Success Breeds Success in Startups
Previous performance is the best predictor of an entrepreneur’s success or failure in future ventures.
Title:
Performance Persistence in Entrepreneurship
Authors:
Paul A. Gompers, Anna Kovner, Josh Lerner, and David S. Scharfstein
Publisher:
Harvard Business School, Working Paper No. 09-028
Date Published:
December 2008
For entrepreneurs, past performance seems to be the best predictor of future success. After examining the success or failure of several thousand venture-backed companies from 1986 to 2003 — where success was defined as the company going public or filing to go public — the authors of this study uncovered an interesting trend. Entrepreneurs who had experienced success at previous startups were far more likely to succeed in future ventures; their success rate was 30 percent, compared with just 18 percent for first-time entrepreneurs. The research also debunked a popular Silicon Valley myth: Entrepreneurs with failed startups on their resumes — where failure was defined as bankruptcy or liquidation — are more likely to perform well in future ventures because they’ve learned from past mistakes. In fact, the success rate of entrepreneurs who had been part of a failed startup was just 20 percent — roughly the same as for first-time entrepreneurs. The research doesn’t explore the specific traits shared by successful serial entrepreneurs, but it does show that they tend to have a good sense for when to enter new markets.
Previous performance is the best predictor of an entrepreneur’s success or failure in future ventures.
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