We live in the age of the start-up when being an entrepreneur is easier than any time before, but yet “competition is fierce, profits are scarce, and venture capitalists aren’t generous when it comes to later stages of funding“, according to New Yorker‘s recent article “Epic Fails of the Startup World” in their Financial Page.
In previous post “The Economist Special Report on Tech Startups“, The Economist showed us a “Cambrian explosion” of start-ups nowadays, however, not everyone is as optimistic as them. James Surowiecki argues that the fact that most new businesses fail is hardly a secret. The reason why are so many people gambling on ventures that are likely to end badly is their risk-taking nature. A traditional answer is that entrepreneurs are just more comfortable taking risks than the rest of us.
Even, as New Yorker points out, overconfident about the prospects of their business as well as about themselves. A paper entitled “Living Forever: Entrepreneurial Overconfidence at Older Ages” in 2013 shows that overconfidence individuals are more likely to self-select themselves to become entrepreneurs. And on the narrow bridge, there will be crowded with overconfident entrepreneurs. And if investors don’t know how to identify good companies in advance, they will end up funding lots of them in the hope that a few will hit it big.