Startup Success Is a Numbers Game

There is an often-cited statistic that 90% of startups fail. What does that mean to you? Is it better not to try?

Even though this number is a bit disheartening, I find it comforting. This number tells us that the secret to success might just be a numbers game.

A 90% failure rate leaves a 10% likelihood of success. That's something to work with.

So, what if we just started more than one business? What are our odds of success? Sneak peek: The more ideas you execute, the higher your chance of success.

The Numbers Game

Imagine you're flipping a coin. The chance of it landing heads up is 50%, right?

Now, if you flip the coin just once, the outcome is uncertain—you could easily get tails. But the more often you flip the coin, the likelier it will become that you'll see heads eventually.

Every flip increases your likelihood of success. This is called cumulative likelihood. If you do two flips this means:

Possible outcomes are: HH, HT, TH, TT.
There are three outcomes that include at least one heads (HH, HT, TH).
The chance of success becomes, therefore, 75%.

This is because, over many trials, the outcomes will start to match the underlying probability (50/50; or 90/10 for businesses).

The law of large numbers tells us: The longer a streak of failure, the likelier a success becomes.

The Startup Numbers Game

Let's apply this concept to startups.

One attempt has a 10% chance of success and 90% chance of failure.
Two attempts in a row decrease the chances of failure.
- The math is: 0.9×0.9=0.81
- So, there is an 81% chance of failure and a 19% chance of success.
Three attempts will give you already a 27% chance of success.

Three attempts will give you a 27% chance that at least one of those three attempts is successful.

How Many Startups?

How many ideas do you need to try? How many startups or businesses do you need to start if you want to be successful at a 90% chance?

The answer is: 22.

If you start 22 businesses in a row, there is a 90% chance that at least one of them is successful.

This also means:

At least one: You could have more than one success.
One of them: You don't need to start 22. Success could kick in at your very first or even at the 3rd attempt (it's just way more unlikely).

Here is a table showing you likelihoods for different number of attempts:

You can find a calculator at the end of this page if you want to play around with the numbers.

Failure is Experience: Fail Your Way to Success

It is important for you to remember: Unlike the theoretical model of coin flips, where each flip is independent of the last, your entrepreneurial journey is interconnected.

Each attempt informs your next.

With each idea that doesn't pan out, you gain invaluable experience. You learn what works and what doesn't, which assumptions were misguided, and which strategies worked.

So, for each failure:

You gain experience.
You build a network.

This increases your chances for success for your next try. This lowers the overall number of attempts you need to be successful.

However, you also need to understand that simply increasing the number of attempts without learning and adapting won't magically improve your odds.

Launching 22 shitty ideas without refining your approach is likely to result in 22 failures. Regardless of some theoretical stochastic outcome.

What does success mean?

There is one important factor we didn't talk about: What is success? Success is not defined here.

It could mean ramen profitability.
It could mean being able to go full time and leave your 9-5.
It could mean a 6 figure exit.

Of course, the higher you set the bar to call it a success, the more attempts you'll need.

Simplifications

I simplified some things. Let's set things straight:

Each individual attempt (flipping a coin or starting a business) does not change the probability of success for that specific attempt.

Each coin flip and each business is independent, and the likelihood of getting heads remains 50% for every single flip.

Similarly, the failure rate for each startup stays at 90%.

Look at it this way: A coin doesn't become heavier on one side, just because it landed on the other too often.

The same is true for your business idea. It doesn't become magically more sound just because it is number 22.

Number 22 could still fail. But the law of large numbers is in your favor. So is your experience.

Let the cumulative likelihood of success work for you.