Does entrepreneurial experience guarantee future startup success? Not really, study says

Summary:Serial entrepreneurs aren't any better than someone launching their first venture, study claims.

Over the course of my career, I've encountered many self-described "serial entrepreneurs" -- those who have made a career path out of launching new ventures, then moving on to the next. While the people I've met appear to have had strings of apparent successes, is entrepreneurial experience a predictor of future success? 
Executives-USDA-April 2013-Cropped-2-Photo via US Dept of Agriculture via Wikimedia Commons.jpg
Photo: US Department of Agriculture
 

Not necessarily, a recent study finds. In fact, serial entrepreneurs overall tend to have very dismal track records. That's the finding of a study from the Centre for European Economic Research, surfaced by Walter Frick at the Harvard Business Review blogsite. The study was based on the success and failure rates of 8,400 entrepreneurial ventures in Germany, and concludes that previous experience in the entrepreneurial realm doesn't really predict success going forward. 

The study's authors state that:
Previously failed entrepreneurs are less likely to survive and, in common with entrepreneurs with mixed prior experiences, are more likely to experience bankruptcy. We find that portfolio and serial experience is unrelated to survival or avoiding bankruptcy. Our results showed that venture survival outcomes are unrelated to prior successful entrepreneurial experience and that failed entrepreneurs are more likely to fail again.
Frick takes issue with the Centre's glum findings -- skills gained in previous entrepreneurial experiences do matter a great deal, he opines. The entrepreneur's education makes a difference, for example. Frisk also cites a 2009 Harvard Business School study of venture-backed startups "that did find previously successful entrepreneurs to be more likely to succeed in a subsequent venture."  The study also concluded that "failed entrepreneurs are about as likely to succeed as novices," he adds. The bottom line: past experience is a predictor of an entrepreneur's ability, he states.

It's true that many well-known business founders, such as Bill Gates, Steve Jobs and Mark Zuckerberg, were extremely successful in their first ventures. More often than not, it's been a matter of being at the right place at the right time. 

Startup success comes from a confluence of factors -- a great idea, a receptive market, and passionate promoters. And -- importantly -- it comes from a tolerance for failure and ability to learn from it. Someone who has experienced the ins and outs of building a startup venture surely has a better understanding of the obstacles that come up, such as how to present to potential investors, how to find the right partners and employees, and how to identify potential customers. 

They may not always be in the right place at the right time, but they're more prepared when the stars do align.

(Thumbnail photo: U.S. Department of Agriculture.)

This post was originally published on Smartplanet.com

Topics: Innovation

About

Joe McKendrick is an author and independent analyst who tracks the impact of information technology on management and markets. Joe is co-author, along with 16 leading industry leaders and thinkers, of the SOA Manifesto, which outlines the values and guiding principles of service orientation. He speaks frequently on cloud, SOA, data, and... Full Bio

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