, and provides leadership and management for the business.

Entrepreneurs commonly face many obstacles when building a business. Three common obstacles that many of them cite as the most challenging are: overcoming bureaucracy, hiring talent and acquiring financing.

Financing New Ventures

Given the riskiness of a new venture, the acquisition of financing is particularly challenging, and many entrepreneurs overcome this obstacle by bootstrapping. Bootstrapping refers to financing a business using methods such as owner funding, providing sweat equity to reduce labor costs, minimizing inventory and factoring receivables.

While some entrepreneurs are lone actors struggling to get small businesses off the ground on a shoestring, others work with additional founders, armed with greater access to capital and other resources. In these situations, businesses may acquire financing from venture capitalists, angel investors, hedge funds, crowdsourcing or through more traditional sources such as bank loans.

Entrepreneurial Ecosystems

Entrepreneurship is a critical driver of innovation and economic growth. Therefore, fostering entrepreneurship is an important part of the economic growth strategies of many local and national governments around the world. To this end, governments commonly assist in the development of entrepreneurial ecosystems, which may include entrepreneurs, venture capitalists, and government-sponsored programs to assist entrepreneurs, These may also include non-government organizations, such as entrepreneurs' associations and education programs.

For example, California's Silicon Valley is often cited as an example of a well-functioning entrepreneurial ecosystem. The region has a well-developed venture capital base, a large pool of well-educated talent, especially in technical fields, and a wide range of government and non-government programs fostering new ventures and providing information and support to entrepreneurs.

RELATED TERMS
  1. Limited Entrepreneur

    A person who is involved in a limited liability company but does ...
  2. Bootstrap

    A situation in which an entrepreneur starts a company with little ...
  3. Factors Of Production

    An economic term to describe the inputs that are used in the ...
  4. Bootstrapping

    1. A procedure used to calculate the zero-coupon yield curve ...
  5. Venture Capital

    Money provided by investors to startup firms and small businesses ...
  6. Angel Investor

    An investor who provides financial backing for small startups ...
Related Articles
  1. Small Business

    Entrepreneur Vs. Small Business Owner, Defined

    An entrepreneur is different from a small business owner, and requires a different temperament.
  2. Small Business

    The 5 Skills Every Entrepreneur Needs

    Understand what an entrepreneur is and the type of risk an entrepreneur faces. Learn about the five skills necessary to become a successful entrepreneur.
  3. Small Business

    Why Entrepreneurs Are Important for the Economy

    This article discusses the importance of entrepreneurs and their important value-add to the economy of a state.
  4. Small Business

    10 Characteristics of Successful Entrepreneurs

    Being a successful entrepreneurs requires more than just an idea or a lot of money. Here are ten things that set successful entrepreneurs apart.
  5. Small Business

    How Entrepreneurs Benefit the Economy

    Why are entrepreneurs important for the economy?
  6. Small Business

    5 Good Habits Every Entrepreneur Needs

    Understand who an entrepreneur is and what an entrepreneur does. Learn about the 5 good habits that every entrepreneur should have.
  7. Managing Wealth

    10 Characteristics Of Successful Entrepreneurs

    Do you have the qualities of a successful entrepreneur? Those who do tend to share these 10 traits.
  8. Small Business

    Entrepreneurs Make Money: Why, How, Where & When

    Why, how, where and when do entrepreneurs make money? Eleven stages or "terms" that entrepreneurs and their ventures go through on the road to success.
  9. Small Business

    Who Counts as an Entrepreneur?

    An entrepreneur is a person who starts a new business or organization, taking some personal financial risk to do so. He or she may quit a secure job to devote time to starting the new business, ...
  10. Small Business

    Serial Entrepreneurs Venture And Venture Again

    Serial entrepreneurs start up a venture, sell it, and start another one, and they often benefit from their previous experiences.
RELATED FAQS
  1. How does an entrepreneur help the economy?

    Find out about how entrepreneurs play a fundamental role in capitalist economies by helping to coordinate resources and bearing ... Read Answer >>
  2. What resources are available to an entrepreneur to raise capital?

    Learn how entrepreneurs can use various resources to raise capital and how each is beneficial throughout the different phases ... Read Answer >>
  3. What risks does an entrepreneur face?

    Find out if you have what it takes to overcome the challenges and risks associated with starting a business and becoming ... Read Answer >>
  4. How does an entrepreneur pay taxes?

    Find out what kind of impact tax policy can have on entrepreneurship in the United States and why all economic agents have ... Read Answer >>
  5. Why do some economists consider entrepreneurship to be a factor of production?

    Find out if entrepreneurship should be considered a factor of production in economic models, and whether or not entrepreneurs ... Read Answer >>
  6. What is needed to be a successful entrepreneur?

    Discover how successful entrepreneurs succeed through passion, motivation and accepting failure. Learn about the qualities ... Read Answer >>
Hot Definitions
  1. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  2. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  3. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  4. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  5. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  6. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
Trading Center