Does Failing Really Increase Future Chances Of Success? (No)

Last night I was at Google Campus and enjoyed listening to a "fireside chat" with Bill Maris, Managing Partner of Google Ventures.

The fire of "fireside" was missing but Bill was cool as a cucumber taking questions from a room full of entrepreneurs.

One interesting point he made and I thought worth repeating is that there are many "truisms" in popular tech culture. Sometimes we need to step back and question these commonly held beliefs with data.

One such truism; entrepreneurs who have previously failed stand a better chance of success versus the first time entrepreneur. Do they? This sentiment is often a byproduct of discussions around failure in startupville. Fail fast. Failure is not to be feared. Celebrate failure. etc etc etc.

Bill pointed out that research on the matter had proved that entrepreneurs who start their first business have just as much of a chance of success as an entrepreneur who has previously failed.

The truth (based on research) would appear to be that it's entrepreneurs who've previously succeeded who stand a greater chance of success versus first time entrepreneurs.

So what is the data?

Admitttedly it was a few years ago.

Harvard Business School published a paper in 2008 entitled Performance Persistence in Entrepreneurship .

The introduction states; "Is there performance persistence in entrepreneurship? And, if so, why? Our answer...is yes: 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."

Note that this is only venture backed startups and this was 2008. Success was IPO. (Success can also be a trade sale).

With this caveat in mind, it boils down to this

  • 1st time entrepreneur: 18% chance of success
  • Previously failed entrepreneur: 20% chance of success
  • Previously successful entrepreneur: 30% chance of success

Success breed success, so goes the old saying and so it also seems, shows the data.

This makes sense. There are more ways to navigate to failure than there are to navigate to success. Understanding what these paths look like is a key advantage. Failing in itself doesn't give this insight. It merely shows you which paths not to follow (not which path you should follow).

However, despite all of this, there is still only a 30% chance of success.

Clearly there are other indicators which matter. Domain knowledge, market readiness, product-market-fit, competition, timing - these all matter a lot. On a personal level, leadership ability, persistence, tenacity and drive also count for a lot.

Here are the things I look for in an entrepeneur. I didn't list "previous success" in that list, although I do think it's a very important positive indicator.

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