

Startup Life 103: Love - jag
http://www.ansanelli.com/blog/?p=443

======
swombat
_Let’s face it, most startups fail. Not just 50% but probably more like 90 or
even 99% fail. I remember reading somewhere from a reputable venture capital
firm that they would get about 10,000 (yes ten thousand!) business plan
submissions in a year. And would invest in 2 to 5. And of the investments,
odds are that 1 out of 10 is successful. in a way that employees and founders
make reasonable money as opposed to simply the investors. The math on that is
5 plans out of 10,000 get funded and 1 out of 10 of the 5 is a success.
5/10,000_.1=0.00005 or in other words a failure rate of 99.995%.*

Ah, c'mon, that's hand-waving maths at its worst.

First of all, the same 10'000 business plans are submitted to every VC out
there. So if there's, say, 100 VCs and they each select 5 start-ups, that's
already a 5% rate of VC acceptance, which translates, based on his numbers, in
a 0.5% rate of success.

But of course, VCs and "success" are not directly correlated. Most successful
businesses out there go there without VCs. Many got there without even needing
external investment. So actually VC-backed business is probably itself only
0.5% of actual existing business.

Even if you were to limit yourself purely to technology start-ups (why should
you, though?), there are many start-ups that succeed without VCs. So,
basically, this bit of statistics is bollocks... and this is without even
scratching the surface of what exactly is meant by "success".

The rest of the article, unfortunately, seems equally handwaving... It begins
with a point about memory loss (which could have been interesting) but
finishes with the true but fairly trite "you should do what you love". Shame,
could have been good to explore this whole "we remember only the good times"
theme a little more.

~~~
mrtron
How many ice cream glove submissions are there to VCs from people with no
ability to follow through whatsoever?

100% of startups that don't start fail. That is a huge impact on the numbers.

Personally, I have 100% chance of succeeding with my startup (with my
definition of success).

~~~
jag
Folks - i would rather be roughly right than absolutely wrong and the point
was that almost all startups fail to ever deliver any meaningful return to
anyone other than investors. The "math" was simply to make a point to get
people to think about. Even if its 1% or 2% or even 5% that succeed
meaningfully (i.e. founders make a lot and lots of employees become
millionaires), that still is a pretty darn small percentage.

And the point is that if you don't enjoy, aka love, the journey and challenges
of a startup, then you should not join or start one.

~~~
swombat
I don't see why "founders make a lots and lots of employees become
millionaire" is a valid definition of success. I have a friend who ran a web
business largely by himself for 4 years and accumulated half a million pounds
out of it. I'd certainly call that successful.

Based on more reasonable criteria, e.g. made the founder(s) a tidy sum and/or
allowed them to pay themselves a decent salary for a while, many more than 5%
are successful, imho.

As for your main point about loving the journey, I agree with that. I enjoy
working on my business and to me that's more important than the money I'll
make from it.

PS: If you wanted to be roughly right you should have said, simply, "A lot of
start-ups fail." No one would have argued with that! :-)

~~~
jag
that's how i started by saying "most startups fail..."! ;-)

and yes there are startups that return a nice amount to a small group. my
first company, Trio Development, was sold to Apple. we were 4 guys, no venture
funding, and 23 years old and were psyched with the outcome.

the point is that way too many people come out to silicon valley thinking
their startup is going to be the next google or even a smaller success like a
mysql being bought for a billion dollars, and the fact is that most don't
happen that way, so make sure you love what you are doing regardless of
whether its a big success.

~~~
swombat
Couldn't agree more! :-)

------
tlb
His reasoning is similar to saying that since out of millions of sperm only
one will fertilize the egg, the chance of having a baby is 1 in a million.

For smart people seriously trying to build something people want where VC
funding makes sense, I'm sure the chances of getting funded are above 50% and
the chances of succeeding are above 50%.

~~~
jag
uh, if the chances for succeeding were above 50% (of course depends on your
definition for success), then banks would fund startups... it's way lower.
being an investor in a few venture firms, i have seen the results, and the
vast majority of startups in which they invest fail.

~~~
tlb
Good VC firms generate positive returns from more than half of their
companies. Even the average VC generates positive returns from 1/3. This is
from a large sample: [http://www.markpeterdavis.com/getventure/2008/09/vc-
backed-s...](http://www.markpeterdavis.com/getventure/2008/09/vc-backed-
start.html)

Bad VC firms, on the other hand, can achieve 100% failure rate. It's not some
throw of the dice, it's about (a) choosing the right investments, and (b)
making them succeed. If they're telling you that it's normal for the vast
majority of their investments to fail, find a better place for your money (and
don't taken money from them either.)

