Learning to “Fail Smart”

As a long-time evaluator of local entrepreneurship programs, I know that entrepreneur ecosystem initiatives can have many positive impacts.  They hopefully generate more startups, more successful startups, and nurture an ecosystem that can help many more entrepreneurs in the future.

One other potential impact is that entrepreneur training and support help entrepreneurs make better decisions. These good decisions might relate to business expansion, but they may also relate to the closure of less promising ventures.  But, proving that we helped an entrepreneur to “avoid bad decisions” or “fail smart” can be tough to document.  It’s kind of like the old, “if a tree falls in the woods. . .” analogy.  How do you prove it?

An interesting new SSRN research paper, “Learning to Quit? A Multi-Year, Multi-Site Field Experiment with Innovation-Driven Entrepreneurs,” suggests that well-run training programs do help entrepreneurs to “fail smart.”  The major study examined 553 innovation-focused startups operating in 12 different coworking spaces around the US, with some of the firms receiving support (i.e., coaching and training) and others remaining in control groups without such support. 

The study yielded two important findings.  First, supported firms who remained in business outperformed peers in terms of raising funds and generating more jobs and revenue.  Second, the researchers found that struggling firms who received support were more likely to close earlier with fewer financial and career consequences.  These results are an important finding, showing that entrepreneur support programs not only help firms start and grow, but that they can also help them to fail fast, smart, and cheap!