7 Types of Entrepreneurs: A Classification Framework by Yu-kai Chou

When people hear “I’m an entrepreneur,” they picture everything from Mark Zuckerberg to the kid selling lemonade on the corner. The term covers so much ground that it barely means anything anymore.

I’ve been an entrepreneur my whole adult life, and I’ve met hundreds of people who call themselves the same thing. But the guy running a lawn care business and the woman building a biotech startup are living in completely different worlds. We need better language for this.

Author Credibility: Yu-kai Chou

Yu-kai Chou created the Octalysis Framework after studying gamification since 2003 — years before the term entered mainstream vocabulary. As a Human-Systems Architect & Behavioral Designer, his framework has been applied by LEGO, Microsoft, Porsche, Coca-Cola, Salesforce, and MrBeast, impacting over 1.5 Billion Users.

Chou has taught the Octalysis methodology at Harvard, Stanford, Yale, Tesla, Google, BCG, and IDEO.

His work has been cited by Harvard, Stanford, MIT, Forbes, Wall Street Journal, Wired, US Department of Energy, NIST, NSF, NCBI, US Department of Education, ClinicalTrials.gov, and Google Scholar — with 3,700+ more academic publications. Explore his books here.

Why We Need Better Labels for Entrepreneurs

I am an entrepreneur, and I believe I have the qualities of one. But the term gets used so generically that it has started losing its meaning.

An entrepreneur could be someone who opened a coffee shop. It could be a scientist who invented a new technology and built a company around it. It could be a high school kid mowing lawns after class. It could be someone tutoring students or making money from a one-page website.

So what does it mean when I say “I am an entrepreneur?” Which kind am I? How would people know?

I understand the key characteristic is the Entrepreneurial Spirit — that persistent drive that flows through entrepreneurs of every size. Many legendary founders started with a simple service (hence the classic lemonade stand reference).

But just like Eskimos have more than a dozen words for different kinds of snow, entrepreneurs should have clearer terms for what they do.

The 6 Dimensions of Entrepreneurship

I believe the type of entrepreneur should be classified along these dimensions:

• Scale — how many employees, customers, and how much revenue
• Difficulty in Initiation — permits, regulations, fundraising, new technology, patents
• Opportunity Cost — what the entrepreneur gives up to start. Could they make $200,000 a year anyway if they stayed in their job?
• Creativity/Originality — did they create something genuinely new, or follow existing patterns?
• Risk — what do they lose if it fails?
• Past Ventures/Experience — whether this is their first venture. (Someone who failed once and kept going is often more entrepreneurial than someone who succeeded once, because anyone can fail — but not giving up takes something special.)

Some entrepreneurs fit in two or more of the categories below, which is fine. Many people start in one class, gain experience, and graduate to a different one.

Classification 1: Solo-Service Entrepreneur

Usually a sole proprietorship — just the founder, with friends as their first customers. The business provides a service that requires time but little or no money to start.

There are few opportunity costs because Solo-Service Entrepreneurs are mostly students selling gum or mowing someone’s lawn. The tasks are usually not original. And needless to say, they have limited experience in entrepreneurship.

But everyone starts somewhere. According to the U.S. Bureau of Labor Statistics, about 20% of new businesses fail within their first year — and many of those are at this level, where the founder underestimates the work required.

Classification 2: Commodity Entrepreneur

These entrepreneurs make healthy investments to start something in a market that’s already saturated. You can find dozens of similar businesses doing the exact same thing.

Most restaurants, coffee shops, and common commodity businesses fall here. They typically follow what the Opportunity Entrepreneur does after it becomes common and widely adopted.

When you ask why they started that business, the answer usually isn’t “I see a gap in the market.” It’s more like “I always wanted to open a flower shop” or “I’m good at this craft and want to be my own boss.”

Real estate falls into Commodity Entrepreneurship as well. The model is proven, the playbook is established — the differentiation comes from execution, not invention.

Classification 3: Network Marketing & Franchise Entrepreneur

For those unfamiliar: network marketing is the pyramid structure of business, where you sell products and recruit other people to run divisions under you. They do the same, and you earn commissions from the layers below.

It’s a legitimate business model as long as a genuinely valuable product or service is being sold. But the initialization process feels too easy, and the opportunity often comes looking for you with full force — not the other way around. (Real entrepreneurs create opportunities; they don’t wait for opportunities to recruit them.)

In my view, this is more of a salesman/manager role than true entrepreneurship. Nothing completely new gets created. You follow someone else’s model, use their equipment, and face relatively small investment and risk. About 80% of the business is worked out for you before you start.

Most people can begin without any past experience. But the stress, problem-solving, and creative tactical thinking still run through it, which is why I still consider it entrepreneurial — just a different flavor.

Classification 4: Opportunity Entrepreneur

Opportunity Entrepreneurs watch the newest trends, figure out what works, and execute. They identify a competitive advantage and start something that already exists — except they do it better.

The scale is usually decent and the initial investment significant. Starting is difficult because of regulations, registrations, and the need for real capital.

Risk is relatively high because it’s hard to correctly evaluate which market trends are worth following — and even harder to have the technical abilities and timing to execute well.

Creativity here comes from how the entrepreneur picks the business and the strategic process they use to build a solid edge. It’s not pure invention, but it’s far from copying. In economics terms, these are the people who “shift the supply curve forward” when profit signals appear in an industry.

Opportunity Entrepreneurs often have past experience as Solo-Service Entrepreneurs. My own journey from gaming to entrepreneurship started at this level before evolving into something bigger.

Classification 5: Innovation Entrepreneur

Innovation Entrepreneurs create something no one else has done in their industry. They identify what’s missing and do whatever it takes to bring it into existence.

The scale tends to be large because introducing something completely new to a market demands significant resources. The difficulty of initiation is extremely high, especially in regulated industries.

But the strongest characteristic of an Innovation Entrepreneur is the willingness to think outside the box and take massive risks. Nothing has proven this business would work. There’s no existing template. The entrepreneur is betting on a vision that doesn’t have data to back it up yet.

This is the category where frameworks like the Octalysis Framework were born — identifying a gap (human-focused design vs. function-focused design) and building an entire methodology to fill it.

Classification 6: High Tech Entrepreneur

The High Tech Entrepreneur is perhaps the most respected classification in terms of pure entrepreneurial ambition. Instead of improving an existing industry, these founders create entirely new industries.

These are the people who invented computers and started the entire computing industry. Who invented automobiles and created a new sector with all its parts and accessories.

Everything about this classification is extreme. Investment, creativity requirements, and risk are all off the charts. You’re investing in something that might not even be buildable, let alone testable or sellable.

These companies usually need venture capital backing, and the failure rate is severe — competitors might finish building what you’re still inventing.

It takes a true entrepreneur to pour that much time, money, foregone income, and energy into a bet this large. But there’s an important distinction: inventors and entrepreneurs are not the same thing. Sometimes the inventor is also entrepreneurial, but knowing how to build a new product doesn’t automatically make someone good at building a new business. Inventors create great products. Entrepreneurs create great companies.

Classification 7: Escape Entrepreneur

Some people launch ventures because they want to make a lot of money or want to be their own boss. In other words, they’re entrepreneurs because they want to escape from something — a bad job, a boring career, a controlling manager.

These are the wrong motivations, and they usually lead to failure. (Unfortunately, this describes the majority of people who start businesses, which is a big part of why nearly half of all businesses fail within five years, according to Bureau of Labor Statistics data.)

The “escape” entrepreneur often quits when they discover the reality: being an entrepreneur means working twice as much as having a job and getting paid a third of what they used to earn, especially in the early years. The grind makes them lose motivation, and they “escape” right back to their former career.

How to Use This Framework

These classifications aren’t meant to create a hierarchy where one type is “better” than another. A Commodity Entrepreneur running a thriving restaurant creates real value in the world.

The point is self-awareness. Know which category you’re in, understand the risks and requirements of that category, and be honest about whether your motivation is driving you toward something (Innovation, Opportunity) or away from something (Escape).

In my later work on Core Drive 1: Epic Meaning & Calling, I found that the most successful entrepreneurs are driven by a purpose beyond themselves — not just escape from a bad situation. The Octalysis Framework maps these eight fundamental motivational drives, and they apply just as powerfully to understanding why entrepreneurs succeed or fail as they do to game design.

If you want to go deeper on turning your entrepreneurial journey into something that feels like play rather than grinding, check out my book 10,000 Hours of Play — it’s built on exactly this kind of thinking.

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