Wednesday, May 22, 2013

Tough Competition Helps Startups Succeed

In a short article "How Competition Strengthens Start-ups" (HBR March 2013), Andrew Burke and Stephanie Hussels report some key findings of their study of tax data of 2 million companies that were launched in the UK between 1995 and 2005.
Surprisingly (or perhaps not), they found that companies launched in crowded markets had higher odds of failure in the first year, but once they survived this year, had a much greater chance of surviving the first 3 years.

The authors explain this effect (that serious competition apparently helps startups thrive) by stating that a challenging environment causes young firms to focus extra on satisfying client needs on one hand and keeping costs down to a minimal level on the other hand.

Let that be a comfort for all startup entrepreneurs who started in the harsh economic circumstances of the last couple of years :-)