How much risk must one be willing to take when starting up a business?

An academic super-hero of mine pointed out a recent paper by Robert Hall and Susan Woodward in the last issue of the American Economic Review. The article is titled “The Burden of the Nondiversifiable Risk of Entrepreneurship” (link here).

One key result is that a “typical venture-backed entrepreneur received an average of $5.8 million in exit cash”. Sounds good, doesn’t it? But read on: “… Almost three-quarters of entrepreneurs receive nothing at exit and a few receive over a billion dollars”. Want to reconsider your lofty start-up ideas?

Author: thies

Lecturer (Assistant Professor) for Real Estate Finance, Cambridge

Leave a Reply

Your email address will not be published. Required fields are marked *