From Failure To Success: 2 Concepts From Silicon Valley #5
How Silicon Valley’s entrepreneurs consider failure is one of the reasons California is a successful ecosystem for startups. I spent 5 months in San Francisco and Los Angeles where I met 70 entrepreneurs and investors. When I asked them “What is the California DNA in startups?”, an answer I often got was that here, failure is viewed positively and is encouraged.
Of course, getting it right the first time is the primary goal. But all entrepreneurs make mistakes and California is inspiring on 2 main aspects regarding failure which I’ll focus on here:
- The motto of “Fail & learn”: failure perceived as a positive experience
- The concept of Pivot: failure as a driver for action
By the way, this article follows my 3rd one about “Momentum” when entering a market. When you miss the momentum, or miss the wave, what to do? Well, learn and… pivot!
1. “Fail and learn”: a storytelling
Failure in California startups is valued and encouraged. It is a positive experience: if you made a mistake once, you won’t do it again. All the mistakes you’ve made as an entrepreneur are areas you handle better today. In Silicon Valley, everybody considers that the more you failed, the more experienced you are…and the more likely you are to win: to build a unicorn! It explains why previous entrepreneurship experiences, even the ones you screwed up, are valued when raising funds and are a strong positive signal for investors.
Sophie Durey, Venture Program Manager at Tamar Capital, shares that in France, trying something and not succeeding is sometimes considered a red flag on a resume and can lead to mistrust. Whereas here, experiencing failures is like a medal for entrepreneurs. On the contrary, never having failed means that you’re probably afraid to take risks. At a larger scale, “Fail & learn” explains why VCs and Big Techs do not hesitate to burn a lot of cash and invest massively in projects that have a lot of potential, according to Boris Frochen, both French and American and co-founder at Ramp-Up Lab. Based on this mindset:
Failure becomes a success.
That’s how failures get to be part of the storytelling. 95% of the entrepreneurs I met here told me their career mentioning their biggest failure with pride. They emphasize what these experiences have taught them. In the end, I accumulated a lot of business cases that I want to share here because they might be useful for you (I’ll personally remember them when launching my project, which I’ll do soon since I’m now imbued with the “go-for-it” mindset 😉)
So here are 3 business cases that led to an unexpected slowdown in startup activity (which could be considered as a failure) and then to learnings:
The first one is Alex Deve’s. He learned from a misidentified target when he founded WhiteTruffle in 2010, a platform aiming at matching Tech talents with startups. WhiteTruffle’s team identified hiring managers as the target and developed a new app for them. The platform was efficient in matching. Problem? Onboarding of the app: the hiring managers weren’t the users of the platform and increased churn. What did he learn? The lack of information from the ground led to a wrong strategy. The target should have been recruiters. Alex considers they executed based on their feelings and were not sufficiently informed about their target’s behavior.
Niv, who I met in my first days in Los Angeles, learned from a wrong focus regarding consumers’ needs. When covid exploded, the issue he identified for his B2C store inventory checking platform was fast home delivery of goods. The team focused on improving the delivery service. Problem? After the pandemic, people wanted to go back to the store. The team wasn’t on the right track and lost consumers. The focus should have been on improving the experience to go to stores. What did he learn? Differentiate short-term demand (due to conjectural situations like Covid) and structural evolution, and always take a step back to anticipate consumer behavior’s evolution.
Jacques-Alexandre Gerber learned from relations with strategic competitors with Intalio. Founded in 2000, his BPM software went from 0 to $3M annually in 3 years. They wanted to expand in Europe. They had engaged with some of their major competitors such as IBM. Problem? Microsoft worked with IBM to enter the market with a competing offering. Intalio was on the sideline. Jacques-Alexandre decided to get back to the US and change the business model, offering a free product and subscription-based features and services. What did he learn? Failing to work with such a big competitor as Microsoft had been a mistake. They should have partnered with them earlier, which they didn’t because Intalio was much more advance in terms of technology.
👉 Learning from failures is encouraged because that’s what leads entrepreneurs to pivot, a key concept for those in Silicon Valley.
2. “Fail and learn” to PIVOT!
Sometimes, projects are stopped because of one failure. Learning from it is the first step, reacting accordingly is the second. For Jacques-Alexandre Gerber, “pivot” is a magic word in Silicon Valley: “entrepreneurs don’t fail, they pivot”! In California, you’re never done. Mistakes and pivots are 100% part of the entrepreneurial journey. But… what does pivot mean? Changing dramatically your way of reaching your objective — your vision.
The idea of pivot reveals 2 main features of California entrepreneurs.
- First: reactivity. “Action-reaction!” It didn’t work? Well, reposition quickly, change the business model, or the marketing strategy. Or build a new startup. But do something to adapt to new events, find a new opportunity!
- Second, ambition and determination: “Start, again and again, until it works.” It’s part of the work culture I talked about in my last article. To Boris Frochen, it’s the mentality of the gold miners, try 80 times before it works. And it will work! That’s the American dream: never give up!
This notion of pivot is part of the big success stories we all know:
- Netflix, for its market trends adaptation, as Doug Erickson, Executive Director at Santa Cruz Works, mentioned to me. Initially, the core business was a DVD delivery service to customers’ mailboxes. But as demands for digital content grew, Netflix not only began offering access to movies and TV shows online in 2007 but also began producing its own original programming in 2013.
- Airbnb (again), for taking advantage of a huge market opportunity, as Donna Bletzinger, CEO of Dyer Stephenson, told me about. In its early days, Airbnb’s goal was to allow travelers attending conferences in San Francisco to stay in private homes, using air mattresses, when hotels were full. It changed dramatically when they noticed that travelers and tourists were not looking for hotels, but for local and cheap accommodation. They then made a huge pivot in their GTM strategy and we know the rest of the story!
The Silicon Valley Playbook also includes major pivots of Slack, Twitter, Paypal, Instagram, or even Youtube, initially a video platform for singles to date each other. This illustrates that pivoting sometimes requires making a shift that no longer fits with the startup’s vision. In this regard, Tximista Lizarazu, CEO of Fraiche, told me: “A dead company has no impact”. Pivots are a way to keep a startup alive and make a future impact.
Dealing with pivot leads me to re-emphasize how central collaboration is in this California ecosystem. To know how to run a startup through pivots, Silicon Valley is considered the best place to be. Not only because all CEOs, Executives, VCs have managed and solved many different strategic business cases to make startups thrive but also because the rule is :
Share your experience with everyone!
In the Bay Area, the principle is that success stories are 90% work and only 10% ideas, according to Boris Frochen. There’s nothing to keep for yourself and Silicon Valley is not afraid to share: share codes, projects, working ways, and share failures and pivots. That’s one of the reasons why CEOs value accelerators and Silicon Valley VCs, not only for the investment they get but also for the experience they will gain through mentoring and networking (that’s smart money)! “Give back. Pay it forward” is the principle: you’ll benefit from others’ experiences and then, it will be your turn to share your entrepreneurship and tech learnings! That’s exactly on that principle that Inovexus is founded: our cross-border experienced mentors are willing to give back the California mindset: ambition, make things done, risk lovers, fail or succeed fast, never give up & pay-it-forward.
In brief: F̶a̶i̶l̶ Pivot and learn!
The same experience can result in a failure or in a pivot: it depends on the way of looking at it and California is an inspiring place for that. Experiencing the “Fail & learn” motto and sharing it with the ecosystem is how Silicon Valley works and succeeds… to no longer be “Fail & learn” but “Pivot and learn” 😉
In the end, this mindset creates a virtuous ecosystem, attracting like-minded people to Silicon Valley, as Sophie Durey highlighted it.
In my next and last article, I’ll apply the famous motto: “Give back. Pay it forward”, giving my tips and feedback on my experience in San Francisco and Los Angeles, meeting entrepreneurs and investors.
See you next week 🇺🇸
Mathilde
