In a longitudinal research study funded by Kauffman Foundation found that over 46% of all innovative new businesses that lasted over five years were founded by “user entrepreneurs”. This figure is even more impressive when you consider that these startups represent only 10.7% of all US startups. The study tracked over 5000 startups founded in 2004 and it was released yesterday.
This fully validates the trend towards end-user lead product innovation described by Eric von Hippel in his book Democratizing Innovation. The two single most important aspects of this group of innovators is their deep knowledge in the subject area and their motivation to improve the existing conditions. This is mainly because the mainstream product manufacturers have no incentives to supplant their current production line with new risky products and because no one listens to end-users who have daring ideas.
The Kauffman funded study found that the professional-user entrepreneurs are very knowledgeable and on average they have a much better human capital involved in the startup than the other types of entrepreneurs. It makes sense in my mind, because I imagine, those people are driven by passion for creating something that they would love to use, attracting a similar breed of people from their industrial field. They are the experts and they know the people in the field better than any outsiders. It is not that the other groups don’t have passion, but while they want to make good products one of their pressing goals is to sell their products to the users, the other people.
The democratisation of innovation favours the end-users, people who want to create better products for personal use. In this group especially females and some minority groups are attracted by the idea to follow their dream and have a go. A high proportion of these entrepreneurs manage to attract good venture capital financing.
This is very good news, because this may be a sign of the future of employment. Individuals from all walks of life drawing from their personal experience to detect an unmet demand, and in the course of inventing a new source of supply they create high value add jobs for themselves and for many others.