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gnat (29)

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Journal of gnat (29)

Sunday April 14, 2002
04:30 PM

"Most small businesses fail"

[ #4190 ]
I was reading Dave Winer's weblog where he said:

The myth that open source wipes out all that comes before it except the BigCo's robs the users of any hope of new user-oriented software. Think about whether or not you want to do that. The world never changed the way the hype said it did. Developers need money to live. If you want good software, you're going to pay for it, one way or the other, sooner or later. A lot of developers are out of work now, perhaps some of them would have jobs if it weren't for this foolishness.

Obviously Dave has a bug up his butt about open source software, but it got me thinking about equating software with businesses. We've all heard the statistic that "most new businesses fail". Sourceforge shows that some new open source software projects fail (never release code, never achieve a userbase), but it's nowhere near the humongous failure rate talked about for businesses.

So I did some checking on the web. Amway's site says they couldn't find any evidence for the "most businesses fail in the first five years" story. Looking further, I found the Small Businesses Administration variously quoted as saying 33%, 60%, and 80%.

The Department of Labor cites the Census as evidence that only 24% of 1992 small businesses were no longer around in 1996. And not all businesses close from failure--some are bought, incorporated, or the owner retires.

It would be very interesting to see a study of the open source failure rate--how many projects never get off the ground? My gut feeling is that it'd be about the same as the Department of Labor is reporting: a quarter, or thereabouts.


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  • Here's a story [] that postulates why so many businesses fail, and which ones are doing the failing.

    "When people hear that magic phrase, 'Be your own boss; own your own business,' they get extremely excited," Howard said. "The reality is very different. Most new businesses in the United States fail every year. Most of the people who believe are people who are naive, generally uneducated--the same people who gamble and believe in the lottery."

    Of course, the author here is merely parroting the meme that "m

  • I don't know how he figures open source caused rampant speculation that led to the meteroic rise and all of many tech businesses. Then again, I don't know how he figures many of the things he figures. Can we have more Spolsky instead, next time, please? :)