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Entrepreneurs who are trying to solve their own problems are the most likely to found successful businesses. That’s the conclusion of a new study released by the Kauffman Foundation.
The study looks at “user entrepreneurs,” those who create innovative products or services for their own use and later start companies to commercialize their ideas.
Such people have founded more than 46 percent of innovative startups that have lasted at least five years, the study reports, even though this group represents less than 11 percent of all U.S. startups.
Orange County has had its share of such user entrepreneurs.
Bill Schultz founded Alignmed in Santa Ana after 10 years of episodes of lower back pain. His own search for an alternative to back surgery led him to a Newport Beach chiropractor who had developed a garment originally intended for rehabilitation after shoulder surgery.
Schultz bought the patent for the garment and made it the foundation for Alignmed.
“The result is a positive anatomic change that can train the body to realign itself,” Schultz told the Register. He had the garment checked out by spine specialists around the country before founding the company with money from himself and private investors.
“Users have ignited technological change in industries ranging from medical devices to sports equipment to juvenile products. In many cases, users, not producers, have the best information, and their incentive is to build something better for their own use,” said Sonali Shah, assistant professor at Foster School of Business, University of Washington, and co-author of the report. “As a result, they are able to create truly novel innovations. When they commercialize these innovations, we all benefit.”
Another local example comes from Jason Lucash and Mike Szymczak, co-founders of OrigAudio in Costa Mesa. The men previously worked at backpack maker Jansport and traveled 200 days a year. They wanted audio speakers that would fold up easily in their suitcases.
Time Magazine named the Fold ‘n’ Play one of “50 Best Inventions in 2009” and OrigAudio starred in an episode of the ABC TV show, “Shark Tank,” in which investors evaluate the potential of entrepreneurial ventures.
User entrepreneurship seems to be especially good at attracting equity capital financing, the Kauffman Foundation study said. Almost 6 percent of user entrepreneurs across all industries reported receiving venture capital in their first six years of operations.
The study also found that user entrepreneurship is particularly attractive for women and minorities who start businesses.
“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. “
Irvine mom Pazit Ben-Ezri wanted a safe, comfortable and portable bed for her infant son to use when the family traveled. Her need led her to design the LulyBoo Baby Lounge to Go and later start a Santa Ana company by the same name. Target and Babies R Us put LulyBoo on their online stores.
Another Irvine mom Sandy Frankfort didn’t like the baby carriers she found on the market when her son was born in 2008. So she created her own, called it Baby Love Wrap and then started a company to commercialize the product.
Baby Love Wrap was one of StartupNation’s Top 200 Mom-owned Businesses in 2010.
The Kauffman Foundation study compared three types of user entrepreneurs: end users who develop products or services for persona use, professional users who develop products for business use, and a combination of the two.
Other studies suggested that user entrepreneurs were the first to introduce innovations into the commercial marketplace in industries as diverse as medical devices, juvenile products and sporting goods, the Kauffman study said, citing some well known companies founded by user entrepreneurs including Yahoo!, Black Diamond and Medtronic.
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