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Startup Success From a Statistical Perspective

October 19, 2006 by Ben Yoskovitz

Dharmesh Shaw over at OnStartups relates some interesting points about startup success from a paper titled “Skill vs. Luck in Entrepreneurship and Venture Capital: Evidence From Serial Entrepreneurs” by Paul Gompers, Anna Kovner, Josh Lerner and David Scharfstein from Harvard.

You can access the full paper online here.

Having never started a business that received VC funding, most of these points don’t apply to me (yet!) – although I find them all extremely interesting.

The one that does stand out is this:

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 that 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. If you’re considering kicking off a startup, it seems that you should just go ahead and do it (even if you’re going to fail). Getting the first failure out of the way (assuming you learn what you should from it) will increase your chances the second time around.

Obviously most first-time ventures fail. That 20% chance number doesn’t look too hot. Heck, the 30% number doesn’t look too hot either! But the point is that you shouldn’t be too afraid of failure when starting a business. The odds are already against you, so don’t panic and overwhelm yourself with dread. Do your best to make it a success and if it fails, learn as much as you possibly can from that.

And at first you don’t succeed…we all know how that goes!

Filed Under: Startups

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Ben Yoskovitz

Founding Partner at Highline Beta, a hybrid venture studio and VC firm that works with large, ambitious companies to identify new areas of opportunity through internal and external innovation.

Previously I was VP Product at VarageSale and GoInstant (acq. $CRM), and Founding Partner at Year One Labs.

Angel investments include: Breather, Spoiler Alert, SendWithUs and others.

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