Into the Valley of Failure

Cass Phillipps set up FailCon, a place for entrepreneurs to share failings. Here, Cass explains what failure means in Silicon Valley now

Words: Cass Phillipps
Illustration: Mike Hughes

You’re five years old and you’re learning to ride a bike. The stabilisers are off and your dad is behind you, shouting at you to pedal faster and faster. He’s running with you but secretly letting go, until eventually he stops and you take off on your own. That brief moment when you look behind and realise he’s not with you results in three things. First, elation. Elation that you’re now on your own. Then, absolute fear. Fear that you’re now on your own. And it’s at this point that fear usually takes over. Failure follows.

Failure hurts, and as you get older it gets worse — more dangerous, even. Fail your business and the consequences could be considerably more dire than a grazed knee.

Still, that doesn’t prevent us from enjoying failure. We all enjoy a good schadenfreude story. We like to witness people who think they are great get what is coming to them. We get pleasure from seeing people who have done wrong get what they deserve. In being able to see the pieces leading to failure laid out in front of us within a story, we like to feel smarter than the people destined to suffer. We take comfort in the knowledge that we wouldn’t have been so ignorant.

It’s a bit perverse, really. About 90 per cent of us start with very little in this world, and most of us aim to reverse that in our lifetimes. We’re not excited by the person born with a silver spoon because it’s not realistic. Instead, we want to follow the path of the person who is like us and who has made it.

So why the fascination with failure? Because there is a flip side to it: for people who are actually trying to start, build or achieve something, there is a want of learning — and learning from failure can be hugely powerful.

Textbook failures
Start-up entrepreneurs crave stories that they can regard as lessons learned. At the same time as aspiring to follow the people who have come from nothing and gone on to achieve success, start-up entrepreneurs also want to ensure they don’t make the same mistakes as those to whom they aspire.

They also crave aspiration, and there’s no shortage of this to be had from seeing fellow entrepreneurs rally back from failure — maybe not all the way back to success, but certainly to the point that they can say, ‘Look, I failed, but now I’m starting on my next company.’

The fact is, all start-ups know they’re going to fail eventually. The start-up community doesn’t know what a 100 per cent success rate looks like because it doesn’t exist. And the biggest fear within that community is not knowing how to bounce back from such inevitable failure.

The question is, then, how do you prepare yourself?

Don’t throw spaghetti at the wall
Silicon Valley — the incubator of some of the world’s most successful companies and a great many more of its most spectacular flops.

In Silicon Valley, of course, the phenomenon of failure is not just embraced but also encouraged. ‘Fail fast and fail often,’ its infamous mantra declares, and going by current start-up failure rates (some put it as high as 90 per cent), the mantra really is being adopted with total abandon.

That’s not to say it’s a bad one — it’s just often misinterpreted. A common misinterpretation is that ideas must be completely scrapped upon failure. That’s a nigh on impossible way to learn. At the opposite extreme are those Valley entrepreneurs who aren’t familiar with the mantra at all. They tend to wait to perfect their products or services before putting them out to market, adverse to failure. They might think they know where problems lie and so keep reiterating without data. That’s another hard way to learn.

The reality is more like this: the smart business leader knows that the first idea he or she has is terrible. This is true in movies, in storytelling, in product development, in science and so forth. At a base level, human beings are really not that intelligent. We do, however, have a lot of ideas and a willingness to keep trying. We are very tenacious in that sense.

“Too many start-ups think the enactment of ‘fail fast and fail often’ means throwing a thousand strands of spaghetti at the wall and waiting to see which ones stick”

The point, then, is not to invest a ton of money and time in first ideas. The point is to get a product or service to market so that it can fail quickly. That way, the failure will be a small, measured failure that hasn’t been backed by millions (yet). It’s at this stage that entrepreneurs really learn. Having gone to market and back again, they can analyse where things looked promising and where they didn’t before beginning round two, armed with data. That’s what the Valley’s mantra means.

Too many start-ups think the enactment of ‘fail fast and fail often’ means throwing a thousand strands of spaghetti at the wall and waiting to see which ones stick. Repeatedly failing doesn’t make you successful; you only become successful if your failures are thought through, criticised, analysed and acted upon so that each one becomes smaller and smaller. Do that and you’ll stand the best chances of arriving at a success.

Wear your failure on one sleeve (and your success on the other)
It’s true that you have to fail several times before succeeding, but some Valley entrepreneurs now believe failure equals more experience. Failed entrepreneurs are racing to publish their start-up obituaries or post mortems — to the extent that I wonder if they’re losing a little of that tenacity I said was so important when trying to succeed.

An investor’s fourth and least attractive proposition within Silicon Valley’s start-up community would be the first-time entrepreneur who’s completely new to the game. Third would be the entrepreneur who has done nothing but fail, because at least he or she would have demonstrable experience. Second would be the entrepreneur who has done nothing but succeed.

And first? The entrepreneur who has both failed and succeeded. When it comes to funding, investors are looking for success — of that there is no question. But to demonstrate failure as well suggests that the entrepreneur has failed, thought about that failure, learned from it and created something better. In other words, he or she is the perfect entrepreneur.

The Valley used to bury its dead quietly
How things have changed. When I started out in Silicon Valley a decade ago, nobody was talking about failure. The bursting of the Dotcom Bubble at the turn of the century made entrepreneurs very gun-shy.

Concerned that the community would lose faith in them, they resolved to embrace optimism. The resulting lack of talk surrounding failure would have made you believe that nobody was even close to failing — but that couldn’t possibly have been the case. I soon realised that I couldn’t even have a conversation about my own struggles as a start-up because I would be perceived as ignorant and likely to fail. Nobody was opening up that dialogue.

I’m glad the pendulum has swung the way it has. While the start-up industry statistically isn’t the most prone to failure, it is surely the most vocal about the topic. Our community is definitely the most accepting of it, and our investors aren’t afraid of it. It’s also true that it is easier to get access to investors’ money, to prototype, to code, to communicate, to market — all of which is to say, failure is cheaper than ever before.

The whole world’s failing
In the five years that I ran FailCon, we developed it into a brand that could be lisenced overseas. Inevitably, I came to recognise global differences in attitudes towards the topic. I realised that there is a life cycle of accepting failure and that each country seems to be at a different stage. There’s the stage where nobody’s talking about it, and then there’s the stage where young people start muttering about it, and then there are conferences and events about it. Finally, it blows up.

A big difference I noticed is that in countries that have very established hierarchical traditions, it’s a lot harder to start conversations about failure. Take China, for instance. There’s an expectation there that people take on their parents’ roles and that paths (not necessarily financial) are laid out for them. That sort of culture is the hardest to break into because their very definition of success relies on a sense of honour and family, both of which can be jeopardised by failure. In ‘younger’ countries such as Brazil and the United States there’s far less of that. They’ve been able to embrace entrepreneurship a little faster because they’ve been able to embrace failure.

That’s what FailCon was all about. The first goal was to get the start-up industry talking about failure. The second was to open up a learning space for entrepreneurs in early stages of development. When you’re in the later stages you have to look at success, but when you’re just trying to get ideas out to market I think you can learn more from people who have failed at the same stage.

Of course, failure doesn’t just apply to the world of entrepreneurship. In another lifetime I would definitely open up the conversation within other industries that are still botching things up. The ability to plan for and think about failure, assess it in a non-emotional way and ask questions is critical for businesses that want to achieve success. All of us carry tiny failures under our belts; that’s unavoidable. We just need to be able to keep them tiny and react to them quickly.

Three of silicon valley’s sorest falls

While fail fast and fail often may be the Valley mantra, these three companies showed how to fail hard.

Homejoy

SECTOR: Home services
FUNDING: $40m
Touted as the ‘Uber for cleaning’, Homejoy excited investors. Many considered the home services industry — estimated to be worth between $400 and $800 billion, according to The New York Times — ripe for overhaul. Homejoy raised a $40 million and started putting in the elbow grease. After an initial boom the start-up hit a wall. Within two years it had closed down. The company made much of four lawsuits filed against it, all to do with worker classification. As reported by Wired, the contract-for-hire system was key to the cost structure and profits of Homejoy’s on-demand model — but it was teetering. This may not be all, though. Wired also pointed to other, more immediate problems for Homejoy. Mounting losses, costly customer acquisition, poor retention, technical glitches and razor thin margins quickly hamstrung the company and made investors shy. Worst of all, for fear of missing out Homejoy embarked upon what many believed to be premature internationalisation. Despite this, Homejoy’s Co-founder has gone on to reincarnate the company, confident that he can turn previous failings into successes.
More reading
• Wired
• The Guardian

Solyndra

SECTOR: Green Energy
FUNDING: $535m
One of the most controversial Silicon Valley start-ups, Solyndra claimed it had developed completely unique solar technology and was producing panels that could be installed for less than those of its competitors, as reported by The Washington Times. The United States energy department gave Solyndra a $535 million loan through its guarantee programme. While it was true that Solyndra had created unique technology, The Washington Times claims the company was doctoring its figures and allegedly lied about the value of its contract commitments in order to appear more financially attractive. Solyndra’s claims of cheaper installation were also in doubt, according to The Washington Post. Worse still, the price of polysilicon — an ingredient required in traditional solar panels but not Solyndra’s — was plummeting. Competition came flooding back and Solyndra filed for bankruptcy. In September 2011, the company ceased all business activity and laid off its workforce. It was a major embarrassment for the Obama administration, according to The Telegraph. More clean energy firms followed Solyndra, taking Silicon Valley’s promise to resolve the global energy dilemma with them.
More reading
• The Washington Times
• The Washington Post
• The Telegraph

Friendster

SECTOR: Social Media
FUNDING: $45m
As, ‘the man who might have been Zuckerberg’, to quote Mashable Senior Business Reporter Seth Fiegerman, Jonathan Abrams bears an expensive cross. In 2002 the entrepreneur founded Friendster, an early social networking platform that allowed users to create and link to profile pages. With $45 million in investment, Friendster quickly built up a healthy user list — as well as hot competition. Myspace soon came along, as well as Bebo and Facebook. Friendster held its ground for a time, at one point even putting in an (unsuccessful) offer to buy Facebook, according to Fiegerman. Friendster’s financial backers eventually lost focus on the platform’s stability, and it started to suffer technical issues. Regardless, the company continued to secure funding and even received a $30 million purchase offer from Google. Friendster refused it in what is now considered one of Silicon Valley’s biggest blunders. In an ironic twist of fate, Facebook later purchased all of Friendster’s social networking patents for $40 million before the company was sold to a Malaysian payments provider who pivoted it into a gaming platform. Friendster’s services were indefinitely suspended in 2015.
More reading
• Mashable

Based on an interview with Malcolm Triggs, Editor at White Light Media

Cass Phillipps is the Founder of FailCon, a Silicon Valley-based conference dedicated to showcasing stories of entrepreneurial failure. A Valley entrepreneur herself, she now works as Creative Director for San Francisco mobile storytelling network and platform Episode Originals.