This will be a controversial article, but I have reached the point where I feel I must go against the flow. I need to challenge the “common wisdom” of the industry experts and say “It’s not OK!”
I am referring to the commonly-held view that 80% (more or less depending on the research) of all new businesses must fail. I think it is time that someone said: “Bullshit! That does not HAVE to be the case.”
This revelation came to me while I was attending the first day of the South Summit in Madrid yesterday – the highly motivating and well-organised startup event (well done Maria Benjumea and team). The problem is among all the showcasing of startup success, there is a well-accepted view that
- the vast majority of startups must fail, and
- failure is good and is simply a learning experience.
To me that feels like going to an International Medical Conference and hearing that elevated infant mortality rates is OK – but not to worry, the survivors will be fine!
This high failure rate of new business is not “fine”. It is a massive waste of resources, brain-power and energy. And it can have incredibly negative impact on those that do not make it! If you are. 23 year old in San Francisco with access to plenty of capital, maybe its OK. But there are many cases where failing and starting again is not an option. For instance when I was chatting to an Uber driver in Nairobi earlier this year (who runs 4 small businesses), he estimated that about 20 people within his family depend on his earnings.
I get a little annoyed when I hear VC’s saying they invest in 1000 ventures to enjoy the successes of a few – and never mention those who do not make it. Or the accelerators who pick the top 20 startups and discard the other 2,000 who applied for their help but did not make the cut. I get it that these are their business models, but I do not get the callous way in which rhe rest are told “shit happens”. If you need to finance 1000 to find 3 unicorns, are the unsuccessful simply collateral damage?
I am not naive, I have been helping companies to survive and grow for 3 decades. There will be failures. Not all ventures should succeed. But I am optimistic and do not believe that such a high proportion need to fail to allow for this learning.
Maybe its time to say “Its not OK” and disrupt the new venture industry!
Watch out for the next post where I will add a bit of fact and rationale behind my rant. In the meantime, why not start a conversation? Do you agree? Do you disagree? Comment below.
Footnote: it was good to meet up with the people from FACE who are trying to help entrepreneurs face the challenges along the journey.
Mashauri is focused on the support of early stage ventures and are about to launch our new site Mashauri.org where we are going to take some tiny steps in this reinvention process. Why not sign up (top right-hand corner or form below) and follow our progress.