\Startup Life Opinion/ Why failure should not be celebrated in the startup world More than 90% of entrepreneurial businesses in Europe will fail. That’s an appalling statistic. By Louise Nicolson 2 September 2019 Credit: Red and Metal Cartoon Spaceship Crashed on White Background 3D Illustration with Copy Space Credit: Red and Metal Cartoon Spaceship Crashed on White Background 3D Illustration with Copy Space \Startup Life Leadership after Covid: upgrade please By Marie Mawad in Paris 6 January 2021 \Startup Life Opinion/ Why failure should not be celebrated in the startup world More than 90% of entrepreneurial businesses in Europe will fail. That’s an appalling statistic. By Louise Nicolson 2 September 2019 Being an entrepreneur is more uncertain, more complex, more stressful, more pressured and less lucrative than regular corporate work. We know — despite the blood, sweat and tears invested — around 90% of entrepreneurial businesses will fail. This figure comes from a 2017 report by the UK Treasury, later confirmed by The Start-up Genome Project’s analysis of over 3,200 high-growth start-ups. Stateside statistics match. According to Harvard Business School cohort analysis, more than 90% of tech-centric, venture capital-backed start-ups fail. But we drown out these statistics with bravado. The Entrepreneurial Myth whispers: go on, have a shot, move fast, fail fast. “I’ve been failing for as long as I can remember,” says Virgin Group founder Richard Branson. “If you aren’t failing, you are not innovating enough,” says Tesla-founder Elon Musk. But not all failures are equal. Those promoting business risk and celebrating failure, often do so from a position of success and wealth. If Branson wasn’t a success, you wouldn’t hear his tale of failure. Success gives star entrepreneurs the platform but hollows out their message. Those who are arguably as talented but didn’t receive the break or the call — the real failures, if you like — remain invisible. Advertisement The impact of failure is also skewed. We expect entrepreneurs to privately shoulder the financial and psychological cost of business failure. But if entrepreneurial businesses succeed, society reaps the benefit. Economies rest on the jobs, wealth, tax and glory generated, traded for the health and wellbeing of the person who generates it. This inevitably has an impact. Research by the University of California’s Michael Freeman linked higher rates of mental health issues with entrepreneurship. The 2019 Entrepreneur Pressure and Wellbeing Study claimed 77% founders felt their business affected their mental health. Discussion about these emerging patterns tends to focus on personal coping strategies such as coaching, training and safe spaces. While these essential interventions are long overdue, there is also an unexamined structural flaw at the heart of enterprise. Not only do we accept appalling business success rates, but we also misrepresent entrepreneurship as easy, failure as personal and the churn of business creation and insolvency as inevitable. Name another economic sector that tolerates the almost certain probability of losing the millions invested. We should be outraged about business failure rates and appalled about the impact on founders. We can do better than this. Perhaps it is time to think about failure like an aviator. Aviation manufacturers and operators collaborate – despite ferocious competition – to learn from failure, rather than measure each other against it. They methodically share, examine and address causes of failure. A flight – like a business – is a complex system of mechanical equipment, maintenance schedules, fallible leaders, team dynamics and uncontrollable external influences. Analysis of aviation incidents considers the whole system – the plane and the pilot and everything in between. Such ‘human factors’ analysis often relies on a quirkily titled ‘swiss cheese model’ to envision how ‘holes’ in an organization’s defensive layers align to create the perfect conditions for failure. An entrepreneurial hole might be a duff decision impacting cash flow or the prolonged absence of your co-founder; it might be a change in your customer’s strategy or wider economic recession. A start-up might flex to handle one or two holes but, if they all align, the business fails. There are patterns buried in entrepreneurship’s 90% failure rate. If aviation, energy, banking and healthcare industries can learn from the swiss cheese model, so can entrepreneurship. Let’s pool the data of the 90%, draw the patterns and learn the lessons. Sharing data, as well as stories, requires an open national business culture where entrepreneurs report failure factors without shame, blame and recourse. We must then systematically analyse this data to find the holes and identify situational, geographical, sectoral, temporal and behavioural clusters in the failed 90%. These clusters and patterns present us with an opportunity to recalibrate business success, to save and scale good businesses, to equip and empower more entrepreneurs to succeed. Data, not celebratory bravado, creates an opportunity to collaborate to tackle the root causes of failure – just as they do in other industries. The prize is huge. If business success rates improved by just 10%, back of the envelope calculations indicate it could be worth £19.6bn to the UK economy, $850bn to the US economy. Most importantly, any economic benefit is coupled with the unquantifiable human benefit of preserving entrepreneurial wellbeing. Now that really is something to celebrate. Louise Nicolson is an entrepreneur and the author of The Entrepreneurial Myth Advertisement Help Sifted get bigger and better (and get a sneak peak at our future plans). Please take our reader survey. Take the survey Terms of Use Related Articles Only 21% of tech unicorns are led by women, report shows By Freya Pratty Click here to read more Black entrepreneurs receive just 0.24% of capital in the UK By Freya Pratty Click here to read more Systemic barriers for minority business owners persist, report shows By Freya Pratty Click here to read more Time to stop using the term BAME By Erika Brodnock and Johannes Lenhard Click here to read more Get the best of Sifted in your inbox By entering your email you agree to Sifted’s Terms of Use Sign up to \Future Proof Sifted’s weekly \Corporate Innovation roundup email By entering your email you agree to Sifted’s Terms of Use Most Read 1 \Fintech Starling Bank wants to buy a lender 2 \Startup Life Chief of staff: the ‘must-have hire’ for startup CEOs? 3 \Fintech The 10 fastest fintechs to reach billion dollar valuations 4 \Venture Capital Rich Europeans need to invest 10% of their money into tech and stop buying stupid stuff like hotels 5 \Public and Academic European Commission makes its first equity investments into startups 10 Join the conversation Subscribe newest oldest most voted Notify of new follow-up comments new replies to my comments AlShould listen to The Art of the Fail podcast, 2 regular guys talking to people about failures, lessons learned, and growing from those lessons. John ThornhillThanks for the recommendation. Any other good podcasts on this subject??? RashaverickWhat should be outed are the vulture capital, pump and dump, first in and first out, ponzi schemes, from venture capital, broken 2 and 20 scam models, like: bitcoin, ripple, eretheum, hampton creek, just mayo, zenefits, ubiome, deepmind, soylent bars, theranos, uber, lyft, several pot stocks, alot of biotech, letc. VC’s are zero Mostel and Gene Wilder in Mel Brook’s THE PRODUCERS. MyPeopleNow.comExcellent article suggesting we take a deep look at the data. Surely there are people bright enough to do it, but no one seems to be. Thanks for this – good to think on. maryam mazraeiAt Autopsy that is exactly what we are doing. Looking at failed and distressed company data to draw insights on common pitfalls to be avoided. More here https://getautopsy.com KrissiI have to agree with you on this article. We really need to look at existing data to understand exactly what is causing the failure. My first point of call would be the markers they potentially use to understand if a start up will be successful may be incorrect. We need to look at the metrics and the physiological characteristics of founders through psychometric testing and then measure that data against companies who have not received funding and have gone on to deliver successful startups and potentially see where the difference may sit Jarie BolanderWhile I agree that sharing one’s story about the journey is helpful and healthy, I must disagree that it will put a dent in the failure rate of venture-backed startups. Innovative is a risky business. It’s hard to figure out what’s going to work or not work without trying. I feel that the startup world is converging on “situational, geographical, sectoral, temporal, and behavioral clusters” that impact success. It’s in all the tips, tools, and techniques that have been systemized by SaaS tools such as Xero, Monday, and Pipedrive as well as podcasts like How I Built This, My First… Read more »JaroslawI’m deadly serious here or I wouldn’t write it. “90% of entrepreneurial businesses will fail” can be reversed IF my “focus search engine optimisation” is applied plus my “seo booster”. Currently it works for two people now, both were nowhere, today they are sitting on page one on Google and probably getting heaps of business from their sectors and rightly so. With Brexit sniffing around, this solution will help businesses in the North and North West of UK primarily. MattyD“We should be outraged about business failure rates and appalled about the impact on founders” There is a place called nature that has its own laws and part of that is often the death of up to 95% of newborn members of any given species such as green sea turtles. I hardly think they stand around thinking of that as all they know is they need to get to that ocean to live. The statement above shows me you are an optimist but not always a realist and that you don’t honestly like capitalism in general as it’s not fair.… Read more »Michael StothardHi MattyD, I take your point. Nature red in tooth and claw. So is business! But still, imagine if some basic mistakes commonly made by startups could be avoided and that failure rate could be 85% or 85%. What a boon to the economy! M
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