Let’s Work Together

Failing For An Interesting Reason

Feb 3rd, 2012

Bill Gregory – While BB’ing (Blog Browsing) a while back, I came across the Huff Post, Small Business America. It is not for everyone, but worth a look to discover some ideas and approaches that may help get a small business started or to grow a small business into a larger and more productive one. Be forewarned, however; as with most blogs, the five minutes you intended to spend will disappear as you emerge an hour or more later from the 10th link you have visited.

A recent blog on Huff Post was by Daniel Tenner.  He is clearly a successful entrepreneur, co-founder of two organizations. One of those, GrantTree, was started in 2010 with the explicit aim of helping innovative tech companies to access government funding, albeit in theUK. Daniel and co-founder, Paulina Sygulska, both worked in and cofounded other tech startups beforehand, and felt that although there are many ways for startups and more mature companies to raise government money, most of those ways are unknown or inaccessible to the average entrepreneur. Sygulska, herself, had co-founded a company of her own called DreamStake.net with the dream of creating a support network for creative entrepreneurs. (And yes, I could not resist taking an unanticipated detour into her fascinating site!)

Tenner’s Huff Post article was titled “The Startup Skill Set” and was the result of a workshop he participated in with Eric Ries, author of “The Lean Startup.” You can find Ries also on the HBR Blog Network, with an article titled “Is Entrepreneurship a Management Science?”

The author’s basic premise is that success in the startup world has more to do with skills than with ideas. They believe a skilled entrepreneur will achieve some measure of success even with a mediocre idea. An unskilled entrepreneur is likely to fail even with a brilliant idea whose time has come. There are exceptions, or course, they say, but you can’t rely on being the exception any more than you can rely on winning the lottery. So the best approach as a new entrepreneur, according to Tenner, is to try and fill the glaring gaps in your skill set (via learning, partnerships and mentorship) so that if your startup fails, at least it will be failing for an interesting reason. This last thought took me on another detour to learn about what Tenner would consider interesting reasons for failing. This detour was so engaging that I decided not to return to my main road. I’ll simply leave it to you to seek out his Huff Post on what he believes to be the core entrepreneurial skills, which you can find at http://www.huffingtonpost.com/daniel-tenner/the-startup-skill-set_b_1224293.html?ref=small-business. I’ll comment on them in a later blog here. I’d like to focus, instead, on his thoughts that failing in a unique and interesting way is hard!

Tenner says that startups are renowned for their unique difficulties, for the fact that each startup faces an extraordinary set of problems that has never been seen before in this particular conjunction. This is largely borne out, he says, by the many definitions of startup which are all about uncertainty, hard technical problems, scalability and so on.  He believes, however, that what usually kills startups is a set of much more mundane issues, like running out of cash (the ultimate killer), building the wrong product, building for the wrong market (both of these effectively equate to what he calls “building a crap product”), having a major fight between the founders, etc. The root reasons, which he says can be described in a thousand different ways, are all essentially the same and relate fairly closely to Paul Graham’s principles on how to start a startup:

  • Start with good people
  • Make something people want
  • Spend as little money as possible.

Tenner says that most startups (particularly those started by new entrepreneurs) will fail because they screw up one of those three basics, not because they face a unique set of never-seen-before circumstances unique to their market, their product, and their specific set of circumstances. According to Graham, “Most startups that fail do it because they fail at one of these. A startup that does all three will probably succeed.”

Starting with good people

Tenner observes that if you started with people who were not committed, not a good match with you, didn’t have the skills, didn’t have the mad perseverance to see things through, were too many or too few, then chances are the team won’t survive the stress of a startup. Even a “regular” business is ultra-stressful, he notes, putting any relationship to the test.

A startup, with its pressure to grow fast, is ten times as stressful and he offers two ways to avoid this, proactively and protectively. Proactively, he says, make sure you only start companies with determined, motivated, obsessive “nutters” who have the same priorities in life as you do. No “Oh heck, I’m about to start a start up, I want my friend John to be my cofounder, I’ve known him since we were kids.” When starting something new & scary, your impulse might be to gather friends around. That’s the wrong impulse he says. You need to be extremely selective, and only start business with someone who is going to be as crazy about it as you will be. Then, protectively, he says once you’ve picked the right person, make sure your arrangement is sustainable, and make sure the company can survive one of you changing their life priorities.

Making something people want

The key mistake to avoid, according to Tenner, and which many promising startups make, is building something in isolation, without any customers, with only theoretical ideas about what will drive sales of the product or use adoption.

Tenner says , “Building what customers want means getting something out and quickly iterating it based on customer feedback. “He quotes Graham, “In a startup, your initial plans are almost certain to be wrong in some way, and your first priority should be to figure out where. The only way to do that is to try implementing them.”

Spending as little as possible

Another way to phrase this, Tenner observes, would be “be on top of your finances”. If you’re bootstrapping, he says that’ll probably come naturally, because it’s your pennies going down the drain. But if you have managed to raise funding, he says this can be harder than it seems. Being on top of your accounting means this can’t be delegated to someone else until you personally understand it. Even if you’ve raised funding, you can’t spend irresponsibly. He says it’s better to be a zero-cost entrepreneur than to be an uncontrolled spender. In short, he notes, it is about being aware of and on top of the basic life pulse of your business, its cash flow. A lot of startups stumble and fall because they’ve taken on way more expenses than they could afford given the stage and success of their project.

According to the author, failing in an interesting and unique way is hard. The average new entrepreneur’s first startup will not face fantastic and exceptional problems – it’ll die because of a combination of starting with the wrong people, building something nobody wants to pay for, and failing to be on top of finances. The good news, he says, if you can prepare yourself in those three areas, and avoid the most likely mistakes there, you’ll greatly reduce the chances of a first-time flop.

Bill Gregory is currently serving as the interim director of the Northwest Indiana Small Business Development Center. Gregory has more than 30 years of business experience in a variety of management development and training roles. He most recently was executive director of the Center for Management Development at Indiana University Northwest. Bill can be reached at bgregory@isbdc.org.