Start-Ups vs Casinos

Posted: July 11, 2016 by Robert Craven

I recently read that just 10% of companies that America’s top ten venture capital firms or VCs [ie private equity firms] invest in succeed. This correlates exactly with the yardstick that VCs and seed corn capitalists that I know use.

 

We know that only 10% of small businesses actually make it to year five, so it could be reasonable to suggest that anything greater than 1:10 (10%) odds would be better than you get from starting a business. Just 10%.

So, is a 10% gamble worth it?

To put all it in perspective, here are the odds of casino gambling:

• Slot machines 32%
• Horse racing 41%
• Blackjack 47%
• Roulette 47%

Here are some conclusions (if you are in any way rational).

1. If you go to a casino then do not go near the slot machines (but 68% of gamblers do.) Another conclusion might be:
2. If you have money to gamble then do not open a small business (but more than 4m people have done so in the UK).
3. If you are the government, then do not gamble anything on small businesses but spend the money in the casino (higher odds of success).
4. As far a small business owners are concerned, maybe it is just not about the money.

Do not gamble at small business unless… Unless what?