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Why do some startups succeed and others fail?
Paul Gompers, Anna Kovner, Josh Lerner and David Scharfstein put together a Harvard Business School working paper to answer that question, Performance Persistence in Entrepreneurship.
In it, they answer things like:
- Do first time entrepreneurs have it harder?
- What's in a VC's name?
- Are successful entrepreneurs skilled or just lucky?
After scouring the 35 page document, here are the fascinating answers to all of those questions and more.
Do serial entrepreneurs have a leg up on first time entrepreneurs?
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Answer: Yup. Serial entrepreneurs are more likely to build successful startups.
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% chance of succeeding in his next venture. By contrast, first-time entrepreneurs have only an 18% chance of succeeding and entrepreneurs who previously failed have a 20% chance of succeeding."
Who is more likely to get a VC's check; a founder who failed at their last venture or a founder who succeeded?
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Answer: If it's the same VC firm, the failed entrepreneur.
Failed entrepreneurs are more likely to get funding than successful entrepreneurs from the same VC firm.
Strange but true.
Is running a successful venture skill, luck or timing?
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Answer: Successful entrepreneurs are skilled at timing the market
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."
See the rest of the story at Business Insider
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See Also:
- This Guy Is Probably Going To Launch Your Next Startup
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- Why Gamers Love Working For Facebook Dating-App Developer SNAP Interactive
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