I have just read an article claiming that 10% of companies that America’s top ten venture capital firms or VCs [ie private equity firms] invest in actually succeed. This correlates exactly with the yardstick that VCs and seed corn capitalists I know use. 10%!
One chance in ten. We know that only 10% of small businesses actually make it to year five, so it could be reasonable to suggest that anything greater than 1:10 (10%) odds would be better than you get from starting a business. Just 10%.
So, is it worth it for a 10% gamble? Well, to put all this in perspective, here are the chances of winning at the casino:
Slot machines 32%
Horse racing 41%
Here are some conclusions (if you are in any way rational).
- If you go to a casino then do not go near the slot machines (but 68% of gamblers do.) Another conclusion might be:
- If you have money to gamble then do not open a small business (but more than 4m people have done so in the UK).
- If you are the government, then do not gamble anything on small businesses but spend the money in the casino (higher odds of success).
- As far a small business owners are concerned, maybe it is just not about the money.
Do not gamble at small business unless… Unless what?
- Robert Craven is the author of business best-seller Kick-Start Your Business (foreword by Sir Richard Branson). His latest book – Grow Your Service Firm – is out now.