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%
Blackjack: 47%
Roulette: 47%

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…

Unless what?
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