One of the reasons for which small businesses are likely to fail is that they do not know about the odds which are in their favor. It is tough for the first time entrepreneurs and if there is a renowned venture capital firm backing you, things are made easy all the more. It has been found that serial entrepreneurs succeed more than first time entrepreneurs. If you are a first time entrepreneur, the chances of success are lean. It has been found that while experienced entrepreneurs have a 30% chance of success, newbie marketers are likely to succeed by 18%.
It has been however seen that new entrepreneurs are likely to be funded more by venture capital firms than experienced entrepreneurs. While it might be strange, it is true that the venture capital firms prefer failed entrepreneurs more. Starting a company in the right industry at the right time is a skill. The success rate of the industry is the best indicator of success in the following venture. Entrepreneurs who succeed by investing in a good industry and year are likely to succeed in their following ventures than the people who succeeded in the business by performing better than other firms which were founded in the same industry and year.
Entrepreneurs investing in a good industry-year are likely to invest in a good industry-year in their following ventures even after regulating for the differences in their overall success rates across different industries. Hence, entrepreneurs have the ability to turn markets. Another thing to consider while setting up businesses is that success brings success. Entrepreneurs with previous success rates can get their hands on more services and capital if the suppliers believe that they have been persistent in their performance. It is also believed that companies which are funded by venture capital firms are more likely to succeed.
The reason is because the venture capital firms or VCs are better in identifying the potential success or because they are better able to add value to the companies which are funded by them. However, if the start up firm has been founded by an entrepreneur who has previously been successful, the repute or support of the venture capital firm does not matter. As successful entrepreneurs can obtain services easily their chances of success are higher. They do not really need the guidance which is provided to them by the venture capital firms.
If the successful entrepreneurs are better, the top tier venture capital firms can have no benefits in identifying them since success is public information and they add but little value. If the successful entrepreneurs have a good time attracting the good quality customers and resources, the best venture capital firms add small value. Most of the entrepreneurs get ideas from their previous employers. The venture capital firms generally do not offer funding to the same entrepreneur on their next venture. You will be wrong if you think that successful entrepreneurs will have no problem receiving funds from venture capital firms which backed them in the past.
Serial entrepreneurs do not usually receive funding from the same venture capital firm across multiple ventures. Serial entrepreneurs are likely to receive venture capital sooner than those who are at it for the first time. If you are established as an entrepreneur, it is easy to convince the venture capital firms that they can bet on you. while 45% fist time ventures receive initial venture capital funding at an initial stage, about 60% receive initial capital funding at an early stage when it is their second or third venture. Established entrepreneurs take about 21 months on an average to secure their venture capital funding as compared to 37 months for the first timers.
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