The fact is, most startups don’t become the next Facebook. Here’s how to tell if entrepreneurship is right for you–and how to improve your chances of success.
The climate has never been better for entrepreneurs, but the startling reality is that for the past thirty years, the failure rate of new businesses hasn’t changed–and it’s pretty depressing. Whatever way you look at it, the fact is, most companies fail.
Data from the Small Business Administration and the Bureau of Labor Statistics consistently show that approximately half of new start-ups no longer exist after five years, and that approximately two-thirds will cease to be in operation ten years after founding. Dane Stangler of the Kauffman Foundation notes that approximately five hundred thousand new firms are created every year and that after five years, fewer than half of these companies will remain. Shikhar Ghosh, a senior lecturer at the Harvard Business School, looks at startups that take in outside money and finds that 30 to 40 percent fail. He defines failure as liquidating all assets, with investors losing most or all the money they put into the company. If failure is defined as not realizing the projected return on investment, then the failure rate is 70 to 80 percent
And the startups that get big–really big, Amazon or eBay or Google or Salesforce.com big, represent only a small sliver of total businesses. Of all of the technology companies started in the United States in any one year, only approximately fifteen ever generate $100 million in annual revenue. Those fifteen companies will ultimately be responsible for 97 percent of the market capitalization of the entire set of companies started that year. The truth is, not everyone is born to be an entrepreneur. It’s incredibly hard work. Marc Andreessen, the famed entrepreneur turned legendary venture capitalist, famously told then-CEO of Loudcloud (and now business partner) Ben Horowitz that when it comes to starting a company, “You only ever experience two emotions: euphoria and terror. And I find that lack of sleep enhances them both.” Eddy Lu, the entrepreneur who slept in his car when he started Grubwithus and was ferociously trying to make ends meet, couldn’t agree more. “It’s not for everyone,” he says
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