Britain’s next generation of entrepreneurs need permission to fail – and to do so publicly.
Around 660,000 new companies are registered in the UK every year. That’s the equivalent of 70 new businesses being formed every hour.
What we don’t often shout about is the fact that 60 per cent of those new businesses will go under within three years, and 20 per cent will close their doors within just 12 months.
There are many different reasons why businesses fail – whether it’s running out of cash, over-optimistic growth plans or being outsmarted by the competition. Instead of learning from these failures, we tend to sweep them under the carpet.
At my business, research fails often. New models or trading algorithms don’t always stand up to rigorous analysis. While we have the luxury of analysing the performance of models in a simulated environment (so failure doesn’t impact our real-world trading or investors), learning where the blind alleys are means our research becomes better and more efficient. From failure comes a higher probability of success.
In the UK, we need to shift the emphasis of our business education. We’re obsessed with studying entrepreneurial superstars such as Steve Jobs and Jeff Bezos and trying to find commonalities and magic formulae for success.
But business is rarely that simple: there’s an enormous amount of luck involved and there’s rarely a clear linear route from an idea to world domination. What seems to be pre-ordained for charismatic founders is actually more about being in the right place at the right time.
We rarely hear about the frequent (and inevitable) small failures which are so common in the start-up ecosystem. We don’t hear about the workload and the intense stress. There’s still a stigma attached to failure and, emotionally, it’s difficult to publicly admit to poor decisions. As with breakups, no-one wants to dwell on the past. But we need to find a way to encourage these entrepreneurs to try again.
We need to collect statistics and analyse start-up failures. Instead of hiding bankruptcies, crashes and setbacks, let’s get them out in the open.
Investors should make it a condition of investment that failures are documented. They should set up forums where unsuccessful entrepreneurs are actively encouraged to share their experiences.
Let’s stop glamourising entrepreneurial success and writing off struggling entrepreneurs. If we want to help Britain’s next generation of new businesses to succeed, we need to break the taboo and make the modes of failure more visible.
Ewan Kirk is a technology entrepreneur and the founder of Cantab Capital Partners (now part of GAM Systematic). He’s also a judge for Management Today’s NextGen Awards, which shine a spotlight on the next generation of ground-breaking, high-growth businesses. Follow him on Twitter here.