

Startup Failure Rates — The Real Numbers - drm237
http://www.smallbiztrends.com/2008/04/startup-failure-rates.html/

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pg
These numbers are meaningless. These aren't startup failure rates, but failure
rates for all small businesses-- i.e. shoe stores, restaurants, etc.

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johnrob
Also, plenty of startups die before ever incorporating. For example, some
hackers crank out a prototype, never get traction, then bail - all without any
paper trail.

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danielha
There needs to be some line drawn to what is considered a startup.
Incorporating is one of the bare minimums. Before that, it's called a startup
idea.

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tptacek
I can't find establishment starts and closings broken down by business type on
the SBA site, but you could probably work that out pro rata by comparing
California to, say, North Dakota, state-by-state. 50% of tech starts still in
business 4 years later sounds crazy high to me.

I'm not sure this is super relevant to YC get-rich-quickr's. Built-to-flip
startups have a different lifecycle than small businesses in general; a small
(read: "real") business grows more conservatively and lasts longer, and a
flipper actually works to shutter itself early (on favorable terms).

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byrneseyeview
Built-to-flip is an interesting way to put it, since the companies you
describe are very similar to individual employees -- productive, but not broad
enough in scope to constitute a whole businesses. If that's what makes them
built-to-flip, doesn't it apply to every lawyer, accountant, sales guy, or
programmer who either functions as part of an infrastructure or can't function
without one?

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tptacek
A built-to-flip company is one that redirects investment (and risk management)
away from building a business and into product development. A single-laywer
law office doesn't do that.

The "breadth" of the company has nothing to do with it. The question is how
sustainable the company is as a business. You can trade long-term
sustainability for short-term marketability --- Cisco and Google will love you
for it, because they don't care about your business infrastructure (they're
firing your director of finance as soon as they buy you) and they want your
product to be maximally useful.

On the other hand, if you miss the big acquirers and you're a flipper, you
die; if you build a business, you get repeated shots at being attractive to
them down the road.

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byrneseyeview
Right. I don't see how this does not apply to, e.g., an engineer or graphic
designer who could create a product but not sell it, or sell it but not create
it. These people can't survive except as part of a big company -- and they get
that way by either getting hired, or starting a built-to-flip startup and
selling out. It seems like a false dichotomy, since these are two ways for the
same people to do the same thing.

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tptacek
I'm sorry, I just don't follow you. In any major city there are scores of
independent solo graphic design and engineering firms. There are also scores
of indie firms who design, manufacture, and distribute products.

Built-to-flip startups are a special class of company who avoid most of the
work of distribution, promotion, sales, and billing in favor of maximizing the
investment value of their product. Again: if they thread the needle and sell
that package to Cisco, they win. If they miss, they die.

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byrneseyeview
So your counterargument is that 1) there are firms that exist as part of the
supply chain -- firms that, if they could not flip their services to bigger
companies -- would not exist, and that 2) there are smaller companies
consisting of employees with built-to-flip careers.

I don't understand why you draw this arbitrary distinction between paying
someone a fraction of your future cash flows (through stock) versus paying
them a stream of cash.

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sdurkin
The idea that the number could be as high as 10% success makes me ecstatic.
Considering the chance of being admitted to the grad or med school of choice,
those odds sound pretty good to me.

