But what about the risks?
by Edward de Jager, CEO VenturesOne
Are You an Entrepreneur?
The words entrepreneur and entrepreneurship get bounced around a lot these days and seem so trendy to use that it has become harder to grasp what it truly means to be an entrepreneur. I think that the National University of Singapore (NUS) Enterprise has come up with a brilliant mantra:
Entrepreneurs realise change and make a difference. They and the start-ups they build have been shaking things up, breaking major boundaries in recent years. We all know the examples of Uber, Apple, Airbnb, WhatsApp and many more (also smaller and local ones). Since the year 2000, over 50% of companies on the Fortune 500 list no longer exist. Some call it disruptive, I call it progress.
Threats don’t come from known competitors anymore but from new entrepreneurs/start-ups you’ve never heard of – Companies that did not exist until recently. This calls for continuous innovation, being on your toes all the time. Thinking outside the box is not sufficient anymore, there should be no box.
85% of Start-ups die from 3 Serial Killers
Though the start-up marketplace has proven that it is perpetually disruptive, it is also profoundly uncertain. Approximately 85% of all start-ups fail within 3 years, regardless of industry. This is an alarmingly high percentage and I believe, one that needs to be acknowledged. Access to funds are easier than they have ever been, with the number of VCs, private investors and crowdfunding platforms popping up. I wonder whether private investors and crowd funders really know what the risks are sometimes.
Why then do so many start-ups fail?
1) Product-Market Fit
Research shows that the number one cause is a lack in product-market fit. They fail to take into account the market need and tackle challenges that are interesting to solve, rather than finding a solution to a real market problem. Being creative and solving any problem can be beneficial to society. But if the market is not ready for it, the solution will just not fly.
2) Lacking adequate Funding
Running out of cash is another key reason. Many start-ups successfully secure the initial funding they need, and still crash, failing to secure follow-on funding.
3) Having the right Management Team
The management makes or breaks a start-up (and companies in general). Start-ups fail because they have management teams that lack strong team-working skills, which then leads to a weak execution. This problem is heightened when B players hire C players. This is something that I’ve seen time and again. All businesses boil down to their people – that’s why excellent management teams are so important to us here at VenturesOne.
No doubt there are many more reasons, but research shows that the ones above are the top 3 reasons and with the growing number of start-ups and the large amount of (venture) capital available, I think it is unacceptable that we see a mere 15% start-up success rate.
How can we increase success rate? Should Venture Capitalists and other financiers change their way of funding and thinking? Are start-up entrepreneurs too optimistic or too eager to become the next millionaire? Is our current ROI thinking a sustainable funding for the future? How can we create a better entrepreneurial ecosystem?
Also here we should apply NO Box thinking. Currently, I’m working with a team of entrepreneurs, investors and students to develop an ecosystem, where start-ups can better utilize Capital, Skills, Know How and Networks to increase their chance of success. Soon we will present our basic ideas, but if I have triggered your curiosity and imagination already, feel free to contact me with your ideas and comments.