Without entrepreneurship with its courageous entrepreneurs, there would be no companies, jobs, prosperity and hardly any innovations. A political system without businesses would not be competitive and would scarcely be a stable democracy.

Being a successful founder, an entrepreneur, is a great joy; but those who fail, experience fatal, often traumatic consequences. And that is not okay when we urgently need more entrepreneurial commitment. At the same time, the crux already lies in entrepreneurship education, which is typically about many things, but rarely about robust entrepreneurship.

Thumbs up or thumbs down?

Is failure as a founder an exceptional phenomenon? No, success is the exception; failure has long been the norm! We experience an enormous waste of material and immaterial resources, resulting in risk aversion. The entrepreneurial potential suffers, as do the careers of the actors and the future of many a family.

It is frightening to see how high the failure rate is. According to Eurostat, only 46 per cent of all start-ups in the EU still exist after five years, and in Germany, only 38 per cent. Only between 10 and 20 per cent survive 10 years. This playing field of founders, but also investors, is fatally reminiscent of the cocky Icarus, who wanted to fly too high, flew too close to the sun and crashed.

The five game changers

What is going wrong but would be easy to change? Here are five of the most crucial game changers.

Firstly, what young founders in particular naturally lack, is experience. Business incubators rarely compensate for this. So, entrepreneurship training has become a good business. But most of it is nothing more than dry swimming in the lecture hall without the indispensable practice. Even most lecturers are business theorists who have never successfully founded and managed a company or worked in one for many years. Such a degree certificate, whether as a master’s or entrepreneurship decree, offers only deceptive security.

A grave mistake start-ups make is to expand and scale very early, even before a solid foundation has been created through concrete success

Secondly, many founders are seduced by the lure of supposedly quick money and become OPM (‘other people’s money’) entrepreneurs. Recklessly, with lofty business plans and a lack of in-depth preparation, they enter the treacherous arena of OPM, of investors, without being aware of all the consequences. They end up being caught between two fronts: the market and their financiers. The fact that entrepreneurship can be ethically motivated and that entrepreneurs should represent true values and create sustainable benefits rarely plays a supporting role.

Thirdly, the core of the entrepreneurial project is often not a well-thought-out, tested innovation, but a pseudo-innovation. It’s either one that others may have implemented long ago, or one that initially appears to be a bombastic solution but is ultimately the cause of much bigger problems. Studies show that in terms of increasing customer value, which is essential for entrepreneurial success, around 70 per cent of innovations disappoint. In the case of digital innovations, which are regularly the linchpin of start-ups in particular, the rate is even worse.

Fourthly, the time factor. A grave mistake start-ups make is to expand and scale very early, even before a solid foundation has been created through concrete successes. But here, “speed kills”. Speed is no guarantee of success but carries enormous risk. In most cases, value-based entrepreneurial action in the sense of organic sustainability with staying power would be more promising.

Fifth, toxic mentors. Mentors can be beneficial if they are the right ones. In numerous instances, however, mentors are not trained for this. They want to help but are too dominant or pursue their own interests. The wise, experienced mentor teaches young entrepreneurs to find the appropriate decision themselves, by asking questions and with closer examination, and thus supports them to become, and remain, successful every step of the way through the thinking skills and self-confidence created in this way.

Reinhold M. Karner, FRSA, is an entrepreneurship and start-up evangelist, multiple chairman (e.g. AP Valletta), corporate philosopher, entrepreneur, author, university lecturer and fellowship connector of the Royal Society for Arts, Manufactures and Commerce (RSA) for Malta and Austria.

This article was first published in German in the Founders Magazin (https://founders-magazin.de).