Friday, November 27, 2009

Cheat sheet: Success Factors in New Technology Ventures

Some sobering statistics remind that, even after gaining initial funding, your high-tech startup still isn't out of the woods. From Success Factors in New Ventures: A Meta-analysis:

...after four years only 36 percent... of (U.S. New Technology Venture) companies with more than five full-time employees had survived.
If you want a handy reference to which factors consistently were correlated with survival for U.S. NTV's, here's your cheat-sheet (in order of decreasing importance):
  1. Supply chain integration: "A firm’s cooperation across different levels of the value-added chain (e.g., suppliers, distribution channel agents, or customers)"
  2. Market scope: "Variety in customers and customer segments, their geographic range, and the number of products"
  3. Firm age
  4. Size of founding team
  5. Financial resources
  6. Founders’ marketing experience
  7. Founders’ industry experience
  8. Existence of patent protection
Interestingly, the "market scope" factor contrasts with Scott Shane's advice that "new businesses that focus their activities (on one market or product) perform better than those that do not," which cites (for example) "Survival chances of newly founded business organizations."

The positive correlation of patent protection contrasts with Guy Kawasaki's disdain for patent protection, although Guy may be speaking towards new software startups specifically rather than to NTV's as a whole.

These factors consistently failed to be correlated with survival for NTV's:
  1. R&D experience
  2. Prior start-up experience (a recurring puzzle)
  3. Environmental dynamism: "High pace of changes in the firm’s external environment"
  4. Environmental heterogeneity: "Perceived diversity and complexity of the firm’s external environment"
  5. Competition intensity
The non-correlation of competition intensity suggests that entrepreneurs as a group are well-calibrated, neither shying away from competition to an irrational degree, nor irrationally ignoring the existence of competition.

3 comments:

Vladimir Golovin

Very, very interesting. The #1 and #2 sound surprisingly similar to what I consider to be the top priorities for my current business.

I wonder if these points can be reformulated as actionable items.

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