Next week I will join a panel of entrepreneurs talking to students in an entrepreneurship class at the University of New Hampshire on the subject of failure. This is a subject that numerous entrepreneurs and investors have talked about in the blogosphere in recent years. I’m certain I have even chimed in on occasion.
But in an effort to organize my thoughts to best convey my experiences, I thought it might be constructive for me to write about it first in some detail.
Different Kinds of Failure
Spectacular Collapse. When most people think of failure in an entrepreneurial sense, they likely conceive lots of money flushed down the drain, jobs lost, and doors shuttered. Indeed, these spectacular collapses often get well-reported. When companies raise millions of dollars in venture capital and go kaput, there are usually plenty of jealous folks who like to make an example of them, especially in these days of prolific social media. And it was less than a decade ago when the first bubble burst and nary a day went by without such a tale being told.
Death of a Thousand Cuts. More often a startup simply runs out of steam, the victim of a series of small failures over time. Perhaps the product never really came to fruition, the market never quite gelled, or the sales process didn’t work. Regardless, eventually the company runs out of money or the founders run out of energy trying to make it succeed, or both.
The Land of Lost Opportunity. This last form of failure may not be viewed as such by many, but to my mind it is far more common than you may think. It integrates some of the same small problems that contribute to the first two types of failure, but the venture may actually survive and even make money. But it never rises to its full potential. Perhaps it was the deal that was never done — or a deal done too soon. More likely it was a failure to invest time and/or money resources at the right time. It’s like the baseball team that wins 95 games and finishes just out of the playoffs anyway. While the team played well, it is no less a failure to fall one game short than twenty.
Lessons from My Failures
I have never experienced a Spectacular Collapse, probably because I have always eschewed “vulture capital” (a phrase I picked up from a VC friend) so it has contained the fallout. Nevertheless, I have learned a great deal from the other two kinds of failure I describe above.
Get a (Business) Spouse. To my mind, it is nearly impossible to be a successful solo founder of a company. Sooner than later, you need to join up with someone just as passionate about the business as you are. Having someone to bounce ideas off of, to keep your emotions in check (never getting too high or low), and to complement your skills and personality are absolutely critical. And don’t delude yourself into thinking you can get this out of an employee. No matter how good an employee you have, it’s different than having a partner in the business committed to total success. To put it in crass terms to help you understand: who stood by Elliot Spitzer’s side in his final hours in office? The woman he married, not the one he hired.
Your Startup Needs to be a Daily Passion. As a serial entrepreneur, this is one of my biggest shortcomings. I have professional ADD and it has probably hurt my ventures more than anything else over the years. Trying to juggle multiple startups at the same time can be a big mistake, especially if nobody is focused on each startup for the better part of every day. A startup isn’t a part-time gig, even though you may need to take on side work to bootstrap your venture. At least one of the founders needs to wake up every day asking how they can move the ball forward — and then doing so.
Trust Your Gut Instincts. I never had my heart in one of the companies I co-founded. I actually argued with one of my partners about it for months before I finally relented and agreed to start it up. I saw too many likely pitfalls and too little long-term upside. What made me change my mind? Dollar signs. The one sign you should almost always ignore. It clouds your judgment and makes you do stupid things. All that said, the business actually did darn well for a period of time, and I made decent money off of it. But ultimately it wasn’t a viable ongoing business. Thus, still a failure in my book.
Fish or Cut Bait. I like to say that my first consulting business petered out because I got too busy with CustomScoop’s success. And that’s partly true. But what really held that company back was my unwillingness to plunge deep into the risk pool by growing it into a “real” business. I insisted on growing through the use of freelancers (and I had no partner). Had I bit the bullet and hired my first employee, that company might well still be going strong right beside CustomScoop. Ultimately, I walked away from it at its peak, and I still wonder what might have happened if I had looked to convert it from a simple sole proprietor doing consulting into something more.
A Final Word
Don’t fear failure, learn from it. Whether your own mistakes or those of others, there’s lots to learn. Unless you are extraordinarily lucky, you will experience failure just as I have. Treat it as an education rather than a disaster and you’ll be that much stronger for it.