Author:HongwuChen
This article is based on the author’s speech at the Cash Capital fund’s 2018 CEO summit on September 7
It’s a fact that startup has a very high failure rate.
Historical statistics shows that only two or three out of hundreds of innovation may succeed.
In the United States, only 4% scientific research can be industrialized and then contribute and boost the economy. In China, the conversion rate will be much lower.
So from the perspective of investment, every new attempt can actually mean that it becomes a loss. While each attempt at innovation may not yield tangible economic benefits, it certainly leaves something for the entrepreneurs, such as the ability to build a team and know which roads are blocked and which directions to follow. For the entrepreneur, we must try under the premise of controlling the risk, but do not think that every attempt will definitely pay off.
We’ve seen tens of thousands of startups, many of which are with a certain scale. People tend to think that I’m great, I can do this, I can do that as well. I want to make money in the short run, I want to make money in the long run as well. In a word I don’t want to lose any money. Frankly, if that’s the case, it means the company isn’t far from failing. Because every enterprise’s resources are actually limited, whether it is money, manpower or knowledge accumulation, there are boundaries. But too many entrepreneurs tend to think about problems with infinite resource perspective. They always think the best, thinking they have unlimited capacity to mobilize the resources they need, which is impossible in objective reality. So the end result, as you can imagine, is the root cause of the failure of many startups.
So, for entrepreneurs, we need to know what to do, what not to do, what to do now, and what to do in the future. It’s important not to think about what will be successful in the future at this stage of our life. Therefore, I think it is very important for a startup to know how to choose.
Another point is that the competitors of the enterprise are everywhere, and the market can’t wait until we make money before competitors come in. The market is actually very brutal, so how to make a breakthrough at a certain point and how to be a little bit ahead of competitors at a certain point is also very important. In this case, the enterprise has no alternative but to focus, the so-called pressure strategy. We only have a little bit of resources, so we can’t do anything when we spread our power.
We often tell others that it takes only one reason to kill a business, while it takes tens of millions of reasons to make a business successful, for which every obstacle can make a business fail in minutes.
In the end, business is never smooth. There are very few enterprises that are truly successful, or many that are successful in stages, not always. The inevitability of such failure requires us to take business operations seriously and continuously. How to learn through failure and can be improved is very necessary. It’s crucial to truly understand failure.
As just mentioned, enterprises may encounter problems, setbacks and failures. So how do we get through this? Frankly speaking, in the past, we have seen more than one business run into difficulties and problems. I once pointed out a very good solution for two companies six months before the problem came out, but most entrepreneurs dare not to “ cut off own arm for survival”. Predicting the possibility of the worst, and avoiding the worst by the most reasonable means of dealing with it before the worst, can be a daily subject for entrepreneurs. Please remember that we are entrepreneurs, we must have the thinking, courage and determination of entrepreneurs . A business run on luck will die sooner or later. The only thing we can do is to plan our way of life well and implement our way of life well. This is what makes our enterprise permanent and stable.
