Entrepreneurs with one success in the rear view mirror are more likely to succeed in subsequent ventures than either first-time entrepreneurs, or those who failed in a past endeavor.
So finds new research from the Harvard Business school that, unsurprisingly, also finds that success often begets success because of the support that gets thrown behind a perceived winner.
Much more surprising about the working paper is the stats it holds. According to its authors, including renowned HBS professor Josh Lerner, successful entrepreneurs have a 34 percent chance of succeeding in the next venture-backed firm, compared with 23 percent who failed previously, and 22 percent chance for new venture-backed entrepreneurs. (Honestly, I had no idea new entrepreneurs, or even second-time entrepreneurs with one failed company, had a one in five chance of succeeding. If I were a new venture-backed entrepreneur, I’d be pretty heartened by that data. Those are way better odds than you’ll find in, say, the restaurant business.)
The study also draws some interesting conclusions about market timing, suggesting that starting a company at the “right time” is a skill, and not just dumb luck. For example, entrepreneurs who’ve succeeded by investing in a burgeoning industry in a good year (at that soon-to-be-hot industry’s outset) are substantially more likely to succeed in their subsequent businesses than those who succeed by doing better than their peers once that industry becomes crowded with competitors several years later. More, those first-mover entrepreneurs are apparently more likely to again form a new company in a hot industry at its outset.
Yet what may be the most provocative piece of the Harvard study is its conclusion that high-quality entrepreneurs don’t need funding by “top tier” VC firms.
Though receiving the imprimatur of Kleiner Perkins or Sequoia Capital can go a long way in helping a startup — because of either the board member and/or the firm’s ability to attract critical resources — the study finds a “performance differential” only when the VC firms invest in startups formed by first-time entrepreneurs, or entrepreneurs who’ve previously failed. If a company is started by someone with a track record of success, then that startup’s future isn’t going to be impacted one way or the other if it takes company from a top fund, or a firm in a lower tier.
If true, that’s saying a lot about the real value that VCs add to the companies that they most like — and vice versa.
The 35-page working paper is here.
In the meantime, here’s a list of firms that have backed the most serial entrepreneurs. (This data was as of last summer.)
Firm / Serial Entrepreneurs / Total Entrepreneurs / Serial Entrepeneurs as a % of Total
KPCB 100 666 15.0
NEA 80 702 11.4
Sequoia Capital 69 432 16.0
USVP 68 454 15.0
Mayfield 63 459 13.7
Accel 61 418 14.6
Crosspoint 60 407 14.7
IVP 56 385 14.5
Bessemer 49 340 14.4
Matrix 44 275 16.0
Source: Paul A. Gompers, Anna Kovner, Josh Lerner, and David S. Scharfstein, using VentureSource data