Monday, August 05, 2013

Failure IS an option

Failure may not have been an option for the Apollo 13 mission, but it certainly is an option for startups. In fact, since statistically the majority of startups fail, you could argue that it's the default option.

Most successful entrepreneurs have a few failures under their belt, and most "overnight" successes are the result of years' of hard work – and in many cases years' of trial and error. Before writing history with Angry Birds, Rovio had already launched 51 games that you've probably never heard. Brian Chesky described AirBnB as a an "'overnight' success that took 1,000 days".

I've had my fair shares of failures as well. It took me a text adventure for the C64 (never completed), a mail-order business for Amiga shareware (a decent success for a student business, but discontinued when the Amiga died), a PC real-time simulation game (nice game, but didn't manage to get it properly distributed) and several other attempts before I had a decent success with, which I co-founded in 1997. Likewise, as an investor I've made several investments that didn't work out before landing my first big hit with Zendesk.

Considering how normal and necessary failure is in the startup world, it's surprising how many VCs are afraid of admitting failure when it happens: Logos are quietly removed from portfolio pages*, asset deals are arranged to make it look like a successful exit, PR stories are written. What's even worse is if the death of a dying startup is delayed by putting more money into it, all out of fear of admitting failure.

If you invest in early-stage startups, you know that a large part of them, maybe more than half, won't make it. The rest of the world knows it too. So why not be open about it?

* We're guilty of this too, but we're thinking that we should keep all logos on the page and add a "R.I.P." badge when a startup died. What do you think?