Tuesday, 28 August 2012
The Casino is the Best Place for Start-Ups
I have just been introduced to an article claiming that just 10% of companies that America's top ten VCs invest in actually succeed. This correlates exactly with the yardstick that VCs and seed corn capitalists I know use. 10%!
One chance in ten. We know that only 10% of small businesses actually make it to Year 5 so it could be reasonable to suggest that anything greater than 1:10 (10%) odds would be better than you get from starting a business. Just 10%.
So, is it worth it for a 10% gamble? Well, to put all this in perspective, here are the chances of winning at the casino:
Slot machines: 32%
Horse racing: 41%
Here is one conclusion (if you are in any way rational).
Conclusion #1: If you go to a casino then do not go near the slot machines (but 68% of gamblers do.)
Some other conclusions might be:
Conclusion #2: If you have money to gamble then do not open a small business (but 4m people have done so in the UK).
Conclusion #3: If you are the Government then do not gamble anything on small businesses but spend the money in the casino.
Conclusion #4: As far as small business owners are concerned maybe it is just not about the money.
Do not gamble at small business unless…