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This could be the companion thread to Optimism- Absolutely Necessary
Try, Try Again, or Maybe Not
By LESLIE BERLIN
IF at first you don’t succeed, it doesn’t matter that you tried.
That seems to be the message of a working paper prepared recently by a team at Harvard Business School. The study found that when it comes to venture-backed entrepreneurship, the only experience that counts is success.
“The data are absolutely clear,” says Paul A. Gompers, a professor of business administration at the school and one of the study’s authors. “Does failure breed new knowledge or experience that can be leveraged into performance the second time around?” he asks. In some cases, yes, but over all, he says, “We found there is no benefit in terms of performance.”
The study looked at several thousand venture-capital-backed companies from 1986 to 2003.
Professor Gompers and his co-authors Anna Kovner, Josh Lerner and David S. Scharfstein found that first-time entrepreneurs who received venture capital funding had a 22 percent chance of success. Success was defined as going public or filing to go public; Professor Gompers says the results were similar when using other measures, like acquisition or merger.
Already-successful entrepreneurs were far more likely to succeed again: their success rate for later venture-backed companies was 34 percent. But entrepreneurs whose companies had been liquidated or gone bankrupt had almost the same follow-on success rate as the first-timers: 23 percent.
In other words, trying and failing bought the entrepreneurs nothing — it was as if they never tried. Or, as Professor Gompers puts it, “for the average entrepreneur who failed, no learning happened.”
This finding flies in the face of conventional wisdom in Silicon Valley, where failure is regarded as an important opportunity for learning. No less an authority than Gordon Moore, a co-founder of Intel, says that in the Valley, “You’re more valuable because of the experiences you’ve been through under failures.”
The basic idea behind the embrace of failure is this: Entrepreneurs who have built and then tried to save a company have seen what does and doesn’t work. This experience is viewed as excellent preparation for tough situations that might arise in a new venture.
“Given conventional wisdom, we were expecting to find much lower differences between failed and successful entrepreneurs,” Professor Gompers concedes.
Not all failures are equal.
http://www.nytimes.com/2009/03/22/bu...l?ref=business
That seems to be the message of a working paper prepared recently by a team at Harvard Business School. The study found that when it comes to venture-backed entrepreneurship, the only experience that counts is success.
“The data are absolutely clear,” says Paul A. Gompers, a professor of business administration at the school and one of the study’s authors. “Does failure breed new knowledge or experience that can be leveraged into performance the second time around?” he asks. In some cases, yes, but over all, he says, “We found there is no benefit in terms of performance.”
The study looked at several thousand venture-capital-backed companies from 1986 to 2003.
Professor Gompers and his co-authors Anna Kovner, Josh Lerner and David S. Scharfstein found that first-time entrepreneurs who received venture capital funding had a 22 percent chance of success. Success was defined as going public or filing to go public; Professor Gompers says the results were similar when using other measures, like acquisition or merger.
Already-successful entrepreneurs were far more likely to succeed again: their success rate for later venture-backed companies was 34 percent. But entrepreneurs whose companies had been liquidated or gone bankrupt had almost the same follow-on success rate as the first-timers: 23 percent.
In other words, trying and failing bought the entrepreneurs nothing — it was as if they never tried. Or, as Professor Gompers puts it, “for the average entrepreneur who failed, no learning happened.”
This finding flies in the face of conventional wisdom in Silicon Valley, where failure is regarded as an important opportunity for learning. No less an authority than Gordon Moore, a co-founder of Intel, says that in the Valley, “You’re more valuable because of the experiences you’ve been through under failures.”
The basic idea behind the embrace of failure is this: Entrepreneurs who have built and then tried to save a company have seen what does and doesn’t work. This experience is viewed as excellent preparation for tough situations that might arise in a new venture.
“Given conventional wisdom, we were expecting to find much lower differences between failed and successful entrepreneurs,” Professor Gompers concedes.
Not all failures are equal.
http://www.nytimes.com/2009/03/22/bu...l?ref=business
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