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Lies, Damn Lies and Statistics About Entrepreneurs

Lies, Damn Lies and Statistics About Entrepreneurs | Pitch it! | Scoop.it
A refreshingly objective perspective on what it takes for startups and small businesses to make it and the percentage that actually do.

If you plan to make it on your own, you'll inevitably wonder about the odds of success. Unfortunately, there are all sorts of statistics floating around that, even if they’re true, are usually taken out of context to create a buzz or undue hype.  

Luckily, I have no skin in this game. I just thought it might be helpful to provide would-be startup founders and small business owners a little objective, qualitative and, if possible, quantitative analysis that sheds some light on the risks they will inevitably have to take.

First of all, none of the successful founders, CEOs and VCs I’ve worked with over the decades have ever given me a decent argument for disputing the common doctrine that roughly one in 10 startups makes it. Having been in this game a long, long time, that always seemed like a pretty accurate rule of thumb.

Last year Y Combinator’s Paul Graham revealed that, over the five years since his incubator program began, 37 of the 511 companies have sold for or are valued at $40 million or more. I know $40 million seems like a lot, but for venture-backed startups that include the likes of Dropbox and Airbnb, it’s actually not. In any case, that’s a 7 percent success rate.

While many of those companies still have room to run, when you consider that Y Combinator only admits a small fraction of applicants (its acceptance rate has been pegged at 3-5 percent) and it probably does have a reasonable “ability to pick winners,” as Henry Blodget correctly suggests, the 10 percent rule starts to look downright optimistic.    

Nevertheless, I always wondered why that didn’t seem to jive with U.S. Census and Bureau of Labor Statistics data that indicate only about half of all small businesses fail within the first five years. While an optimist may see that glass as half full, that, as it turns out, would be a big mistake.

Truth is, just because a business doesn’t fail doesn’t mean it actually pays the bills and makes money.

Related: Why Stressed-Out Control Freaks Make Insanely Great Entrepreneurs

Crunching U.S. Census and survey data The National Federation of Independent Business (NFIB) estimates that 39 percent of all small businesses make a profit over their lifetime. About 30 percent break even and another 30 percent lose money. Moreover, small business owners have personal bills, too. They have to pay for housing, transportation, insurance and energy. They have to put food on the table. So if the business breaks even over its lifetime, that probably doesn’t cut it.

I don’t know what percentage of companies that make money also cover all their personal bills but I think half would be a pretty reasonable guess. And the percentage that pay the bills and provide for some reasonable level of comfort in retirement might be roughly half again. Since the latter is how I define business success, that leaves us with about a 10 percent success rate.

Yes, I know that’s a lot of arm waving but since I actually have some expertise in this area and it does jive with the observed 10 percent success rate for venture-backed startups, I think it’s a pretty darn good number to use in your financial planning. Besides, it’s the best I can do on short notice.  

Now, here’s where things get interesting. The obvious question to ask is, what makes the difference between the 10 percent that make it and the 90 percent that don’t? If you ask 10 self-proclaimed experts on the subject, you’ll probably get 10 different answers … and they’d probably all be wrong. It really isn’t complicated and the answer is more black and white than you might think.

You might become one of the 10 percent if you …

1. Come up with a truly differentiated product for a large and growing market that, most importantly, has a value proposition that customers are willing to pay for. If not, you will not gain or maintain market share.

2. Love what you do and have no problem working your tail off day in, day out for years and years, focusing on that and not much else.

3. Actually know what you’re doing, i.e., have solid knowledge and -- better yet --experience, not just in your particular field but also in the basics of finance and running a business.

4. Are a good manager who actually knows what that means. In case you don’t, it means you can develop and execute a plan that gets the job done and delivers products and services on time and on budget that excite your customers.    

5. Are an effective leader who understands people. Motivating others is all about building real relationships with real people in the real world. Customers, employees, investors and vendors are all people. That’s what business is all about.

6. Have something inside you – something to prove that drives you to do whatever it takes to win and persevere in the face of adversity, competition and obstacles that every business owner faces.

7. Make smart decisions based on solid information from expert sources and your own intuition, not on popular wisdom or feel-good nonsense.

8. Have the courage and the guts to take big risks, challenge the status quo, face the truth and do the right thing even when it’s the hard thing to do.

If that seems like a lot for someone just starting out, you’re right, it is. While everyone loves to talk about business wunderkinds like Richard Branson and Bill Gates, the truth is the vast majority of successful business leaders had careers in the corporate world that gave them the experience, knowledge and skills to make it on their own.

Personally, I think those who have what it takes will come out on top no matter what they decide to do. If you think you’ve got what it takes to make it big on your own, then I say take all this with as much salt as you like and remember the immortal words of Han Solo from The Empire Strikes Back, who said, “Never tell me the odds.”

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Marc Kneepkens's insight:

Excellent article. What does it take to succeed. 10 points to increase your chances to success.

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What is a Startup...?: Why has my startup not taken off yet?

What is a Startup...?: Why has my startup not taken off yet? | Pitch it! | Scoop.it
Why has my startup not taken off yet?
Many startups fail. Many entrepreneurs start with a lot of energy (and anxiety), build expectations around the business they are building, launch it, are for a while very happy with it, and after a period of gradual decay, after 6 months or 1 year there is nothing more of them and the members returned to "safe" jobs. But why? What was missing for that startup to become a success? 


In order not to frustrate expectations: the aim of this paper is not to present micro-economic data, statistics or research on why startups fail. The aim of this paper is to show my opinion on the topic, based on what I see and read every day. 


As many of you may have already read, failing is part of the innovation and self-discovery process, and it's something totally linked to entrepreneurship. Starting a new business is venturing into the unknown: you can do many previous researches and studies, but there are variables that will be not well measured in advance. Sometimes you will need to launch your startup first and then see what happens when it's running.

Maybe your calculations were sufficiently well-aimed, you have studied the market and the competitors, you had luck and the necessary preparation, you did all on the "right time" and "the right way" and your startup is suddenly a success. Maybe you realize that important variables were ignored in the business plan and things did not evolve as planned. It's normal: making mistakes is human. Making mistakes, in the context of entrepreneurship, is fully part of the learning process. 

The way you go on after a mistake is the key and how you behave makes ALL the difference: you need to continue, understand it is a chapter, not the end of your story as an entrepreneur. Everything depends on how you will assimilate this mistake and go on with your business, with your dream. 

Many entrepreneurs are at this moment launching a business that will need some adjust to be a success (success here has the meaning of being well received by the public and generating sustainable income). Others will launch something that needs to be completely redesigned to be a success. Others will launch something that the market is not yet "ready" to accept or use, and they will have to invest in marketing, partnerships, sponsoring, endorsement and will have to convince the public they are good enough. That means a lot of time and persistence. Everyday believing and acting. For each person and for each business there is a needed time for development/maturation. It's necessary to try, believe, strive, pivot, adapt, follow. You should not be discouraged by an error, failure, or a broken company. 

You tried that way, it did not work. There are others. If you truly believe in your business, you need to continue with it, ask new opinions, study more, seek further advice and seek new paths to follow. 

There is a path to success, a straight shot. But it's not always there, on the first attempt. Sometimes you will need to improve more to reach it. Sometimes you will need to really conquer success, be ready to manage it and make it something sustainable. And that is actually good, that will make you grow. 

Success (and here I am talking about entrepreneurial success) will come, but each one has a journey, each one has a necessary way to go (a way that will enable each person to learn and grow). Do not give up. If you truly believe in your business, it will someday happen, maybe not exactly as you imagined, but it will happen and you will be much stronger when it happens.

You may need to re-create it completely. You may need to study more and harder, listen to other opinions, change partners, change partnerships, teams, sources, resources. If you are really proactive and seek people to help you, if you do not let your pessimistic thoughts or people who do not believe in you convince you, certainly your journey will be successful. 

It may be that the final result has nothing to do with your original plan. It may be that you end up getting involved in an area that has nothing to do with what you initially envisioned. You may conclude that being an entrepreneur is not for you. But certainly this journey of mistakes, successes, attempts (and courage!) will be very positive and will bring you closer to who you really are and what you really believe. 

See you soon!


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Startups: 10 Tips For Getting the First 18 Months Right | CallFire

Startups: 10 Tips For Getting the First 18 Months Right | CallFire | Pitch it! | Scoop.it
Launching a new business is one of the most daunting prospects you will ever face. Even with years of experience, reams of contacts, clients lined up, money in the bank and that all-important hunger for success, there are so many unknown quantities.

If you educate yourself about some of the common mistakes made by start-ups during the first year of business, you can avoid becoming one of the 80% of business that fail in the first 18 months. To help your fledgling company traverse the choppy waters of the business world, have a look at our top tips for surviving that all-important first year and a half. 

To read the full article, click on the title or image.

Get your Free Business Plan Template here: http://bit.ly/1aKy7km

Marc Kneepkens's insight:

Increase your chances to success. Don't be part of the 80%+ startups that don't make it. Getting a startup going is a massive effort. Don't underestimate it. Here are some good common sense tips.

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What Fuels a Startup's Success? Drive to Win vs. Fear of Failure

What Fuels a Startup's Success? Drive to Win vs. Fear of Failure | Pitch it! | Scoop.it
All offense and no defense can cripple your company. So how do you strike a balance between both?

George Deeb is the Managing Partner at Chicago-based Red Rocket Ventures, a growth consulting, advisory and executive staffing firm based in Chicago. 

What fuels a startup’s success? Is whether you are “driven to win” or have a “fear of failure”?

I think both sides of this argument are pretty self-explanatory, but let’s just make sure we are clear on what we are talking about here.

Being “driven to win” is an insatiable desire to be #1 in your industry, often with a “take no prisoners” mindset of growing market share as quickly as possible. The CEOs of these types of businesses often have a deep disliking of their competitors, and see themselves in an “all-out sprint” against the CEO’s of others in their space.

To me, this is an offensive strategy (as in, on the attack, not distasteful.)

On the other hand, “fear of failure” is driven more by not wanting the company to go out of business, and the perceived negative impact that would have on the CEO’s resume and reputation.  To me, this is a defensive strategy.

A sports analogy

So, if that is in fact a good analogy, are you aware of any competition that doesn’t require the proper balance of both a good offense and a good defense?  I really think if you have too much of one, without the other, your success will be hampered.

As one example from the sports world, let’s look at the failed Rich Rodriguez tenure as head coach of Michigan Football between 2008 and 2010. His innovative offense broke every statistical record as the most productive offense in the 132 year history of this storied program.

However, at the same time, his lack of defensive focus, broke every record in the wrong direction as the worst defensive program in the history of Michigan football. This lop-sided mix of skills, resulted in a middle-of-the-road record (7-6 in 2010), and the ultimate firing of Rich Rodriguez at the end of that season.

A business analogy

This analogy holds true in the business world as well. All offense and no defense can cripple your company.

If you are too scared to fail (e.g, too much defense), that may cripple your ability to innovate out-of-the-box ideas that, if successful, would catapult your business to new heights never before possible.

Let’s use Apple as an example. What if Steve Jobs had stayed “defensive,” focusing on protecting Apple’s market share as the leader in personal computers? We would have never seen such great innovations as the iPod, iTunes, iPhone and iPad that revolutionized the tech scene in the years that followed, fueling Apple’s meteoric growth and stock price.

On the flip side, if you try to use too much offense, you can cripple your business by growing too quickly, running out of cash or entering more markets than logically makes sense for your phase of development, stretching your limited resources too thinly to be sustainable.

My personal experience

I think this theory holds true from my personal experience while CEO of iExplore. I was equally focused on “offense” and “defense,” and was deeply-driven to win market share and partnerships away from my competitors at the time.

Concurrently, I had a deep fear of failing, especially in the wake of 9/11/2001 and the negative impact that had on the travel industry. I wasn’t going to let terrorism end my dream or taint my track record, and I fought on through very difficult market conditions, even though the odds of success were not in my favor.

Without the offense, we would have never built up a #1 market position and partnerships with National Geographic, Travel Channel, Expedia, Lonely Planet and others. But without the defense, it would have been a lot easier to simply file for bankruptcy in 2001, given the uphill battle that lied ahead.

To me, it is not whether you are “driven to win” or have a “fear of failure” – your startup success needs an equal balance of both. This is where having multiple co-founders may benefit your company to allot different perspectives and tasks for different people working toward the same goal.

Be sure to read my companion piece, Passion Drives Success, for additional insights on the key psychological drivers of entrepreneurial success.

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4 Things Remarkable Startups Have In Common

4 Things Remarkable Startups Have In Common | Pitch it! | Scoop.it

Why do some startups succeed and others don't? Here's a hint: It doesn't have to do with if an idea is good or bad. Indeed, the successful entrepreneurs are able to run with amazing concepts and pivot otherw when needing. There are a few more tried and true principles that can contribute to the success of your new company.

Among other things, these are four things remarkable startups have in common.

To read the full article, click on the title or image.

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Via Luis Costa
Marc Kneepkens's insight:

Four good reasons.

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