Business failure stigma is a myth, say investors

success failure sign

There is no evidence that the stigma of business failure exists, according to a new report.

The study, by the British Private Equity & Venture Capital Association (BVCA), challenges some of the most common misconceptions of the European venture capital market, and argues that the belief that Europe is lagging behind the US in terms of financing entrepreneurship is just not true.
 
The report dispels the myth that there is a stigma attached to business failure, which it says can damage entrepreneurship and a startup’s ability to raise funding, stating that a previously unsuccessful entrepreneur in Europe has just as much chance of receiving finance for a new venture as in the US.
 
George Whitehead, venture partner manager at Octopus Investments, said that the difference between extraordinary success and complete failure can be down to many factors, including timing, global competition, key hiring decisions or just plain luck.
 
"To discount those people who have failed at some point in their careers would be to ignore almost every successful entrepreneur in the country.
 
"Failure is a key part in building genuinely disruptive businesses and can be essential in experimenting and adapting a business model before it is pivoted towards a successful outcome."
 
Richard Anton, a partner at Amadeus Capital Partners and former BVCA chairman, said that unfavourable perceptions, formed in the fallout of the dot.com bubble, continue to influence opinions within the investment community and beyond.
 
"Such attitudes have unfairly hampered European high-growth companies which in turn poses a serious threat to the future of both entrepreneurship and the economy across the Continent."
 
Other myths challenged by the report include the opinion that US venture capital firms are more likely to hold successful exits than European VC houses, when in fact, the report states, they are equally likely.
 
In addition, the myth that US VC success is due to insurmountable differences between the US and Europe, is disputed in the study, which states that success in both Europe and the US is down to the same factors, such as the experience of both venture capitalists and entrepreneurs.
 
Earlier this month, the EU published an action plan on entrepreneurship, with the stigma of business failure included as a key target.

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