
Is Your Startup Destined to Fail? - The 90 percent failure rate myth - brett
http://www.entrepreneur.com/article/printthis/173214.html
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vegashacker
I've always been pretty skeptical of the 90% number, but I don't think this
article clears up the matter. I'm assuming all of us here aren't interested in
opening up a mini-mart (rather we're interested in startups in the PG
definition of the word -- basically something that scales). And yet, the "over
half" figure that's quoted in the article I'm sure includes things like mini-
marts. And I would guess that a mini-mart business has a better chance of
staying open over a year than a tech startup does. So the "over half" might be
inflated in the other direction.

Also, I wonder if companies that in reality fail before one year might just
tend to wait until the next tax year comes before officially shutting it down
with the government. If so, depending on how the stats were found, this could
inflate the success percentage.

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nostrademons
There was some study - I think it was linked to on Dharmesh Shah's blog
(onstartups.com) a month or so back - that indicated the success rate for
first time entrepreneurs in VC-funded tech startups was 18%. For entrepreneurs
with a previous failure it was 20%, and for entrepreneurs with a previous
success it was 33%.

I suspect that the success rate is somewhat higher for bootstrapped tech
startups, because you're given the option of failing and trying again with the
same company, different idea. Usually if you fail with a VC's money, they
liquidate the company. If you fail with your own, you can take the assets you
have and try to redirect them to a new line of business.

I thought I saw another study somewhere that said that the average number of
failures a bootstrapped startup goes through is 4. That squares with the
success rates for VC-funded startups above, if you assume that each failure
simply means the entrepreneur tries a new idea. You have a 18% chance of
succeeding on the first try, a 33% chance of succeeding by the second try (82%
* 82% = 67.24% chance of failing), a 45% chance of succeeding by the third
try, and a 55% chance of succeeding by the fourth try, for an average of 3-4
attempts necessary before success.

~~~
pg
If the success rate for VC funded startups is 18%, then I could easily believe
the overall rate is 10% or lower, because angels fund more startups than VCs,
and they are less selective.

~~~
nostrademons
More selective doesn't necessarily mean a higher success rate, if VCs can't
pick the winners at a higher rate than their general frequency in the
population. Wasn't there just an article on here about how VC-funded "A teams"
do no better, and often worse, than VC-funded "B teams". And I thought your
"Unified Theory of VC suckage" mentioned this too, though rereading it, it
seems more about how VCs take winners startups and make them fail rather than
how winners avoid the VCs to start with.

That said, my high school math teacher and first employer was an angel
investor, and he said his success rate was *well* under 10%.

A lot also depends on your definition of failure. When Ludicorp shut down Game
Neverending and launched Flickr, would that count as a failure? If they had
taken millions in VC funding, would they have been able to shut down GNE and
say "We're going to build a photo-IM client"? I'm currently working for a
(profitable) startup with 4 products. Only one of them is generating any
revenue. If that had been VC-funded, it likely would have been 4 separate
companies, 3 of which were failures.

------
brett
my favorite line: "At any rate, it seems clear that some people simply want to
believe that entrepreneurship is harder than it really is."

