When a venture is formulated, two types of ventures emerge: ‘small and medium enterprise’ (SME) or an ‘Innovation-driven enterprise’ (IDE). What follows is a brief overview of the two types.
When to form a SME?
SMEs are usually started by a single person that serves a local market and sometimes grows into a medium-sized business over time. Rewards usually entail personal independence and a concurrent cash flow from the business. The amount of revenue and jobs are usually directly related to the money and resources that are injected into the business. Jobs created are usually non-tradable, meaning its geographically fixed in one area.
When to form an IDE?
IDEs on the other hand, are innovation driven. They take more risk and are more ambitious in serving markets that go beyond local markets, looking at regional and global penetration. They usually have a team of founders and use some form of technology, a unique process, business mode innovation or some other form of innovative ideas to gain a competitive advantage.
What makes IDE’s different?
Innovation driven enterprises exist exclusively to create wealth, even if it means giving up some control, such as equity. Meaning that the founding team will be willing to give away a portion of their ownership of the venture, in return for funding and/or expertise to grow and scale the venture even more. IDEs start slow but have exponential growth ones there is traction. Jobs created in IDEs are mostly tradable, meaning that they can be outsourced and are not geographically bound.
Looking at these differences, the question remains:
“Do your venture serve a local market to fulfil an immediate need, or is it innovation driven, looking at regional and global penetration?” The type of enterprise will pre-expose entrepreneurial intentions and the actions that will flow.