If you want to be good at something, you need to practice. A new Harvard Business School working paper shows that this sensible advice also applies to entrepreneurs. The study compared entrepreneurs with a successful track record with first time entrepreneurs and those who had failed in the past. Not surprisingly, the entrepreneurs with past success were more likely to succeed with subsequent ventures (30% vs. 18% for first-timers and 20% for entrepreneurs who had previously failed). Their success derives from two factors: their own skills, especially in terms of market timing skills, and the perception of those skills by customers and investors. Investors who recognize an entrepreneur’s market timing skills are more likely to provide outside funding, and this funding helps contribute to more successful company outcomes. In effect, success begets success. Interestingly, top-tier investors did not seem to make a difference in this study in terms of successful outcomes relative to the experienced entrepreneurs. The authors theory of “success begets success” shows that successful entrepreneurs are able to attract better resources and thus in the case of investors, do not have as much need for “added-value” as the less proven entrepreneurs.
You can access the 2008 Harvard Business School Working Paper, “Performance Persistence in Entrepreneurship,” by Paul Gompers, Anna Kovner, Josh Lerner, and David Scharfstein paper here (pdf).