Small & Medium Enterprise (SME) Entrepreneur v. Innovation Driven Enterprise (IDE) Entrepreneur

“If it scares you, it might be a good thing to try.” — Seth Godin

MIT Instructor Bill Aulet says there are two dramatically different types of entrepreneurs; the Small and Medium Enterprise (SME) Entrepreneur, and the Innovation Driven Enterprise (IDE) Entrepreneur. Learning the distinction is important for aspiring entrepreneurs.

Bill says the two types are fundamentally different. SME entrepreneurs are small companies that will stay small. They tend to focus on local markets, often as a service company, and aren’t particularly looking to go global. Think nail salon, drycleaner, or restaurant. They’re important to the economy and region they serve, but at some point linear growth taps out. There’s cash flow here, just not a tremendous amount of cash flow out again.

When it comes to what Bill calls IDE entrepreneurs, the big difference is you’re looking at global, or super general markets to serve. It’s going to require more cash because the dynamics of and IDE business usually show exponential growth. You’re likely to see negative cash flows here. It will initially require a lot of capital, but if it works, it will take off. Generally, there’s a lot more risk. You have to manage multiple stakeholders as well as the underlying innovation. You can view his full comments here.