In August, mega venture capital firm Andreessen Horowitz announced a $350 million investment in residential real estate company Flow\u2014the single largest investment the VC titan had ever made.<\/p>\n
But a bigger surprise than the investment amount was the person who received it: Adam Neumann, the charismatic but controversial cofounder of WeWork, who quit as CEO in 2019 after a bungled initial public offering amid questions about his business practices.<\/p>\n
\u201cThe market values the experience they have and rewards them in terms of high seniority, high prestige positions, even though they failed.\u201d<\/p>\n
Why would the VC firm risk supporting an entrepreneur with a questionable track record? A recent paper might contain the answer. Entrepreneurs coming off an initial VC-backed failure often see their careers accelerate in their follow-on job, as highlighted in \u201cFailing Just Fine: Assessing Careers of Venture Capital-Backed Entrepreneurs Via a Non-Wage Measure.\u201d<\/p>\n
After exiting their startups, these entrepreneurs obtain jobs about three years more senior than their peers, according to the research. The findings suggest that companies value the experience of entrepreneurs, who often have their hands in most aspects of the firm: operations, marketing, finance, communications, and product development. Clearly, general management skills win the day, says one of the paper\u2019s coauthors, Paul A. Gompers, who is the Eugene Holman Professor of Business Administration at Harvard Business School.<\/p>\n
\u201cThe market values the experience they have and rewards them in terms of high seniority, high prestige positions, even though they failed,\u201d Gompers says.<\/p>\n
The research comes at a time when Americans are taking more risks, with people quitting their jobs in record numbers and many starting their own businesses. While some of those new businesses are bound to fail, as is typical, perhaps the findings provide some welcome encouragement: Entrepreneurs not only land on their feet after a failure, but actually move further up the career ladder.<\/p>\n
The research challenges previous studies finding that entrepreneurs who failed early in their careers often accepted jobs at a lower salary than their previous roles.<\/p>\n
\u201cThat literature portrays failure as a stigma,\u201d says Gompers. \u201cIt might make you think that if you start something and fail, people aren’t going to want to hire you.\u201d<\/p>\n
In addition to Gompers, the study\u2019s coauthors are Natee Amornsiripanitch, an economist at the Federal Reserve Bank of Philadelphia; George Hu, a graduate student at Harvard University; Will Levinson, researcher associate at HBS; and Vladimir Mukharlyamov, an assistant professor at Georgetown University\u2019s McDonough School of Business.<\/p>\n
The researchers focused on entrepreneurs backed by venture capitalists, but they faced a challenge right off the bat. How do you measure success for job holders in different roles in industries as diverse as technology, finance, and academia? Who is more successful: a tenured university professor or a partner in an insurance firm? Traditional career success measures such as compensation might not tell the whole story.<\/p>\n
<\/p>\n","protected":false},"excerpt":{"rendered":"
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