Entrepreneurs Not Learning From Mistakes

Entre­pren­eur­i­al fail­ure is an integ­ral part of even­tu­al suc­cess and an import­ant oppor­tun­ity for learn­ing, or so goes the con­ven­tion­al wis­dom (hence in some part the quote—commonly attrib­uted to Lisa Amos—that entre­pren­eurs aver­age 3.8 fail­ures before suc­cess).

Ignor­ing the anec­dot­al suc­cess-after-fail­ure stor­ies that stick in peoples’ minds, a team at Har­vard Busi­ness School decided to quant­it­at­ively study entre­pren­eur­i­al fail­ure and suc­cess rates and dis­covered that, con­trary to pop­u­lar belief, entre­pren­eurs don’t seem to learn from fail­ures, and suc­cess is the only exper­i­ence that made a dif­fer­ence to per­form­ance.

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; […] 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.

2 thoughts on “Entrepreneurs Not Learning From Mistakes

  1. Andrew

    The roughly one suc­cess in four attempts seems to cor­res­pond with the per­cent­age (22%-23%) rate of suc­cess. Maybe the les­son to be inferred is that per­sist­ence can even­tu­ally get you over the hump.

    I think the recur­rent suc­cess rate may have some­thing to do with net­work­ing con­nec­tions and increased will­ing­ness of investors to fund someone with a proven track record, rather than learn­ing from the exper­i­ence, per se.

  2. Andrew

    Con­versely, it is pos­sible that entre­pren­eurs would pay a pen­alty in investor con­fid­ence for their fail­ures, so a drop in the suc­cess rate of sub­sequent ven­tures might be expec­ted. Since the per­cent­age does­n’t drop and actu­ally increases slightly, per­haps exper­i­en­tial know­ledge does play a role.

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