There is a great deal of debate surrounding the chances of an entrepreneur doing well or poorly. How many startups fail? How many are more likely to be successful in their business model and in their subsequent international expansion? Can that probability be calculated? In this sixth installment of the advice series, we offer entrepreneurs through Patrick Hunt we will try to shed light on this topic, using particularly interesting studies.
To begin with, we can dismiss statements about the success of a new company that are often repeated but are only partially true. For example, The well-known estimate that “90 percent of startups fail” is a myth. It's not true. To clarify this, we can read an extensive and detailed study by Greg Stevens and James Burley, “3000 ideas — 1 commercial success”. In this report, it is stated that 99.7% of the ideas generated in the process of creating new products fail. But the same study reveals that approximately 60% of the projects launched on the market are successful. It is necessary to know how to distinguish stages, specifically between the generation of ideas, and the stage of launching new products to the market. There are studies that try to contextualize the success or failure of companies taking into account four fundamental parameters in their development: the activity surrounding the issue of patents, the activity of projects in large companies, the activity of venture capitals and the activity of investors. And we can mention the report prepared by the Kaufman Foundation, which analyzed how business angels invest in group. The conclusions were obtained by analyzing 1000 investments with their respective outputs, these investors:
- they lost everything or almost everything in approximately 50% of them
- they earned between 1 and 5 times what they had invested in approx.a little over 30%
- they earned between 5 and 10 times what they had invested in approx. 10%
- they earned between 10 and 30 times what they had invested at about 4%
- and they earned more than 30 times what they had invested at about 6%.
This study is important because it establishes that the 10% to which so much reference is made, what it really means is that only 10% are projects that have a high enough return to compensate for what venture capital loses in those projects that go badly.This latest study also shows that, from the perspective of entrepreneurs, things are not as negative as they seem, since 50% of them manage to launch a business that is capable of returning the investment made in it, generating wealth and jobs. So go ahead, entrepreneurs!
