Do Entrepreneurs Learn From Failure? Not Really

Entrepreneurs don't really learn much from failure.

What they do learn from is success.

That's a rather surprising finding from recent research at Harvard Business School, conducted by professors Paul Gompers, Josh Lerner and David Scharfstein. In their study of several thousand venture-backed concerns, the authors found:

  • First-time entrepreneurs receiving VC funding had a 22 percent chance of success, defined as taking a company public.
  • Already-successful entrepreneurs had a 34 percent chance of also succeeding in their next venture.
  • Entrepreneurs whose companies cratered had almost the same follow-on success rate as the first-timers: 23 percent.
In other words, failed entrepreneurs don't appear to learn from past mistakes. But those who have had success are able to translate that into more success down the road. Maybe the winners are just smarter than you or I. Or maybe success breeds success. If you hit the jackpot your first time out, high-quality financiers and partners will be ready to back you the next time out.

So what should entrepreneurs take away from the research? According to the researchers:

"Certainly one lesson that emerges from our analysis is to find an experienced (and successful) partner! Given the very difficult investment conditions, venture investors are paring back their portfolios and are hesitant to make new commitments. To get serious consideration, the more that you can do to seem like a 'sure thing,' the better off you are."
Read an interview with the authors in The Success of Persistent Entrepreneurs on HBS Working Knowledge.