- January 29, 2018
- Posted by: matt
- Category: Blog
When working with communities to build entrepreneurial ecosystems, Iâ€™m often asked for the â€œsecret sauceâ€ to identifying successful entrepreneurs in advance.Â I wish I had this power, but itâ€™s sadly not that easy.Â Â A large chunk of the entrepreneurship literature is focused on this question of what factors contribute to a businessâ€™ long-term success.Â Â If, for example, you take a look at the excellent Startup Cartography Project, youâ€™ll find lots of interesting correlations. For example, a new venture has a massively higher prospect of success if it takes out a patent in the first year, is headquartered in Delaware, and is organized as a corporation (as opposed to a partnership or LLC).Â Â Another interesting stream of research assesses how personality traits affect business success.
All of this excellent research still doesnâ€™t translate well into the real world, in the sense of providing clear directions to winnow out good ideas and good businesses from bad.Â Â Another recent research pieceÂ from the World Bank as offered further confirmation on this front.Â This study,Â â€œMan vs. Machine in Predicting Successful Entrepreneurs,â€ looked at Nigerian business plan competitions and tested a number of waysâ€”from expert judges to economic modeling to the use of machine learning to predict business success–to assess the quality of business pitches and ideas.Â Â The results?Â Â None of the methods proved to be very effective in predicting success, leading to this â€œdog bites manâ€ conclusion from the authors:Â â€œBusiness success is really hard to predict.â€Â Well, we knew that already but itâ€™s always useful to be reminded of the dangers of hubris and excessive confidence.Â Even when weâ€™re armed with the best research and analysis, a good entrepreneur can surprise us!