Lamarwaltersuccess Blog

January 13, 2011

“Why Businesses Succeed and Fail?”

Filed under: Business, Inspirational, Motivational, Sucessful, Uncategorized — lamarwalter @ 11:27 pm

1. Do serial entrepreneurs succeed more than first time entrepreneurs?
Answer: Yes.

If you’re a first time entrepreneur, outlook not so good.

According to the Harvard researchers, there is performance persistence in entrepreneurship.

They write, “All else equal, a venture-capital-backed entrepreneur who succeeds in a venture (by our definition, starts a company that goes public) has a 30 percent chance of succeeding in his next venture. By contrast, first-time entrepreneurs have only an 18 percent chance of succeeding and entrepreneurs who previously failed have a 20 percent chance of succeeding.”

2. Who is more likely to get funded by a venture capitalist firm, a new entrepreneur or a tried and true one?
Answer: A new entrepreneur.

Failed entrepreneurs are more likely to get funding than successful entrepreneurs from the same venture capitalist firm.

Strange but true.

3. Is entrepreneurial success a skill, or is it luck?
Answer: Starting a company at the right time in the right industry is a skill.

Here’s why: According to the Harvard paper, “The industry-year success rate in the first venture is the best predictor of success in the subsequent venture. Entrepreneurs who succeeded by investing in a good industry and year (e.g., computers in 1983) are far more likely to succeed in their subsequent ventures than those who succeeded by doing better than other firms founded in the same industry and year (e.g., succeeding in computers in 1985).

“More importantly, entrepreneurs who invest in a good industry-year are more likely to invest in a good industry-year in their next ventures, even after controlling for differences in overall success rates across industries. Thus, it appears that market timing ability is an attribute of entrepreneurs.”

Nothing indicated it has anything to do with wealth.

4. Does success breed success?
Answer: Yes.

Entrepreneurs with previous successes can get their hands on more capital and services if suppliers think they are persistent performers.

“For example, high-quality engineers or scientists may be more interested in joining a company started by an entrepreneur who previously started a company in a good industry and year if they believe (justifiably given the evidence) that this track record increases the likelihood of success,” they write.

5. Are companies that are funded by top-tier venture capitalist firms more likely to succeed?
Answer: Yes, with one exception

The reason these companies are more successful is obvious.

It’s either because the top venture capitalist are better at identifying potential success, or it’s because they’re able to add more value to companies they fund. The Harvard paper assumes both.

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