It’s better to have tried and failed…
Dharmesh Shah has got a very encouraging article at onstartups entitled Six Interesting Stats About Startup Success.
Here is my favorite stat:
Failure Increases Chances Of Success: Entrepreneurs who succeeded in a prior venture have a 30% chance of succeeding in their next venture. First-time entrepreneurs only have an 18% chance of succeeding. Interestingly, those have previously failed have a 20% chance of succeeding. So, it seems that you’re better off having started a company and having failed — then not having started one at all.
The article is based on a paper by Paul Gompers, Anna Kovner, Josh Lerner, and David Scharfstein, entitled Skill vs. Luck in Entrepreneurship and Venture Capital:Evidence from Serial Entrepreneurs
Pretty interesting paper, especially given their ability to make quantitative a field (early-stage investing) where there ain’t that many numbers available when the first bets are made . . .
That paper takes a binary view of success. YouTube and Writely were both successes, but at very different scales . . . I wonder if this would change if the definition of success were stratified. How does the scar tissue from a failed venture affect the risks founders are willing to take in venture 2? Do they take a more risky path, to make up for the past? Or do they play it safer?
Jason,
That’s a really interesting question. Gamblers and traders usually tell you that the long shot pays better than the odds. But both gamblers and traders know that it is discipline that wins in the long term. If you bet on a stock, set your stop loss at -5% and your upside at +10%. If you always hold to those rules, you will win in the long term.
According to that theory, the failed founder (if he or she is disciplined) shouldn’t change the risk at all, but instead, just step up to the plate again.
Who knows?
- Rod