Hi, Vincent here. When we started our masters in entrepreneurship, so many years ago it seems, we were kindly informed that our chances of failure were pretty high—above 75% after 5 years, I believe. So that’s about on par with a career in Catalonian linguistics then… Nice!

For my thesis, while it was not the primary focus to discover those failure-rates (after all, how can you interview start-ups about failure, while they’re still running?), we did get some implicit data about it amongst ca. 300 Dutch technology start-ups, younger than 5 years. Specifically, we looked at several factors: at technology-level, which we assigned three levels (low, mid, and high); funding-levels; and ambition-levels, which we assigned four levels (none, low, medium, and high).

An ambition of “None” signified a planned closure or a similar pessimistic outlook on the future of the firm. “Low” meant that a business was not planning to do much in terms of growth in the future. “Medium” meant some growth in terms of people or regional expansion. And “High” signified people who had plans to grow significantly, such as expanding into other countries or otherwise. A low technology-level signified a low tech component in the business, e.g. a warehouse, which could in some cases still be classified as a “technostarter” in the Netherlands. A mid-technology-level signified an undifferentiated tech-component, to which many a web-based firm belonged. And high-tech signified a high tech-component, differentiated within the industry, e.g. a biotech-firm, but also sometimes software.

Now, we found interesting correlations between all of those, the most obvious one being related to technology-level and funding (higher = higher, duh). I won’t go into those now, but I can at a later date, if there’s interest. Ambition was, to me, the most interesting, as young start-ups have little in tangible resources at that stage, except for ambition, people, an idea, hopefully, a business-plan, and, equally hopefully, some money/collateral, with which to convince third parties of their chances of success.

Concerning ambition-level, when correlated with technology-level, we got this:

Medium-level ambitions (or as I like to call them, “realistic”) clearly dominated the chart on all three levels. Interesting is that that the low-ambition-level was highest amongst medium-tech firms. My interpretation was that undifferentiated technology is worse than the opposite or no tech-component at all. You are simply overwhelmed with competition. The “Lows,” signifying imminent failure were quite equal for all three levels, at the 10% mark.

And concerning ambition-level, correlated with funding, we got the following:

Again, the results are not really shocking, though you have to wonder what came first, the ambition or the funding. What we see is that funding is abysmal for those start-ups with lower ambitions, who didn’t even attain first-round funding, and great for the “high ambitions” specifically.

Now, there’s no clear answers here for you. How do you get ambition, is it correlated with success or is success correlated with ambition? To me, those that showed the highest ambition, also understood their business best and had formed clear plans about how to meet their goals. A high ambition-level, just like a high technology-component, is correlated with a higher resource-need—you’ll need more money to expand internationally and build that factory—so it is not surprising that funding is positively correlated with it.

What is clear, to overcome failure, you have show a certain level of ambition. Whether that is a rational thing or one based on emotions & dreams, I leave up to you, but in my opinion it is a combination of vision & reducing assumptions (risks) about that vision through study and hard work.

Hope it stimulates some entrepreneurship (and that my post was not too academic).

Note: this is only 2 pages from a 180-page thesis on the funding of high-tech start-ups. If the feedback’s good, I’ll post a lot more, if not, a lot less.

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