As a society, we need to pay attention to the failing 90% also. Question we have to ask ourselves is: Why are 90% companies failing even if the founders/entrepreneurs themselves are so smart, hardworking and driven? What is missing in the ecosystem that we can improve upon to improve entrepreneur success rates, even by a couple of percentage points?
Because entrepreneurs start from scratch with a newly conceived idea, the best analogy to discuss this problem and potential solutions is to compare them with a newborn child.
Both take birth with big hopes and dreams. However the kind of support that an entrepreneur receives during their early days is poles apart from what a newborn child receives.
When a child is born, the family and society around the newborn child has a very well laid out system to make sure that the child is taken good care of, nurtured and protected to grow into a healthy child. Right from teaching the child how to walk and how to say words to putting them through a formal education process, the family and society work to make sure that the child is developing mentally, physically, emotionally and socially.
The life of a first-time entrepreneur starting off with a newly conceived idea is however very different. The entrepreneur is pushed into this unknown world of business without any formal or informal education. There are no systems in place to ensure that this new entrepreneur receives the right education, training, protection and support to grow into a successful entrepreneur. Vast majority of entrepreneurs have no choice but to figure out answers as they go. Most of the times, they end up making costly mistakes and in the process, lose valuable time in their entrepreneurial journeys. Very few entrepreneurs or serial entrepreneurs recognize this early on and surround themselves with good mentors and advisors, who help the entrepreneurs to stay on track and minimize the number of mistakes they can make.
While we as a society have figured out a way to reduce infant mortality rates, we are yet to figure out how to reduce entrepreneur failure rates. Reason is not because we don’t know how to, but there is no ‘will’ to address it because of what drives the entrepreneurial eco-systems, which is funding and financial returns.
In almost all entrepreneurial eco-systems, there is too much talk about ‘raising money.’ The topic of funding dominates the news in media and at networking events. There are pitch nights organized for entrepreneurs to present their business plans, and the best among them grab the attention of investors who are looking for deals. The rest of the entrepreneurs are back to the street figuring out ways to convince the investors. Because there is so much hype around raising funding, most entrepreneurs when asked what their biggest problem is and they mention ‘funding.’
Entrepreneurs need to understand that funding is not everything. It is necessary but not sufficient to achieve success. Some startups in fact fail post funding because of pre-mature scaling. Startup Genome Report Extra on Premature Scaling – a project coauthored by Berkeley & Stanford faculty members along with Steve Blank and 10 startup accelerators as contributors, presents extensive data and analysis on the this topic, and this is a must read for every aspiring and current entrepreneurs.
What entrepreneurs fail to understand is that investors might not always necessarily focus on what entrepreneurs need and want. Investors care about their portfolio and they try to keep it very diversified. Even if 2 companies out of the 10 companies in their portfolio make it big, the investors make huge profits. So, what should entrepreneurs do to maximize the odds of their success. This is where the ecosystem can play a vital role to ensure that entrepreneurs receive the right kind of education and mentorship. Having the right mentors is key for entrepreneurs, and Startup Genome report validates this with real data. The report states that startups that have experienced mentors on their side are able to track their performance metrics more effectively, and experience 3.5 x better growth, than startups who are figuring out things on their own.. In simple words, Mentorship is all about having someone ‘who has been there done that,’ provide you their perspective and share stories from their own experiences. Most successful entrepreneurs have mentors: Bill Gates calls Warren Buffet as his mentor; Steve Jobs was mentored by Andy Grove, and Mark Zuckerberg relied on Steve Jobs for advice and guidance.
The entrepreneur ecosystems must create conditions for entrepreneurs to get connected with good mentors. The value of mentorship should be written about and discussed in the media as mainstream news, in the same manner of importance as an entrepreneur getting funded. Entrepreneurs need to be taught how to find, approach and work with good mentors to make their startups ‘fundable.’ If you have all the basic metrics and processes to be fundable with the help of good mentors, then everything else will fall in place.
The longer startup ecosystems don’t stress on the power and value of mentoring, the worse the success rates will be for entrepreneurs. Just like timely vaccinations and feeding protect infants, quality mentorship and ongoing education can significantly increase the odds of success for entrepreneurs. Infant mortality rates are down to about 0.5% in the United States, and imagine the pace of economic development if we work together and create conditions to bring down entrepreneur failure rates to even 80% from 90%!!!
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