First-time Entrepreneurs?

Library House's newsletter yesterday (free registration req'd) highlighted an article by David Storey in the FT- making the case that there is no correlation between an experienced entrepreneur/management team and a company's success.

Storey summarises this belief [that failure is accepted in the US, and that it is a source of learning] to dismantle it, arguing that knowledge gained from a failed business makes little difference to future business success, due to the unpredictability of starting a business. ‘The best analogy is with a lottery,’ Storey writes, ‘it is not possible to learn to win a lottery.’

Storey points to research in the UK and Germany which indicates that experienced founders are no more or less likely to succeed in starting a new business than novices. It goes against one of the basic tenants of venture capital investing – focusing on the experience of the management team

At first, I thought that was the stupidest thing I had read in a very long time.

However, after giving it some more thought, I actually agree:

I'm not too worried about entrepreneurs being young or old; experienced or novice. I *am* worried about very large markets where an investment can be the leader (or at least one of the top 3). I'm also worried about great products and real, unmet needs…

An entrepreneur's experience? I've never lost any sleep over that one.

4 thoughts on “First-time Entrepreneurs?

  1. Despite registering, cannot access the article.

    Anyway, at least he didn’t find a negative correlation (= experience decreases chance of success) did he?

  2. I didn’t get to read the original (in the FT), but no, I don’t think there’s any reference to that. I think any correlation to experience and success (in a start up) is tenuous- it can help in some situations and hurt in others. The fact that there are so many moving parts and uncertainty around them means that even the best management team can still blow it…(and vice versa).

  3. Nice illustration of the quite old (at least as old as this industry is) “bet on horse” vs. “bet on jockey” parable, nicely sorted out by Kaplan @ UoC

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