Failure Not Required: Learning From Other Startups’ Mistakes
Why is failing a requirement for success? Perhaps we can take a look at others’ failures as an example of what not to do.
Photo by Nathan Dumlao on Unsplash
My education in business has had me convinced that I must undergo failure as a rite of passage in order to grow. However, when I think about failure in my own life, I think back to exams I flunked and was able to talk my way into retaking, or jobs I was rejected from but found someone else willing to give me a chance. This doesn’t feel like the kind of failure they tell you needs to happen. No, real failure is when things don’t work out, there is no Plan B, and you have to start from scratch. I constantly ask myself when this is going to happen, as though it’s coming any day now — but maybe it doesn’t have to…
Failure Avoidance
If you do a simple Google search on “business failure” or “startup failure”, you’ll find articles like Why You MUST Fail to Succeed and 6 Ways Failing is Necessary for Success. You’ll find a few odd articles (Harvard Business Review, Thrive Global) that’ll tell you a fall from grace isn’t necessary to learn how to persevere in business, but they will focus on positivity and modeling success as the alternative. But why have we not thought about failure avoidance as a model? Truth is, there’s way more data out there about success than there is about failure. People just don’t want to talk about how they messed up.
What We Have Today
It seems like we only hear failure stories in passing; failure is either not mentioned, or framed within the context of future wild success. One of Walt Disney’s early production companies, Laugh-O-Gram Studios, ran out of money. Mark Cuban tried selling powdered milk to no avail. Nick Woodman’s (CEO of GoPro) gaming startup, Funbug, went belly up. These stories were told because their narrators went on to become big names.
Walt Disney’s Studio
I want to hear the stories of those who had failed ventures, gory details and all, and for us to start collecting the data too many of us are scared to share. My hope is that it could help someone currently working on new venture avoid common missteps.
A few companies have begun to collect data on failure, but are still relatively young. Autopsy and Failory are a couple that have begun to catalog startup deaths. CB Insights has published select startup post-mortems, as well as a deep dive on the reasons for startup failure. Sifting through their reasons, I’d say 4 of the 20 deal with personal issues (disharmony between investors/founders, burn out, lack of passion, lost focus), 2 of the 20 are just bad luck (mistimed product, no investor interest (which can be argued isn’t just bad luck)), whereas the majority of the 20 seem like factors that can altogether be avoided with the right strategy, research, and precautions. I’m not saying the strategy is foolproof; of course when a large number of these factors collide it may not be worth the trouble of dealing with it at all, but I believe this is a start.
Mistakes I’ve Seen Firsthand
As I was going through this exercise I began to wonder why I have yet to experience significant failure in my life, and I believe it’s because, just like many people my age, I have not taken large enough risks to allow myself to fall down. I went to NYU, spent some time at an investment bank (Credit Suisse), and now work at a venture capital firm (BDMI) — I’ve never gone off on my own or taken any big career leaps.
However, I feel there are stories and lessons I can learn from as I progress in my career. My uncle is a great example — he started an alternative fuel cell business with investments from friends and family. At first it seemed like things were going well and the product had some market need; he was given an offer for several million dollars just for the IP, with no revenue. He refused because he thought it would be a much larger business. As he shopped the company around to investors, looking for more capital, he began to face challenges. He would come to meetings without his CTO, attempt to explain a product he knew very little about technically, and seldom brought along a prototype. And when investors asked questions during a meeting, he’d say
“I won’t answer until I feel you understand the product, which I really don’t think you do.”
Super low resolution 80’s style demo video
Needless to say, the company never went anywhere because my uncle didn’t understand that trust in the team is always prioritized over belief in the product — a lesson which I am able to not only take along in my capacity as a VC analyst but also if I ever want to start my own venture.
I hope others don’t experience these stories this close to home — let’s finally start talking about failure in a super honest and public way.