The Truth About Startup Failure

The hard thing isn’t dreaming big. The hard thing is waking up in the middle of the night in a cold sweat when the dream turns into a nightmare.

–Ben Horowitz, The Hard Thing About Hard Things

In the Silicon Valley-inspired startup culture, we glamourize failure. We wear our failures like badges of honor, write post-mortems with all the gory details, and duck our heads in mock humility when discussing them in person.

“Shoot for the stars,” we say.

“Fail fast,” we say.

Unfortunately, the message that is often missed in this go big or go home mentality is that failure really sucks.

Failing Looks Like…

Failure is not glamourous. It’s not even pretty.

Failure looks like losing 30 pounds in 3 months because the stress is so much you can’t eat.

Failure looks like not closing that funding round 6 months after you graduate from the accelerator, despite following every step they outlined.

Failure looks like going 6 months, a year, 2 years without a paycheck and seeing your bank account so drained you need to get a “job.” Except the only thing on your resume is a failed business, so…

Failure looks like pulling together the best team you could, selling them on your vision, and then not making payroll.

Failure looks like looking friends and family in the eye and telling them you–you, personally–lost every dime of the money they invested.

Failure looks like no longer speaking to the person you once trusted enough to call a business partner.

Failure looks like wrapping yourself so much into your business that it becomes your identity. And when it fails, you don’t know who are anymore.

Failure sucks. There’s no easy way around that.

Success is falling nine times and getting up ten.

–Jon Bon Jovi

One More Round

You know what else failure looks like?

It looks like getting up and going one more round.

Because even though I just told you (and myself, again) what failure looks like, if you’re an entrepreneur you don’t really care. You (like me) are thinking, “Yeah, yeah, but this time I won’t fail.”

Personally, I’ve learned that entrepreneurship is like life on steroids. Life is hard, with ups and downs and lots of chances to make mistakes. Entrepreneurship is the same, at a speed and intensity that will take your breath away.

Entrepreneurs will do well to be honest with themselves about the harsh reality and extreme pain of failure. We can’t glamourize or make it seem like anything but the soul crushing defeat it is.

But, you know you’re a born entrepreneur when you can’t help but go for it anyway.

Where Failing Startups Get Lost

Conversations in the startup community seem to be dominated by funding, features, and hacks. The ability of founders to balance the new information that’s out there with the tried and true principals of business is a critical differentiator in the success or failure of startups. Failing to prioritize the basics of running a business can doom the business, regardless of the product, the sales team, or the investment. Likewise, sufficient attention to running the business can cure a failing startup.

Partnerships

Partnerships are both a blessing and a curse. The right partner can make a startup successful. While that’s true, it is important to remember that the converse is not. Not getting a partnership is rarely the cause of a startup’s failure. When you find partnership opportunity, it’s ok to pursue it as long as you compartmentalize.

Partnerships tend to monopolize a disproportionate amount of a founder’s attention without contributing to the startup’s success to justify the diversion. Partners also tend to cause feature creep (adding features that were not on the project road map). Startups need to focus their time on sales and the features that are required to get paying customers in the short term. A partner is not an investor, and should more typically be viewed as a potential customer with a very, very long sales cycle. Managing partners as a potential sale help a startup allocate time without overspending in this one area.

Infrastructure

Many technology startups fall into the infrastructure trap. Just because the founder dreams of becoming the next Twitter does not mean that the company, in its infancy, should build the infrastructure of a mature company from the outset. The aspiration to integrate with every platform on the market doesn’t mean a startup should do it today.

When a startup plans to build key components from scratch, it start with off the shelf product and grow into those custom components at a measured rate. Instead of building it’s own servers at the outset, Facebook implemented years later, when the time was right. For every startup whose infrastructure was less than perfect, there are ten-fold that overbuilt and ran out of money before they saw any traction.

Hiring

Startup news sites, pitch days, and startup contests can mislead entrepreneurs to believing that skyrocketing growth is just around the corner. Founders frequently rush to hire, but startups have limited funds and founders have limited time. New employees take both. Very few startups need an executive level software engineer to build their minimum viable product. That is not to say that startups should not hire the talent they need, but only hire the people absolutely necessary. An early stage company rarely needs a data architect or executive vice president of business development. Begin with people who can get you to the next level and share your vision whether their employees or contractors.

Side Projects (aka Distractions)

Don’t start side projects. They require time, money, and attention that a fledgling business can ill afford. You don’t need to organize a community garden to sell your rain gauge. You don’t need to create your own camera to sign customers for your photo sharing website. Yes companies, especially large ones, do it all the time, but it’s a startup killer. Instead, stick with your near term product and sales goals.

Michael Johnstone brings over a decade of technology and business experience to Mark Cuban Companies. He has a proven history of strategic planning, leadership, product development, and operations in both startups and mature companies. Michael is responsible for deal flow and manages internet and technology strategy for MCC portfolio companies. He previously founded Taglyn GPS Tracking, specializing in small fleet management, before selling it to a private company in 2011. Prior to Taglyn, Michael spent nine years as founder and president of eLocomotive Design, which built custom software and websites. He brings a depth of first-hand entrepreneurial knowledge and operational expertise to every transaction. Michael also serves as an advisor and mentor to multiple startups and is a mentor to accelerators including TechStars and DreamIt. Michael is passionate about helping founders turn their startup into fully functional and profitable enterprises.

Chicago Startup Dabble Trying To Save Itself With Honesty

Dabble is a great Chicago-based startup that’s trying to serve as a marketplace for people to take specialty classes on anything from guitar playing to bridge playing to designing websites. The market place for this kind of startup is getting kind of crowded, but the two women behind the wheel, Erin Hopmann and Jess Lybeck are doing whatever they can to chug along.

In all fairness Dabble is doing a little better than just dabbling. Mashable reports that they’ve raised $500,000 in two angel rounds. They’ve received a bunch of good press locally and regionally. In fact they are often compared to other startups with similar ideas as one of the first to market. Add to that the fact that they are on pace to double sales in 2013 and you may be wondering why the need to “save themselves”.

Well at one point, after closing their angel rounds, Hopmann and Lybeck took on a few more employees and salaries for themselves. At this point they’ve cut back down from 7 employees to 3 and also stopped taking a salary. It would seem sales aren’t sustaining the company and they are looking for another big round of funding to get it over the hump.

So they’ve decided to try something a little different. Both Hopmann and Lybeck are penning a blog called “30 Days of Honesty.” “What do you do when you’re struggling with a company you love” is the headline at the top of their blog. In it they talk about the trials and problems they are going through right now as they run out of runway.

The hope is to help other entrepreneurs, and at the same time maybe find that special investment that will get them to the next level.

The women told Mashable that they’ve already received responses from customers who offered to pay more to keep the startup afloat. Other entrepreneurs have written in with encouragement, ideas, and words of wisdom, and they also just set up an appointment with an investor who had read the blog.

Today (September 10th) marks day 16 of their quest.

What comes next? Hoppmann says she may have to find work if the company doesn’t turn around. “If it’s a month from now, and there’s not some hope for taking pay out of Dabble by the end of the year, I will go and seek out something that is a source of income,” she said in the interview

They aren’t the first ones to talk about a startup failing. There was an anonymous Tumblr called “My Startup Has 30 days to Live,” and even our good friends at WorkForPie penned a thought provoking post as they were running out of runway earlier this summer.

What happens next for Dabble? You can keep up with their plight here. Hopefully they will find both the knowledge and the money they need to continue. If not, hopefully they’ll dust themselves off and start again.

What’s it like to fail? Lucas Rayala, the founder of Minnesota startup Altsie, who chronicled the failure of his startup in TechCrunch will speak on that topic at Everywhere Else Cincinnati.

Jacksonville Startup Path.To Finds The Path.To Startup Failure, Shares Ways to Avoid It

“Failing gracefully.” That’s a topic that comes up a lot in the startup world. We are all too familiar with the failure rate of startups: depending on who you ask, 70-80% of startups fail. On Tuesday we found out that Jacksonville startup path.to will be shutting down on July 19th.

Almost a year ago we interviewed path.to’s CEO Darren Bounds after reporting the previous month that they had expanded their “e-harmony for jobs” startup to include Chicago, Boston, and NYC. For a while everything looked great for path.to. They were rewriting the boring old job search platform and making it more intuitive with algorithms and indepth profiles.

Not only that, but the team is incredible. We met most of them just a few months ago during Jacksonville’s OneSpark festival. A few of the Path.to team members were helping music discovery startup Aurora while others were helping social event tracking startup #eventhash. During the event, organizer Elton Rivas told us that the path.to team were very active in Jacksonville.

“Failing sucks – especially when it comes to your startup. It’s like being kicked hard in the shins right after being dumped, all while standing in the pouring rain with no cabs in sight, only to have a huge truck drive by and splash mud all over you,” path.to community manager Jill Felska wrote on the company’s blog.

What happens next for the team? Well naturally they’ll continue being innovators, entrepreneurs, and members of Jacksonville’s thriving statup scene. Specifically though, Fileska reports that many of the team will continue innovating in the hiring space and making it a happier space by working at Ignite, a job industry idea incubator also based in Jacksonville.

While the ride is officially over tomorrow, the path.to team shared these six valuable lessons they learned during the two years they were building path.to.

1) Don’t wait to solidify your monetization strategy.

“A ‘build it and they will come’ mentality has taken over the startup space. And yes, we were included in that camp. The problem is, it rarely works that way.

We started out with the strong belief that if we could build up a large, impressive user base, that the customers would follow. Unfortunately, we were wrong. We underestimated the amount of education that would be needed to sell our product – and then were very slow to give it the sales attention it really needed.

Monetization can’t be an afterthought when it comes to startups. Shiny products are great only if they’re solving a real problem that customers will pay for.” – Pete Cochrane, President

2) Technology alone isn’t the solution.

“When the product isn’t succeeding like you expect it to, working to make sure you are providing the core service to the customer is more important than continually adding features, optimizing site-speed, and conversion funnels. Perfecting the tech stuff is fun for some of us, but it is only worthwhile if it adds value to a service that people are finding useful.” – Charlie Cauthen, Technical Architect

3) Two-sided markets are a bitch.

“Building a two-sided market is hard. Really, really hard. If I had a do-over, I would start in just one or two key cities, then wouldn’t expand past them until we had built a strong community of both job seekers and businesses who saw value in our product. Becoming a go-to product or service in your launch city not only validates your idea, but also helps drive engagement in future cities.” – Jill Felska, Chief Community Officer

4) Build for the customers you already have.

“We spent a lot of our time trying to make Path.To better by adding new features, adjusting our pricing strategy and trying to make it available to as many people as possible. While important, it’s the existing customers that really matter. If you remember to focus and appreciate the users that you have, they’ll do the work of sending more people your way.” – Kristin Gattis, Path.To People Person

5) Team communication and trust is key.

“Communication is possibly your most important organizational asset. You can have the best team of engineers and designers in the world, but it means nothing if you can’t work together and solve problems. Poor communication drives down morale and can seed resentment that persists until the issue is resolved.

Learning to surface and resolve issues quickly was one of the most important lessons we learned throughout this process. While we could not identify and resolve every problem, creating an environment of open communication and feedback was crucial.

Just as you have processes to monitor the health of your product and servers, someone in your organization should also to pay attention to the the human aspect of the product.” – Joey Marchy, Project Manager

6) Test, test, test…and then learn to let go.

“The biggest thing I learned throughout the process is to test your product’s efficacy as often as possible. Constantly ask yourself whether you’re really solving someone’s problem at the core or if you’re just making current processes slightly better. Accepting that something isn’t working and changing course is more important than getting it right the first time.” – Dennis Eusebio, UX/UI Designer

Hindsight certainly is 20/20 isn’t it? The funny thing is, these lessons aren’t breaking news. They’ve all been written about before.

The problem is that it’s hard to absorb them and look critically at your business when you’re in the trenches. When things are getting done and moving along everyday.

If our team was to challenge you to just one thing, it would be this: take a step back and really look at what you’re building. What advice from mentors, articles, and your customers could impact your business for the better today? It may just save you the trouble of closing your doors someday down the road. We truly hope it does.

OneSpark was one of the biggest startup events we’ve ever seen, check out our coverage here.