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Angel Investors in Groups Achieve Investment Returns In Line with Other Types of Equity Deals

Angel Investors in Groups Achieve Investment Returns In Line with Other Types of Equity Deals

www.kauffman.org
Travis Hardman Travis Hardman
1 year ago
In slightly more than half the venture investments, some or all of the study respondents' investment capital was lost.
Meaning in slightly less than half, the investment generated at least a break-even return.
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Failing Firms And Successful Entrepreneurs: Serial Entrepreneurship As A Simple Machine | Effectuation: Society for Effectual Action

www.effectuation.org
Travis Hardman Travis Hardman
1 year ago
The advantages to holding concurrent portfolios that exploit heterogeneity are well known. The same advantages may be achieved in the serial context through contagion.
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For example, both failed firms and successful ones entail useful learning effects and path dependencies in the careers of serial entrepreneurs.
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The Incentives to Start New Companies: Evidence from Venture Capital

www.nber.org
Travis Hardman Travis Hardman
1 year ago
Entrepreneurs with a coefficient of relative risk aversion of two would be willing to sell their interests for less than $1 million at the outset rather than face that risk.
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Why 11 out of every 12 startups fail

agbeat.com
Travis Hardman Travis Hardman
1 year ago
The consistent startup takes a more reserved and systematic approach to the growth of their business, because they want to make sure they have a stable foundation on which to build and grow the business.
Inconsistent companies scale prematurely. Consistent companies make the effort to refine and perfect their business model before aggressively marketing.
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  • 23% of consistent startups who offered free products have over 100k users or customers.
  • 99% of inconsistent startups with free products never break the 100k mark.
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    Startup success has more to do with providing a great, useful product while slowly building steam and marketing efforts. This way, you’ll have a steady, stable following that will be there to celebrate with you once you’ve ironed out all the problems in your business model.
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    How Not to Die

    www.paulgraham.com
    Travis Hardman Travis Hardman
    1 year ago
    If you can just avoid dying, you get rich.
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    When startups die, the official cause of death is always either running out of money or a critical founder bailing.
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    One of the most interesting things we've discovered from working on Y Combinator is that founders are more motivated by the fear of looking bad than by the hope of getting millions of dollars. So if you want to get millions of dollars, put yourself in a position where failure will be public and humiliating.
    In essence, don't get a job, don't go to school, because it lets you say you're doing something else. Put yourself in a place where the startup is the only thing you're doing.
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    I wish every startup we funded could appear in a Newsweek article describing them as the next generation of billionaires, because then none of them would be able to give up. The success rate would be 90%.
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    Are there zero users who really love you, or is there at least some little group that does? It's quite possible there will be zero. In that case, tweak your product and try again. Every one of you is working on a space that contains at least one winning permutation somewhere in it. If you just keep trying, you'll find it.
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    When the disaster strikes, just say to yourself, ok, this was what Paul was talking about. What did he say to do? Oh, yeah. Don't give up.
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    Much more commonly you launch something, and no one cares. Don't assume when this happens that you've failed. That's normal for startups. But don't sit around doing nothing. Iterate.
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    The 18 Mistakes That Kill Startups

    www.paulgraham.com
    Travis Hardman Travis Hardman
    1 year ago
    In a sense there's just one mistake that kills startups: not making something users want.
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    Most of the groups that apply to Y Combinator suffer from a common problem: choosing a small, obscure niche in the hope of avoiding competition.
    Having competition is a good thing. It means you're doing something worthwhile.
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    Companies of all sizes have a hard time getting software done. It's intrinsic to the medium; software is always 85% done.
    As the user in Quora mentioned, the real 9-in-10 number may just include a bunch of projects that never launch anything.
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    The most common type is not the one that makes spectacular mistakes, but the one that doesn't do much of anything—the one we never even hear about, because it was some project a couple guys started on the side while working on their day jobs, but which never got anywhere and was gradually abandoned.
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    If you look at the origins of successful startups, few were started in imitation of some other startup.
    Need to find an unsolved problem.
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    The stick-to-your-vision approach works for something like winning an Olympic gold medal, where the problem is well-defined. Startups are more like science, where you need to follow the trail wherever it leads.
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    if you avoid every cause of failure, you succeed
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    A Harvard Professor Analyzes Why Start-Ups Fail

    A Harvard Professor Analyzes Why Start-Ups Fail

    boss.blogs.nytimes.com
    Travis Hardman Travis Hardman
    1 year ago
    For example, one of the most common decisions is to co-found with someone you have a prior social relationship with — friends or family – and not a prior professional relationship. But that type of team is the least stable. It’s the most likely to end up in disaster.
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    In my data, by the time start-ups raise the third round of financing, 52 percent of founder C.E.O.’s have been replaced.
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    Founders have to get clarity about their own motivations and what is most important to them as they’re heading out on the journey.
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    What is the truth behind "9 out of 10 startups fail"?

    What is the truth behind "9 out of 10 startups fail"?

    www.quora.com
    Travis Hardman Travis Hardman
    1 year ago
    Phillips and Kirchhoff (1989) find, using the 1976-1986 United States Establishment Longitudinal Microdata (USELM) files of the U.S. Small Business Administration,  new establishments show an average survival rate of 39.8% after 6 years.
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    The economically rational founding team would sell at time of VC funding for $900,000 to avoid the undiversified risk.
    That's a funny statement, but kind of the point of VC generally, that you're investing in undiversified potental.
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  • 3 startups fail, have gone bankrupt or business were closed
  • 3 startups are worse than average, aren’t very profitable, returning less than the invested capital, but are still active
  • 3 startups are a moderate success, are profitable, returning just the invested capital, were not acquired yet and are still active
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  • 22 percent were failures
  • 57 percent are still independently operating
  • 29 percent got further funding post-Y-Combinator
  • 10 percent were acquired
  • This is the trend across several seed funds, so the more accurate statement might be 1 out of 10 startups have a timely exit.
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    What is a startup? Two founders working in a garage, who try and build a product? Are they a startup when they incorporate? Is the project a startup when they get funding? How much funding qualifies? Does $30k that you've pulled out of your 401k count as funding? How about VC?
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    But if you were to look at all of the new business ventures that people put serious effort, time, and money into, most of them never find a complete team that quits their day jobs, hire a lawyer, incorporate, rent office space, launch a product or service, or obtain arm's length outside funding.  In other words, most startups never even launch, much less succeed.
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    According to this dataset, about 50% of angel-backed companies return less than investors put in
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    Business Failure Rates: What Percentage of Businesses Fail?

    Business Failure Rates: What Percentage of Businesses Fail?

    smallbiztrends.com
    Travis Hardman Travis Hardman
    1 year ago
    New research from the U.S. Bureau of Labor Statistics suggests that most failures of American startups will occur in the first two years of their existence.
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    The data show that, across sectors, 66 percent of new establishments were still in existence 2 years after their birth, and 44 percent were still in existence 4 years after.
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    These survival rates do not vary much by industry.
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