Effectuation: Do You Need To Be A Risk Taker To Be An Entrepreneur? – Inc42.com

Source: Inc42.com

By Diana Chingakham


Professor Saras D. Sarasvathy, explains how Effectuation can be the causal reason for startups. “Effectuation is the series of techniques to pursue non-predictive control of businesses by entrepreneurs.” Basically, an entrepreneur is able to focus on finding solutions to issues he/she is facing, instead of predicting the future. By virtue of focusing on what is under his/her control, an entrepreneur is able to bring about an outcome. All startups face some sort of limitations. Effectuation is the mode in which those limitations are addressed.

“When one causally pursues the idea, you write to investors seeking funding. But when you effectually address, you work with people whoever is available, people who are willing to collaborate and you end up creating the effects for your business rather than wait for a cause… Of the 600,000 business companies that start every year in the US, less than 1,000 will get VC funding.”

Research shows that effectuation works very well with lean startups.

My Comment

It seems that now, more or less, there is another word for “Bootstrapping”… Effectuation. You make do with what you have. Instead of waiting for things to happen, you focus on finding a solution, with the variables under your control.

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