7 ms·

First time entrepreneurs have 18% chance of success; 2nd time entrepreneurs: 30%

30 points by pierrefar 18y ago

swombat 18y ago
Lies, damn lies, and Harvard Business School statistics.
- goodgoblin 18y ago
  Its science!
kirse 18y ago
Web startups, 60% of the time they work every time!
- jamess 18y ago
  I was going to go with 99% of the time they never generate enough revenue to cover their costs, but each to their own I suppose.
- sebg 18y ago
  I bet your library smells of rich mahogany.
seekely 18y ago
Misleading title. From the very first sentence: "All else equal, a venture-capital-backed entrepreneur who starts a company that goes public has a 30 percent chance of succeeding in his or her next venture. First-time entrepreneurs, on the other hand, have only an 18 percent chance of succeeding, and entrepreneurs who previously failed have a 20 percent chance of succeeding"
- dcurtis 18y ago
  "a venture-capital-backed entrepreneur who starts a company that goes public" There's, like, four total people in the world who match that description in web-based companies over the past few years.
sanjayparekh 18y ago
There was a paper by the National Bureau of Economic Research from back in 2006 that had a similar study and findings. I dug through it and brought out the relevant parts (relevant to me at least) here: http://www.sanjayparekh.com/skill-versus-luck-in-entrepreneurship-and-venture-capital/ http://www.sanjayparekh.com/skill-versus-luck-in-entrepreneu...
deleted 18y ago
[deleted]
frisco 18y ago
They use a strange metric for success, in that the company has to go public. I'd say a good acquisition is clearly also a "success". Assuming that far fewer companies go public than are acquired (and make the founders wealthy), their numbers are quite a bit low. At any rate, those numbers are already HUGELY higher than I had thought.
- fallentimes 18y ago
  I think issuing dividends on a consistent basis (applies to public & private companies) & total profitability is a better measure of success than going public or getting acquired. The latter two rely too much on someone else.
- bd 18y ago
  In the actual article they mention it: "The findings are similar if we define success to also include firms that were acquired or merged." Also numbers seem to be ok (about 1-in-5 for the first time enterpreneurs, 1-in-3 for the already successful ones and 1-in-4 overall), considering these are all venture backed companies, thus pre-selected from a much larger pool. Plus, if you check the list of 40 VCs (Kleiner Perkins, Sequoia, Benchmark, Bessemer, Greylock, Accel, etc.), these are also skewed toward the top of the distribution, so there is another level of pre-selection.
copenja 18y ago
Which means if you dedicate yourself to starting two businesses you have a 57% chance of succeeding at least once.
- mixmax 18y ago
  and if you dedicate yourself to starting 4 businesses you have a 114% chance of suceeding. Check your statistics ;-)
- NyxWulf 18y ago
  Ok, I have no idea how you came up with 57%. Even if you add 18%+30% (which is not mathematically valid) you'd only get 48%. How in the world did you get 57%?! The real probability based on the article (according to my calculations) is 34.4%, which is actually much better than I would have guessed. Here is how I came up with that. The article states a first time entrepreneur succeeds at an 18% rate. And someone succeeds at a 20% rate given they failed the first time. P(First Time Success) = .18 P(First Time Failure) = .82 P(Success | First Time Failure) = .20 P(Second Time Success) = P(Success | First Time Failure) x P(First Time Failure) + P(First Time Success) 0.344 = .18 + (.82 * .20) In words: 18 percent of entrepreneurs will succeed on their first try. 82 percent will fail. Of that 82 percent that failed, if they try again, they will succeed 20 percent of the time. To get a number from the original population of first time attempts you have to multiply the 82 percent who failed by the 20 percent who succeeded on the second try which results in 16.4%. That 16.4% is the percentage of the original population who tried on the first try but did not succeed until the second try. The end result being 34.4% of the original population will be successful on their first or second try. Hopefully that makes sense. * edit to format the formulas a little better
daveambrose 18y ago
I submitted this a day ago: http://news.ycombinator.com/item?id=384801 http://news.ycombinator.com/item?id=384801
AndrewWarner 18y ago
Entrepreneurs who sit on their asses and never take a shot have a 0% chance of success. Ignore the stats. Take your shot.

30 points by pierrefar 18y ago

swombat 18y ago

Lies, damn lies, and Harvard Business School statistics.

goodgoblin 18y ago
Its science!

kirse 18y ago

Web startups, 60% of the time they work every time!

jamess 18y ago
I was going to go with 99% of the time they never generate enough revenue to cover their costs, but each to their own I suppose.
sebg 18y ago
I bet your library smells of rich mahogany.

seekely 18y ago

Misleading title. From the very first sentence: "All else equal, a venture-capital-backed entrepreneur who starts a company that goes public has a 30 percent chance of succeeding in his or her next venture. First-time entrepreneurs, on the other hand, have only an 18 percent chance of succeeding, and entrepreneurs who previously failed have a 20 percent chance of succeeding"

dcurtis 18y ago
"a venture-capital-backed entrepreneur who starts a company that goes public" There's, like, four total people in the world who match that description in web-based companies over the past few years.

sanjayparekh 18y ago

There was a paper by the National Bureau of Economic Research from back in 2006 that had a similar study and findings. I dug through it and brought out the relevant parts (relevant to me at least) here: http://www.sanjayparekh.com/skill-versus-luck-in-entrepreneurship-and-venture-capital/ http://www.sanjayparekh.com/skill-versus-luck-in-entrepreneu...

deleted 18y ago

[deleted]

frisco 18y ago

They use a strange metric for success, in that the company has to go public. I'd say a good acquisition is clearly also a "success". Assuming that far fewer companies go public than are acquired (and make the founders wealthy), their numbers are quite a bit low. At any rate, those numbers are already HUGELY higher than I had thought.

fallentimes 18y ago
I think issuing dividends on a consistent basis (applies to public & private companies) & total profitability is a better measure of success than going public or getting acquired. The latter two rely too much on someone else.
bd 18y ago
In the actual article they mention it: "The findings are similar if we define success to also include firms that were acquired or merged." Also numbers seem to be ok (about 1-in-5 for the first time enterpreneurs, 1-in-3 for the already successful ones and 1-in-4 overall), considering these are all venture backed companies, thus pre-selected from a much larger pool. Plus, if you check the list of 40 VCs (Kleiner Perkins, Sequoia, Benchmark, Bessemer, Greylock, Accel, etc.), these are also skewed toward the top of the distribution, so there is another level of pre-selection.

copenja 18y ago

Which means if you dedicate yourself to starting two businesses you have a 57% chance of succeeding at least once.

mixmax 18y ago
and if you dedicate yourself to starting 4 businesses you have a 114% chance of suceeding. Check your statistics ;-)
NyxWulf 18y ago
Ok, I have no idea how you came up with 57%. Even if you add 18%+30% (which is not mathematically valid) you'd only get 48%. How in the world did you get 57%?! The real probability based on the article (according to my calculations) is 34.4%, which is actually much better than I would have guessed. Here is how I came up with that. The article states a first time entrepreneur succeeds at an 18% rate. And someone succeeds at a 20% rate given they failed the first time. P(First Time Success) = .18 P(First Time Failure) = .82 P(Success | First Time Failure) = .20 P(Second Time Success) = P(Success | First Time Failure) x P(First Time Failure) + P(First Time Success) 0.344 = .18 + (.82 * .20) In words: 18 percent of entrepreneurs will succeed on their first try. 82 percent will fail. Of that 82 percent that failed, if they try again, they will succeed 20 percent of the time. To get a number from the original population of first time attempts you have to multiply the 82 percent who failed by the 20 percent who succeeded on the second try which results in 16.4%. That 16.4% is the percentage of the original population who tried on the first try but did not succeed until the second try. The end result being 34.4% of the original population will be successful on their first or second try. Hopefully that makes sense. * edit to format the formulas a little better

daveambrose 18y ago

I submitted this a day ago: http://news.ycombinator.com/item?id=384801 http://news.ycombinator.com/item?id=384801

AndrewWarner 18y ago

Entrepreneurs who sit on their asses and never take a shot have a 0% chance of success. Ignore the stats. Take your shot.