What is an entrepreneur?

Entrepreneurs are innovators who spearhead new industries that investors may be interested in pursuing.

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One of the most important jobs of any investor is to know just who and what you're investing in. Especially when you utilise a buy-and-hold strategy.

This includes the company's financials but should also extend to its founder or C-suite. Small businesses often can generate a lot of buzz, especially when they're run by someone who is truly an entrepreneur.

What is an entrepreneur?

Entrepreneurs are innovators by nature who seek to change or disrupt their industry in some significant way rather than simply service an existing customer base. Although entrepreneurs are business owners, not all business owners are entrepreneurs.

Some entrepreneurs are financed by venture capital or hedge funds, but many others are self-funded. This leads to a wide range of business sizes run by entrepreneurs.

There are many definitions of the word 'entrepreneur', but you'll know one by how they approach the business world. Are they looking to simply take over an existing business model, or are they finding unmet needs and filling them? Innovators typically come to mind when we think about entrepreneurs.

Entrepreneurs and the stock market

Although investors often put a great deal of money into high-risk situations hoping for a large return, they are not entrepreneurs because they're not invested in innovations.

But that's not to say that investors and entrepreneurs are totally unrelated. In fact, they often help one another. When an entrepreneur has a great idea, they may seek funding from private equity investors, who can help the idea gain attention that it wouldn't have otherwise.

When the idea becomes a big enough business, it can become a publicly traded stock through an initial public offering. If investors believe in the entrepreneur who is behind the idea and believe it can be profitable, they can give the company more funds to work with and generate considerable buzz.

Choosing a stock based on its entrepreneur

Many stocks are eventually sold by their founder. But if you're interested in companies that are still relatively young, it's important to look at the entrepreneurs behind them as well. A few solid characteristics of good entrepreneurship include:

  • Balancing innovation with reality: It's great for someone to have an incredible idea, and that's exactly what entrepreneurship is all about. Sometimes, however, entrepreneurs reach too far and end up in a place where their goals become unattainable. For example, someone might design a new type of mass-market vehicle but fail to ensure accessible ways to fuel it. Thus, the idea hits a dead end.
  • Having a long-term plan: Entrepreneurs are always the 'idea people' at their company, but they're not always the best planners. For a company to really succeed, they need both innovation and long-term planning. Ask yourself: How does this entrepreneur plan to fund the business in the difficult years of research and development, and where do they see their company in 10 years?
  • Delivering on promises: One of the strongest traits of an entrepreneur is the ability to see what others cannot. Sometimes, though, this leads to problems. Entrepreneurs may firmly believe that their vision is sound. Still, if they have a history of entering the innovation cycle again and again without delivering on their promises, they may not be the best investment.

A few notable entrepreneurs

Not every company founder is an entrepreneur, but there are many you may encounter as an investor. Entrepreneurs can sometimes make or break their own companies from the way they behave when they're at the helm, and they can even cause stock ripples long after they've left. You'll often find these companies trading on the US-based Nasdaq Stock Exchange, although not exclusively.

Some notable entrepreneurs include:

  • Jeff Bezos: The founder of Amazon.com (NASDAQ: AMZN) started with a small online bookstore and piloted it into one of the biggest e-commerce businesses on the planet. Bezos continues to push innovation with his privately held Blue Origin spaceflight company.
  • Helen Greiner: With little more than a dream and a wish for cleaner floors, Greiner co-founded and ran iRobot (NASDAQ: IRBT) before stepping down in 2008. Since then, she has continued to work with drones and robots in various capacities, pushing cutting-edge innovations along the way.
  • Anne Wojcicki: Seeing the vast potential of direct-to-consumer DNA testing, Wojcicki co-founded 23andMe (NASDAQ: ME) and continues to serve as its CEO. Her company has helped millions of people learn more about their genetic health risks.
  • Mark Zuckerberg: A co-founder and CEO of Meta Platforms (NASDAQ: META), the parent company of Facebook, Zuckerberg has been instrumental in shaping modern social media as a phenomenon and an advertising medium.

This article contains general educational content only and does not take into account your personal financial situation. Before investing, your individual circumstances should be considered, and you may need to seek independent financial advice.

To the best of our knowledge, all information in this article is accurate as of time of posting. In our educational articles, a 'top share' is always defined by the largest market cap at the time of last update. On this page, neither the author nor The Motley Fool have chosen a 'top share' by personal opinion.

As always, remember that when investing, the value of your investment may rise or fall, and your capital is at risk.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon.com, Meta Platforms, and iRobot. The Motley Fool Australia has recommended Amazon.com, Meta Platforms, and iRobot. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.