

Stats About Startup Success - fosk
http://onstartups.com/tabid/3339/bid/79/Six-Interesting-Stats-About-Startup-Success.aspx

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glimcat
"First-time entrepreneurs only have an 18% chance of succeeding.
Interestingly, those have previously failed have a 20% chance of succeeding."

p1 = 0.18

p2 = 0.20

Naively, p1 || p2 = 0.344

Cumulative probability after N attempts assuming p = 0.2 for any n > 1:

1: 0.180

2: 0.344

3: 0.475

4: 0.580

5: 0.664

6: 0.731

7: 0.785

8: 0.828

This also neglects things like mixed-experience teams (i.e. the probability
data in the article is obviously very high level and overly simplistic).

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rewind
The analysis is interesting, and I think it fits for low values of n (and even
then, only if the VCs LOVE the team), but I think you might be looking too far
ahead without doing the non-numerical analysis. If you failed seven times, do
you think you'll get funding and have an 83% chance of success? I think your
chance of getting funding, no matter how much the VCs love you, will plummet
drastically after a certain value of n, and I'm guessing it's a lot lower than
seven (but I have zero data to back that up).

~~~
glimcat
Yes, it's an extremely naive first-order model. It assumes a series of
independent "fair coin toss" events and gives the probability of at least one
success using the given values.

Really, business success is not a random event, although there are many random
factors which influence it. What this is doing is taking the "success rate"
(which is whatever you want to make it be) and assuming that it works as a
forward-looking probability.

In reality, the growth rate is likely to be higher for many people due to
learning and the relatedness of successive ventures. There are also likely to
be limiting factors which scale more rapidly than experience increases the
probability of success - you're not likely to ever reach 83%.

But keeping in mind that it is a generalized approximation, the conclusion of
the first-order model is still good.

* Start early, there are no ideal conditions.

* Evaluate often, if you don't do anything that can fail then you are likely over-invested in the single attempt.

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colindoc84
"5. Better VCs Provide Better Deals: Venture capital firm experience is
positively related to pre-money valuation. More experienced firms pay more for
new ventures -- likely because they have higher success rates. "

Kind of tautology, no?

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nplusone
Both the original paper
(<http://papers.ssrn.com/sol3/papers.cfm?abstract_id=933932>) and the blog
post are from 2006.

