These failure rates are massive given that especially these us ivy league startups have a way better access to money, know-how, market size etc. compared to startups in most of the other parts in the world. As a founder myself in Europe, I feel that the failure rates here a considerably higher if you would correctly include all phases as Mr. Eisenmann did. After being involved in smaller successful, semi-sucessful and failed startups I at least from my experience can confirm most of it. I also learn a lot. Though, he may need to add causes which happen as well: company corruption, underestimating the importance of sales (sales theory is important!), most founders are too young and unexperienced (older founders need more support and security as their success rate is soon much higher if they decide to found.) etc.
There is a misalignment between value creation along a market adoption curve and profitability particularly with early stage companies. Profits often come much later on the market adoption curve and often on the backs of those who came before. (Love the robot example) I have speculated that a more capital efficient approach, rather than a winner takes all and many losers, would be a series of special purpose vehicles (spv) with license or future cash flow participation across a diverse set of investors in the spv. You could enable a diverse set of stakeholders to participate in the learning and adoption curve with more at bats and faster iterations and pivots without the 19th century baggage of “the corporation”. A cascading series of miracles is not an investment strategy or business model - break up the risk into more manageable pieces and spread the returns amongst a broader set of investors.
These failure rates are massive given that especially these us ivy league startups have a way better access to money, know-how, market size etc. compared to startups in most of the other parts in the world. As a founder myself in Europe, I feel that the failure rates here a considerably higher if you would correctly include all phases as Mr. Eisenmann did. After being involved in smaller successful, semi-sucessful and failed startups I at least from my experience can confirm most of it. I also learn a lot. Though, he may need to add causes which happen as well: company corruption, underestimating the importance of sales (sales theory is important!), most founders are too young and unexperienced (older founders need more support and security as their success rate is soon much higher if they decide to found.) etc.
Welp. Never been more demotivated to start a business. Thanks guys
Awesome podcast episode with tons of smart insights. I'm gonna buy the book.
It is really good especially after 40 minutes.
There is a misalignment between value creation along a market adoption curve and profitability particularly with early stage companies. Profits often come much later on the market adoption curve and often on the backs of those who came before. (Love the robot example) I have speculated that a more capital efficient approach, rather than a winner takes all and many losers, would be a series of special purpose vehicles (spv) with license or future cash flow participation across a diverse set of investors in the spv. You could enable a diverse set of stakeholders to participate in the learning and adoption curve with more at bats and faster iterations and pivots without the 19th century baggage of “the corporation”. A cascading series of miracles is not an investment strategy or business model - break up the risk into more manageable pieces and spread the returns amongst a broader set of investors.
Great stuff. Thank you!