Many people ask me whether they should build a start-up. Frankly, I believe this is the wrong question to ask. We're often led to believe that start-ups have a success rate of 10%. Given this expected value, you probably shouldn't build one. Yet, whether you should be a founder is a different question entirely. As a founder, you have the choice to stop building a start-up, pivot, or start again. Over your lifetime, you could potentially start as many as 20 start-ups.
Considering this, each with a 10% likelihood of success, your probability of having at least one successful start-up over the course of your lifetime is 88%. The math is incredibly simple and is detailed below.
However, I believe the outlook is even better. Your probability of starting a successful start-up will likely improve with each attempt. My own empirical data suggests that the likelihood of success increases by roughly 10% for subsequent attempts, and up to 40% for repeat founders. For especially capable individuals, I believe the likelihood of success is even higher. The problem with averages is that they consider the entire population. If you look at a subset that doesn't resemble the general population (as I believe my angel portfolio does) or listen to investors like Fabrice Grinda, who has made over 1000 investments and show that over 50% of them result in an exit, you start to believe that the numbers can be better.
However, let’s forget about my optimism and assume that the maximum likelihood anyone can achieve over the course of building 6 start-ups is 40%. The math then suggests a 99.98% likelihood of building a successful start-up over the course of 20 attempts. Even with just 10 ventures, there's already a 97% chance that at least one start-up succeeds.
The question of whether you should build one start-up or whether you should be a founder is hence a very different one. You are comparing a 10% success rate to a 99,98% success rate and therefore the way you frame the question is far from trivial. Moreover, being a founder for the rest of your life has very different implications to building one start-up. If you’re interested in entrepreneurship or considering quitting entrepreneurship after your first company didn’t go the way you planned, I encourage you to change the question you’re asking yourself.
About the Author |
Daniel Dippold
Founded NewNow Group, Unlimitix, and EWOR (>€200M in company value) in his twenties and initiated Sigma Squared Society (200 directors, 30 countries).
