The following article by Erin Griffith on Fortune.com is refreshingly candid. It cautions readers not to believe all that they might read online about startups. The available startup wisdom is larded with bad advice, incorrect statistics and wishful thinking. It’s quite a good read. But are its statistics any more credible?
Ms. Griffith questions the validity of the oft-quoted statistic that 90% of all startups fail. While refuting this hackneyed calculation, Ms. Griffith cites only the failure rate of venture backed startups. She points out that less than 60% of venture backed companies have failed since 2001. It’s a valid point. But when did the term, “startup” apply only to venture backed companies? Approximately, ten thousand venture deals close in the US during any given year. During any 12 month period, however, nearly 500,000 new US businesses are formed. Yes, many of these have no chance of becoming “the next” Facebook or Google. So? Businesses can still be quite profitable and attractive, yet fail to promise a 10x investment return.
My point is that the online, start-up dialog is dominated by billionaire CEOs, successful venture capitalists and famous “faces,” all of whom are far removed from the exigencies of their pure startup days. Their advice, honed in the upper echelons of the startup world, has great value, but not necessarily to those most in need of guidance: Pre-revenue startups.
It’s worth questioning Silicon Valley startup advice.