Dr. Liam Cheung, Partner at Tactico
Sep 10, 2019 - 3 min read
At Tactico, we are fans of academic papers and invest a great deal of time trying to understand the world we invest in objectively. In a world where opinion tends to dominate fact in “news” and where “information” is all too commonly part of a click-bait scheme with its own agenda, we find select academic research to be an oasis of original ideas and facts.
In this blog post, we would like to share an interesting paper that we have been discussing. This paper investigates two questions: 1) are entrepreneurs that succeed once more likely than most to succeed a second time? 2) If yes, what are the factors that determine that success? This is one of the papers suggested to us by our friend Jiro Kondo, a finance professor at McGill University, when we were discussing the factors of venture capital, or VC, success.
Some takeaways from this paper that we found interesting included the importance of timing as well as entrepreneurial success at timing ventures. This confirms other research that singles out timing as the factor with the highest weighting when looking at firm success. In addition, the paper points to evidence that serial entrepreneurs are better at predicting market timing of ventures.
One disappointing feature regarding the state of VC research exemplified in this paper is that there is very little data to identify VC-backed firm success and the data used in the paper is limited to the period from 1980 to 2000. Public offerings or IPOs at this point seem as outdated as a criteria for success as the data period used in this paper. We would be very interested in seeing the results of this research repeated on a more recent dataset, with perhaps a Series C or greater as a success criteria.