There are several tactics through which an entrepreneur can position themselves to be successful when a majority of small businesses fail. It helps to learn the odds which are in your favor as has been found by Anna Kovner, David Scharfstein, Paul Gompers and Josh Lerner in their paper at the Harvard Business School entitled Performance Persistence in Entrepreneurship. Here, certain burning questions are answered. Is the battle tougher for initial entrepreneurs? And what is it that makes for a successful entrepreneur – luck or skill?
Serial entrepreneurs have a higher success rate than first timers: First time entrepreneurs do not have a good outlook. The researchers at Harvard believe that entrepreneurship requires persistence in performance. An entrepreneur who is backed by venture capital has 30% chances of success in their next venture. A first time entrepreneur has only 18% chances of success, while those who have failed previously have it at 20%.
A new entrepreneur can be better funded by a VC firm than a true and tried one: Although it might be a bit strange, it is true that failed entrepreneurs are more successful in getting funding from a VC firm.
Starting with a company at the right time in the right industry is a skill: It is so because the industry year success rate in the initial venture is the best indication of success in the following venture. If an entrepreneur succeeds by investing in good industry and year, they are more likely to succeed in their following ventures than people who succeeded by performing better than the other firms which were founded in the same year and industry. Entrepreneurs investing in a good industry year can invest in better industry years in their following ventures even after they have controlled the differences in the overall success rates across different industries. Hence, the market timing ability is the attribute of entrepreneurs. It has nothing to do with wealth.
Success breeds success: Entrepreneurs who have experienced success previously can have their hands on better capital and services if the suppliers believe that they are consistent performers. Good quality engineers and scientists can be more interested in registering for a company began by an entrepreneur who had started a company in a good year and industry if they believe that the track record enhances chances of success.
Companies which are funded by top VC firms are more probable to succeed: This is because the top VCs are good in identifying potential success, or because they can add better value to the companies which are funded by them.
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