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This article was published on February 10, 2022

Are we cultivating a generation of failed startup founders?

Are we driving innovation, or instilling false hope in wannabe entrepreneurs?

Are we cultivating a generation of failed startup founders?
Ari Joury
Story by

Ari Joury

Medium’s largest publication is The Startup, with more than 700,000 followers. Hundreds of thousands of people who are curious about startups, have created one themselves or plan to build one in the future.

Hundreds of thousands of people who want to change the world in a myriad of ways. Hundreds of thousands of people with a vision and the motivation to work for it. Hundreds of thousands of people who want to reinvent things.

Entrepreneurs, so the story goes, are a rare species. According to that story, most people enjoy the comfort of their corporate jobs and their steady salaries too much to even consider taking the leap to entrepreneurship. Most people just don’t find the discomfort and the risk of failure too attractive, the story says.

Yet more than half a million people are right here, reading The Startup. More than half a million people who are at least curious about all that discomfort, that risk, that excitement. People, here and all over other platforms, too, who want to change the world, in all the big and small ways. People who want to make it, in business and in life.

More and more people are joining the conversation. More and more people are starting their own side hustles or full-time ventures because they’re hoping that it will lead them to success.

Can all these people make it? Can so many people change the world in a million different ways? Or might we be better off encouraging these people to search for secure jobs, so they contribute to the economy in a safe and predictable way?

Entrepreneurs could weaken existing businesses

Startups are the growth motor of today’s economy — or so we’re taught. It’s through disruption and innovation that we can impact people’s lives today and in the future. That’s what they say.

From this viewpoint, it comes as no surprise that incentives to launch something new are seemingly everywhere. They range from motivational blog posts — I won’t even bother to link them, just look on your LinkedIn feed — to programs in schools and universities, to entrepreneurship classes inside companies.

Why would companies want to teach their employees how to leave and start their own venture? The reason, according to a decade-old piece in the New York Times, is linked to companies’ hiring strategy.

Top-talented people, so the assumption, aspire to be the next Mark Zuckerberg, not to work for him. Therefore, companies must promise to help with these aspirations, and later set other incentives to keep the talented people from leaving again.

The question is, how committed will these talented people be if they consider their next job only a springboard to their next venture? Will they really give it their best shot, or will they leave their half-assed work on the table once they’re ready to leave?

Of course, it depends on each individual situation. But on the whole, the cult of entrepreneurship might be hollowing out established companies by attracting talented people that are only half-committed to their work.

Most big businesses of today were once startups

The previous point implies that setting fewer incentives for entrepreneurship may be better, especially inside companies. This might be beneficial in the short term because it would keep employees more focused on what they’re supposed to do.

On the other hand, consider the big businesses that are driving the stock market indices and a large part of the overall economy today: Apple, Amazon, Google, Facebook, and Microsoft all were startups a while back. Had their founders had less motivation to do what they did, what would our world today look like?

There’s a delicate balance between keeping talented people inside corporations big and small, and motivating them to start their own thing. The former will keep existing companies performing at their best. The latter helps build the companies of the future.

Having more startups might mean less economic growth overall

Despite the fact that startups are popping up all over the place, studies are finding that older firms tend to be more productive than new ones.

One could conclude that it might harm the economy if more startups are founded. This would essentially result in a shift of gears as workers direct their forces to young and inefficient firms instead of old and productive ones.

This conclusion is logical, but in my opinion short-sighted. Of course, most startups won’t be very productive in the first few years after their creation. It takes time to put systems in place, start operations, and earn the trust of clients and business partners. If a startup’s product is heavy in R&D, you can add another few years of low productivity on top.

But that doesn’t mean that building a startup is a waste of resources. The investment of today is the gain of tomorrow. In other words, if an economy can afford to create new businesses and grow a little less today, that could result in huge economical gains tomorrow.

History seems to confirm my take on the story: the US has one of the biggest startup scenes worldwide, and isn’t coincidentally the home of the most world-dominating corporations.

Europe has had a far more conservative strategy over the past decades, and hasn’t built half as many dominating enterprises despite its excellent education system and its wealth of knowledge and resources. Similar parallels can be drawn in other regions of the world: the more risk-taking is culturally embraced, the more successful businesses seem to be borne of a country.

Entrepreneurship means embracing failure

Whichever entrepreneur you ask, there’s no way they haven’t failed at some point. Some entrepreneurs rode their first couple of ventures against the wall before succeeding.

Others had a promising business for years, only to realize that some fundamental flaw was preventing it from gaining any significant market share. Others again abandoned a successful business because they feared that it wouldn’t work out.

If that sounds scary to you, you’re not alone. Even in the United States, failure is regarded as something bad. For many people, it’s something that ought to be avoided.

But that’s not true. Failure and success don’t need to be opposites. Entrepreneurs often view them as cause and effect.

You need to fail in order to succeed later. The only important thing is not to give up. Use a failure to dig deeper, and come back stronger.

However inspiring that sounds, it is no common mindset. Even among entrepreneurs, you’ll need to search to find people who think and act this way.

The VC bubble has been looming for decades

Building a startup means taking a risk. On a personal level, that means embracing failure. On a financial level, it means investing slightly insane amounts of money, and accepting the fact that you might lose some or all of it if your business doesn’t work out.

That’s what venture capital, in its simplest terms, is all about. You throw money at one hundred people with crazy ideas and watch 98 people lose it all. You still get considerable capital gains from the couple of people who succeed and bring home enormous returns.

Some people, including some authors at The Startup, have been pointing their fingers at this kind of system. What happened to the good old bootstrapped company whose first goal was profitability? Why are we throwing millions at college kids with power-point-slides instead of keeping our eyes on the businesses that keep tuckering on and making solid profits year after year?

I admit that there is quite some sensationalism around twenty-year-old founders raising millions of cash. I also admit that we don’t value the fact that older founders tend to build higher-growth startups enough, and the fact that the average founder is 45.

However, I would argue that the issue isn’t as deep as it initially seems. Well-informed investors and entrepreneurs know the statistics beyond the headlines. Headlines about VCs giving money to crazy-seeming ideas may obscure the fact that most investments go into sound and promising businesses.

We’ve been speaking about a potential VC bubble for decades. But we forget that it only takes a few successes for the whole model of venture capital to work out.

Have we had that kind of rare success? Think about Amazon, Apple, or Google for a split second.

Will we have this kind of success in the future? Let’s say that there are enough market opportunities!

Entrepreneurs or Wantrepreneurs?

The debate about the VC bubble does raise another question though: what about those people who plunge into entrepreneurship without doing their due diligence?

What about the twenty-somethings that look at Mark Zuckerberg and Elon Musk and think they can do that, too? What about the founders who celebrate when they’ve secured a few million in funding, but haven’t realized that the real work has yet to begin?

I don’t want to dramatize, but I think the media — and that includes writers like myself — has a responsibility to educate about entrepreneurship. Of course, it’s in our interest to bring over the fascination and inspiration that abounds among entrepreneurs.

Of course, tacky headlines have their role in that game, too. But we shouldn’t try to attract people that aren’t fit for the job.

We shouldn’t make people believe that young college dropouts with a couple of PowerPoint slides can become millionaires overnight. We should be making sure that we communicate why investors believe in an idea, how much work it took for a founder to secure funding, and how much more work still lies ahead of them.

In other words, we should be incentivizing entrepreneurs, and not wantrepreneurs.

The bottom line: entrepreneurs exist despite, not because of, the status quo

It’s easy to point our fingers at the bad bad media, and the bad bad VCs, and the bad bad capitalistic system, and say that it’s all a mess. It’s easy to say that all headlines are fake and all successful entrepreneurs are immoral. It’s easy to say that we’re lying to an entire generation and leading them to make business ventures that are destined to fail.

Yet there are many amazing founders today who all aim to make the world a slightly better place. There are many people who have embraced failure despite our cultural barriers, and have continued fighting when others have seen no hope.

The status quo isn’t perfect; I think we can all agree on that. But I don’t think the current imperfections come from having too much entrepreneurial spirit around. Rather, we should be focusing on cultivating the right entrepreneurial mindsets.

I don’t think that we’re misleading an entire generation into pursuing hopeless businesses. If many of them experience failures, those might serve as lessons on how to get successful later on.

If Medium’s The Startup boasts hundreds of thousands of followers, that isn’t a cause for concern. It’s a cause for hope and optimism: if hundreds of thousands of people have a genuine interest in making the world a better place, I for my part won’t be scared about the future.

This article was originally published on Medium. You can read it here.

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