Category Archives: Entrepreneurship

Various national attitudes to time

The Stockdale Paradox

Great story from Jim Collins about Admiral Stockdale and American POW survival in Vietnam.

Stay or go? Blind faith or realism? Hope or action?

Vietnam POW

Vietnam POWs

Radio 4: The Value of Failure

I collaborated on one of these five pieces for BBC Radio 4 on The Value of Failure.BBC

How do you define failure?

In my PhD research, Gulst and Maritz provide an excellent summary of how to define failure. If you can find the article – see below. If you cannot find this an alternative is available as an online pdf  – click here.

Failure definition

Failure definition

“Gulst, N. and A. Maritz (2009). Venture Failure: Commonalities and Causes. Proceedings of Regional Frontiers of Entrepreneurship Research 2009: 6th International Australian Graduate School of Entrepreneurship (AGSE) Entrepreneurship Research Exchange. L. M. Gillin. Adelaide, South Australia557-570.”

Doctoral thesis published

I graduated from Cambridge University with my PhD in April 2013.Keith Cotterill PhD Thesis

My thesis can be downloaded here. Enjoy !

Design Conference Paper published (CADMC, September 2011)

I presented the following paper at the Cambridge Academic Design Management Conference (September 2011), co-written with my collaborator, JP (Joao Fonseca da Silva).



Submission of PhD Thesis

After three years, I submitted my thesis to the University of Cambridge for examination.

Title: “How do attitudes of habitual high-technology entrepreneurs to early-stage failure differ in Silicon Valley, Cambridge and Munich?”


Online education making a difference.

I’m proud to be associated with TenMarks, a cloud-based service that provides a personalized practice and learning software to help teach students of varying skill levels mathematical concepts. They just closed their first full funding round. Its the future.

Reasons for early-stage venture failure

Research notes 2011 on the literature regarding reasons for failure in early stage companies (partial). A revision of this is in progress.

A clear distinction is required between failure due to the individual entrepreneur and that attributable to the venture itself (Gulst and Maritz 2009). In the table below, a number of causes of new venture failure are presented, along with a commentary on these causes.

Reason for failure Commentary
(Missing) entrepreneurial characteristics Risk of venture failure is higher when entrepreneurial characteristics are absent.
Over-confidence Entrepreneurs consistently perceive their chances of success as being significantly higher than those of comparable companies.
Novelty In the absence of established market, sector or product, new ventures struggle to define a clear new value proposition.
Product design First mover advantage requires a trade-off between early availability and product readiness – going to market too early may be damaging.
Opportunity evaluation Is it worthwhile to proceed with the venture? Inadequate qualification of the opportunity is a frequent explanation for failure.
Product Newness There is inherent risk in terms of stability, acceptance and trust by customers in a new venture.
(Bad) timing Product readiness has to coincide with market readiness.
Rapid growth Customer adoption rates may exceed a venture’s ability to absorb, process and support new customers.

Table 1. Causes of New Venture Failure (Gulst and Maritz 2009)

Lack of preparation is considered by Matherne, who evaluates whether early stage ventures are better “doing” than “planning” (Matherne 2007). Given the hands-on ethos of young companies, consuming precious resources on business planning may appear unnecessary. However, other writers (Delmar and Shane 2003) suggest entrepreneurs receive great value from the planning process, which in turn reduces the risk of business failure.

Thornhill and Amit, in their review of 339 Canadian bankruptcies, highlight differing reasons for failure in mature and young companies. They find that “failure among younger firms may be attributable to deficiencies in managerial knowledge and financial management abilities. Failure among older firms, on the other hand, may be attributable to an inability to adapt to environmental change.” (Thornhill and Amit 2003: 498). They take a Resource-Based View (RBV), suggesting termination is conceptually due to an exhaustion of their initial resources or “internal asset stocks.” However, this fails to account for non-financial resources in early stage companies: for example, the “upside” associated with stock options may play a psychologically greater role than other financial incentives. The level of enthusiasm, focus and skill conveyed by founders of early-stage firms may persuade initial customers, investors and partners to overcome the liability of newness and sign deals with such a firm.

Some writers point to the importance of language in analysis of failure. Meta-definitions are needed to define who was “at fault”, who was “to blame”, and what were the “underlying causes” (Cope and Cave 2008). The use of ‘blame’ and ‘fault’ implies value judgment in the evaluation of failed ventures. This may help explain why phenomenological approaches have yielded valuable results. Culture and language are also essential factors in any comparative study where feelings, opinions and viewpoints may be impacted by language barriers.

In Pretorius’ examination of many reasons for failure (Pretorius 2008), he distinguishes between causes and preconditions. In his analysis, these causes may be characterized thus: human causes; internal or external; structural; or financial. Human causes of failure provide a rich variety of considerations including the five stages of decline (Weitzel and Jonsson 1991): the blinded stage; the inaction stage; the faulty action and faulty implementation stage; the crisis stage; and the dissolution stage.  Internal and external causes may be represented as either controllable or non-controllable factors: a study of Singaporean small businesses (Theng and Boon 1996) found that endogenous factors were significantly more likely to cause failure than external issues. Structural causes vary according to several dimensions: age, size, maturity and possibly the “liability of newness”. Financial causes are possibly the easiest to measure: corporate financial data enables rich analysis of the current and predicted health of new ventures, although technology startups tend to be privately held.

Garnsey and Heffernan studied “growth setbacks” in their longitudinal study of UK high tech firms (Garnsey and Heffernan 2005). This is reflected in what Pretorius calls the “turnaround” activity (Pretorius 2009). Companies that recover have difficulty doing so alone, and remain vulnerable: continual support from investors, customers, suppliers and employees may be required for business continuity. “It takes only minor perturbations to block the inflow of resources in irrecoverable ways” (Garnsey and Heffernan 2005: 691). Another longitudinal analysis of UK survival of 622 small firms including 71% which may be considered early-stage (Saridakis et al. 2008), concludes that educational background of the founders and the level of bank finance are primary indicators of failure or survival.

Larson and Clute suggests three reasons for small-business failure: personal characteristics; managerial deficiencies; and financial shortcomings (Larson and Clute 1979). These reasons become critical at certain ‘inflection points’: one such point is the Founder-CEO succession period, representing a shift in culture, experience, process and personalities (Wasserman 2003). Two other critical stages occur when initial product development is complete and when the first funding round is secured: both representing dangerous failure points for young ventures.

In early-stage firms, the “liability of newness” and the “liability of smallness” may be critical (Zacharakis et al. 1999). The liability of newness addresses the team, technology, market and investors, individually and in combination. The liability of smallness adds another dimension: as young firms emerge with products and customers and start to grow, there is often an “executive limit” (Zacharakis et al. 1999) to when and how this growth may occur. Shepherd and others also scrutinize the liability of newness. They suggest three main issues are at play: the novelty to the market, novelty of production and novelty to management (Shepherd et al. 2000). They conclude: “the decline in mortality risk occurs as the venture’s novelty in each of the three dimensions is eroded by information search and dissemination processes.” (Shepherd et al. 2000: 394).

In the Dominican Republic, Alvarez, et al. examine the lifecycle of new businesses as motivations and intentions of founders evolve (De Castro et al. 1997). Like other studies (Stokes and Blackburn 2001), they suggest that business failure is only one reason for business closure: others include retirement, identification of better alternatives and achievement of original goals. Alvarez applies three theoretical lenses to review this: (1) strategic choice theory, where business closure may be a discretionary choice made by founders; (2) organizational equilibrium theory whereby closure may reflect alternative options for participants; and (3) efficiency wage theory, where rational employees may pursue better salaries elsewhere.

Garnsey and others provide a holistic view of failure in new firms. Basing their approach on the work of Edith Penrose (Penrose 1995), Garnsey et al. identify five area of interest: patterns of survival, continuousness of growth, turning points, reversals and cumulative growth. Their conclusion is that “New firm growth is not indeterminate but, like other complex dynamic processes, the outcome of systemic feedback mechanisms, the effects of which may be mistaken for randomness when statistical methods are used that cannot capture the subtleties of causal feedback.” (Garnsey et al. 2006: 18). This echoes Casson’s work on the impact of “shocks” to early-stage companies (Casson 2005).

The Dark Side of Entrepreneurship

I am drawn to studying failure as its such a prevalent aspect of being an entrepreneur.

A new study by Mike Wright and Shaker Zahra – “The Other Side of Paradise: Examining the Dark Side of Entrepreneurship” – attempts to expose the wider social costs of entrepreneurship on family, friends, relationships and society. They explore this ‘blind spot’ in a refreshing way, introducing major issues and implications for public policy.

This dark side is important. If we are entering a post-career world in which entrepreneurship is increasingly important, self-knowledge and awareness of the true cost of being an entrepreneur will rise in value.

Different types of entrepreneurs

Some notes on various types of entrepreneurs from my literature review. any references can be found in the “Reading List” tab of this blog…

Gulst and Maritz document various types of entrepreneur, based on a survey of entrepreneurial literature. (Gulst and Maritz 2009). The types include: nascent; novice; one-time; habitual; habitual (serial); habitual (portfolio). Our research will focus on habitual entrepreneurs (serial or portfolio). Another categorization scheme involves examining the prior experience and aptitudes of the individual: are they “natural-born” entrepreneurs or have they learned the skills of entrepreneurship over time (Shane 2010). Alternatively, types of entrepreneur may be categorized by investigating personality traits and behaviour, developing profiles based on characteristics such as confidence, optimism, persistence and passion.

Cope and Cave conducted in-depth phenomenological interviews with failed entrepreneurs and conclude that early-stage business failure represents a particularly traumatic yet significant entrepreneurial learning experience (Cope and Cave 2008) They see the process as a “learning journey” which is different for each individual. McKenzie and Sud delve further into hermeneutical territory, looking at the orientation of five entrepreneurs through detailed interviews (McKenzie and Sud 2008). This research adopts a different definition of entrepreneurs (and definition of failure): they suggest that entrepreneurs are individuals who can see “what is not there”, and that failure represents a deviation from the “entrepreneurs’ desired expectations”.

Other studies (Carland et al. 2002) provide insight into whether serial entrepreneurs have different motivations and attitudes than novices. Their research builds on an editorial by MacMillan, suggesting there are three types of entrepreneur: (1) those who survive the perils of startup life and rise to become CEO of their successful corporation; (2) those who achieve success and then drop out, and “never again venture into the perilous waters of entrepreneurial behaviour”; and (3) a third category of “business generator”, who enjoys the uncertainty and excitement of starting a new venture.” (MacMillan 1986: 241).

Evans and Leighton offer an analysis of US data, suggesting that: “The probability of departing from self-employment decreases with duration in self-employment, falling from about 10 per cent in the early years to [zero] by the eleventh year in self-employment” (Evans and Leighton 1989: 520). This suggests that the entrepreneurial lifestyle (working for oneself, with increased control over a future destiny) becomes stronger over time. Once sampled, it becomes difficult to give up.

However, despite these attempts to categorize the types of entrepreneur, perhaps there are simpler forces at work. In an interview with Mike Wright, Birley suggests that circumstances typically determine who becomes an entrepreneur: “there is no dichotomy between entrepreneurs and non-entrepreneurs; with the right stimulus, the most unexpected people can become entrepreneurs.” (Wright 2001: 38).

Conference Dates

I will be presenting my research on entrepreneurial failure and other subjects at several conferences in the coming months. Hope to see you there!

San Jose, CA. IEEE International Technology Management Conference. June 27-30, 2011.

Cambridge, UK. Cambridge Academic Design Management Conference (CADMC). Sept 7-8, 2011.

Sheffield, UK. Institute for Small Business and Entrepreneurship Conference. Nov 9-10, 2011.

Examining failure – who is being examined?

Being a technology entrepreneur involves a direct and primary relationship between the individual and the venture – typically as founder, executive and board member, and possibly as an investor in, or employee of the firm. I believe its more useful to focus on the attitudes of entrepreneurs, not investors.

Studying entrepreneurs (and investors) requires an awareness of human nature. Cannon and Edmonson write: “We have an instinctive tendency to deny, distort, ignore, or disassociate ourselves from our own failures” (Cannon and Edmonson 2004: 7), which places the researcher on alert – in investigating attitudes to such phenomena, personal barriers and sensitivities may inhibit the gathering of truthful and candid observations. McKenzie and Sud assert the inadequacy of quantitative research methods: “the primary methodologies of US entrepreneurship research are mail questionnaires and directed interviews.” (McKenzie and Sud 2008: 124). They propose an alternative approach, examining the personal stories told by entrepreneurs about their varied failures.

In such cases, is it the venture or the entrepreneur that has failed? Timmons is clear: “Business fail but entrepreneurs do not.” (Timmons 1989). Yet some individuals clearly do fail: they take on more responsibilities than they can handle and make poor decisions. There are good and bad businesspeople, as much as there are good and bad ventures. Perhaps there is an evolutionary aspect here: failure can be seen as a process by which weak entrepreneurs are eliminated from future activities. There are two ways such “bad entrepreneurs” can be eliminated: through self-selection, in the case of “one-time” entrepreneurs (Gulst and Maritz 2009) who choose not to start subsequent ventures, and through market factors (inability to raise funds, recruit staff or customers).

Narcissism (within limits) is cool – phew!

Love it. If I get this right, creativity is maximized in teams where there is a mix of narcissists and non-narcissists. Teams of all narcissists and all ‘normals’ are less creative! Great summary from Bob Sutton here.

Narcissus Jonquilla

Narcissus Jonquilla

East and West

I was struck today by what is happening in Silicon Valley software. Currently, most new startups are consumer and social network-related, a frenetic hub of activity which is distracting us from the shift in the global economy. Sure, the consumer sector (e-commerce) is important, and technical innovation is always cool, but while the cream of western society in the US (and the UK) fixates on high-risk, fast-paced startups, Asian entrepreneurs are building things in massive quantities. Crash

Massive shifts in global affairs appear to be preceded by an elevation of the trivial: decadence in pre-war Berlin, a peak in imperialist sentiment before the Great War, before the fin-de-siecle crash. I think we are seeing it now in technology: massive excitement in a new wave of social network services, preventing us from concentrating on the fundamentals we will need in a decade or so.

On (BBC) Radio Four this morning, an analyst explained how in Asia, the 2008 Global Financial Crisis is now referred to as the North Atlantic Crisis. This is true. Technological innovation in the trivial distracts us from what we really need to be doing. Building things.

Ron Conway is right

The “Super Angels” bandwagon is a recent phenomenon.

Ron Conway’s back-to-basic email is excellent and worth a read.

Angel attitudes

My PhD research looks at entrepreneurs’ attitudes to failure in Germany, UK and USA. An article by Jeff Lynn in TechCrunch talks about a UK angel focus on investment levels rather than returns, a total contrast to recent Ron Conway press. In Silicon Valley, returns are more clearly a driver: having fun along the way and making a contribution are more important than tax breaks and financial planning.

The angel investor culture surely has an impact on entrepreneurial attitudes to failure. Perhaps there is an holistic “portfolio theory” at work here – UK angels tend to see investing as a numbers game involving risk mitigation, tax sheltering and hedging the market. Silicon Valley investors may have a broader range of variables beyond the alpha and beta to drive their investments. What about Germany, too? Does the presence of early-stage support from organizations such as the Fraunhofer institutes distort the motiviation for non-family related investing?

Just a thought. I need to come back to this after some interviews.

After the startup, the scaling

Excellent summary here by Andy Grove about the loss of manufacturing capability and sensibility in the US economy. A bit harsh on setting off a trade war, but common sense and stated with huge credibility. Having startups is great, but scaling some of these successful businesses means making things – manufacturing.

Visualization of Qualitative Data (Capture)

Conducting qualitative research involves specific forms of data capture. How visual techniques can be used in such activities is not widely appreciated. Visual outputs and analysis are well covered in the literature, but visual methods in data capture are much less represented.

Several sources here are on my list for review in the next few weeks (including the Tufte books) as I put my plans together for interviews later in 2010.

  1. MEYER, A. D. 1991. Visual Data in Organizational Research. Organization Science, 2, 218-236.
  2. SLONE, D. J. 2009. Visualizing Qualitative Information. The Qualitative Report, 14, 489 – 497.
  3. TUFTE, E. 1983. The visual display of quantitative data, Cheshire, CT, Graphics Press.

[Thanks to Jonathan Johnson for the Slone reference].

    Top 10 Mistakes Made by Entrepreneurs

    Great informal session on what its like to be an entrepreneur in Silicon Valley.