Warnings for 1st time Entrepreneurs

http://www.realistadvisory.com/2009/05/7-warnings-for-1st-time-entrepreneurs.html

by tylerhwillis • 17 years ago

19 11 17 years ago

unbannable• 17 years ago

98% chance of failure?

My understanding is that the 5-year failure rate of new businesses is about 40-50%. Given that an average 2x-year-old has a much lower chance of being successful enough in his first couple of jobs to (a) stay there for 5 years and (b) have it still be worth coming to work every day, this isn't a bad failure rate.

tptacek5• 17 years ago

Fewer than half of all businesses started last time this statistic was taken will survive four years (presumably the number is lower during this business cycle). But simply being alive (or even nominally profitable) isn't the same thing as "success". It's just "not failure". What are the numbers on successful exits? Remember, we tend to read only about the successes; when we read about "failures", it's more often than not the failures of those companies lucky enough to have gotten on our radar before.

In any case, the article isn't making a case for "not doing a startup". It's making a case for being realistic about outcomes. This is a good thing. If you're going to fail, fail fast so you can move to the next thing.

nkohari• 17 years ago

This article was absolutely terrible. Several points sound more like the author is playing buzzword bingo, and the rest are unsupported by the explanation. Take #1, for example. How does the number of business plans that received funding relate to a 98% chance of losing your capital investment?

tptacek5• 17 years ago

I don't know, I agree that the evidence presented is sketchy, but the number sounds right. You're certainly far more likely to fail than succeed.

I didn't think the article was terrible at all.

jasonlbaptiste• 17 years ago

This is honestly the worst article I've ever had the displeasure of reading on Hacker News. I'm all for realism, and the odds are always against us. That's fine, but he's basically eliminating everything he can. He's more pessimistic than "realist". Honestly, if you want to read about pitfalls and things to do/not do as first time entrepreneurs there are hundreds of better articles that have been posted here.

tptacek5• 17 years ago

So the reason this is the worst article you've read here is that it's too pessimistic?

tptacek5• 17 years ago

Couldn't agree with #4 (Exorcise BigCo Demons) more, haven't seen it written about much, feels like a fresh point worth considering.

Whole startup org charts (or use-of-proceeds slides) are based on the same stale shake-and-bake playbook, which is probably why so many of the resulting companies have the obligatory 4-person marcom team with the VP/Marketing, the Dir/Marketing whose job depends on managing booths at conferences, the PR/AR person who adds the obligatory budget line item for Gartner and Schwarz Communications, and "Sr. Marketing Manager" whose job it is to project manage the people that team outsources copywriting to.

hnbw2• 17 years ago

What is he talking about in #5? I simply have no idea what he means. Can anyone explain?

tptacek5• 17 years ago

He's saying that consumers are less likely to pay you for web product features than he thinks you think they are. He's also saying that he thinks the way to get money from small business customers is to have a quantifiable value proposition: he thinks you need to be making them money in a way that you can clearly spell out in terms a company controller would believe.

hnbw2• 17 years ago

Thanks.

If that's what he meant, then I have to agree with a few of the others -- it's a terribly written article even if the points are good. I appreciate the explanation!

jack7890• 17 years ago

I disagree with all the negative responses here--I think this is an excellent article with useful warnings. Yes, the 98% datapoint is random and unsubstatiated, but I think the author is using it more figuratively than literally. Most startups fail. That's all he's saying.

Warnings for 1st time Entrepreneurs

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