Success breeds overconfidence is once again proven my Marcus Frind. Marcus is the now famous founder, sole-employee, and current media darling from PlentyofFish.com. His story is a great one. Start a company and build it slowly over time. Google search the site and you can find Plenty of ____ on plentyof fish.com. Lee Gomes wrote a piece about him back in May 2007 for the Wall Street Journal. Gomes declares POF the model for future web start-ups. 
Frind even got a big thumbs up from Guy Kawasaki.
Marcus seems to have let his success go to his head, which is no longer used for thinking clearly. In recent posts he has declared that the reason more 20 year-olds create successful companies is that they innovate while old folks (30+) only copy and improve. Marcus is in his 20's, and is now wealthy so that qualifies him to speak for all generations. I'm happy for his success, I just wish he would focus on what he knows and not what he does not know. (Interestingly, after some negative feedback Marcus took down the post, but as luck and Google would have it someone quoted it in another blog - Jason Miller on WebProNews.com.)
This brings us to todays post - Do VC Backed Founders actually make any money ...
In this post, Frind declares that often they do not. The real trouble starts when he quotes other blogs that quote other online articles that quotes a Wall Street Journal partner StartupJournal.com article (no link provided by any of those who cited the article - here is Paulette Thomas's piece.) that quotes some US government SBA data on business failure rates. He says that, according to the chain of references, 66% of start-ups are still in business after 4 years.
So, now everyone should just quit their job and start a business because Marcus Frind says so. The trouble with this data, and even more with the interpretation is this. First off the US numbers include franchises which, while an owner may fail the location may remain. The data I have heard quoted say that franchises have a 90% success rate. That could be because the franchiser protects the data by keeping the business open. Second, many of the businesses in the US survey are Sole-Proprietorships which can just go dormant but are not by definition considered a failure. So, while the legal entity may not be operating and the government does not consider it a failure - it is for all intents and purposes - out of business.
The SBA official quoted says that many of the companies no longer in operation were sold and that the founders considered that a successful conclusion. A sell-off may be a success to the founder but not to the investors. Add to that the fact that people lie. They would rather call a fire-sale a sell-off than a failure.
On top of all of this data quoting, no one seems to ask about making money. In business is not the same as successful. Even bankrupt companies can still be "in business" after the settlement. My issues is not about quoting data, it is about quoting data without understanding the real issues. We can all talk about what we want to hear, but in the end the truth will be revealed. It is hard to start a business. It is hard to be successful. It is wrong to make it appear to be less of a challenge than it is.
The real trouble is that for most venture backed start-ups the rate really is: 10% success, 20 % breakeven and 70% lose money. For many others, who start businesses that never raise money and that never register, they come and they go unnoticed and their failure rates are even higher but they are not added to the picture. I am a big fan of starting companies. I just think that the reality should not be undermined by people who don't know what they are talking about.
There are plenty of fish in the sea and plenty of companies to start. If you want to start one listen to people who were successful because of their abilities not in spite of them. A good idea can carry a weak person a long way. The true mark is to see it repeated with intention and design not luck and good timing.
On a side note Paulette notes:
The study also shed light on some characteristics of successes. To sum up: Businesses with more resources fared better. Being an "employer" firm -- not just a solo operation -- was one of them. Starting with capital of more than $50,000 was another, as was a college degree for the entrepreneur. Starting with an office from home also increased success rates, presumably because it keeps initial costs low, Mr. Headd says.
On the other hand, failed businesses tend to be started by younger entrepreneurs in the service or retail trade, beginning with little or no capital.
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