5 Takeaways From My First (and Hopefully Last) Failed Company

John McCaffery
Jul 23, 2019 · 6 min read
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This was written in the Fall of 2018 shortly after Tenbo Air decided to wind-down it’s business operations. While I was not a founding member, I was the first full time employee and I have a strong sense of ownership over the project to this day.

For the past year, I spent the vast majority of my time and energy helping two friends of mine build a drone services startup, Tenbo Air. Last month, we decided it was time to walk away from the project.

It seems like many founders and early employees of tech companies are proud of their failures. I’m under the impression they walk around Silicon Valley pitching investors on their next great idea by touting a resume of failed attempts as proof of “experience”. But it’s easy to fall into the trap of being proud of a failed company without giving serious consideration to the lessons you learned along the way. In my opinion, when a company goes under, it is the fault of every employee who failed to do or say something to right the ship.

The good news about the bad news is that I don’t plan to miss out on the opportunity to learn from the mistakes we made. I’m sad and angry that the experiment is over, but I learned so much about business, entrepreneurship, people, and myself. I have consolidated a lengthy list of lessons into the following Five Takeaways from my First (and Hopefully, Last) Failed Company.

Lesson 1: Scale It Before You Nail It

A commonly used sayings in startups (credit to Loredana Padurean, Asia School of Business): “Nail it, Scale it, Sail it.” If it’s not abundantly clear, the saying describes the three general stages of a company and (arguably) the order in which a company should evolve. “Nail it” refers to product development. “Scale it” refers to increasing volume of whatever product/service you offer. “Sail it” refers to the creation of sustainable company policies and long-term strategies.

According to this guidance, it doesn’t make sense to invest in scaling a product before it’s perfect. And I get the logic. Rolling out a product or service that isn’t polished tarnishes your brand. Undoing the damage caused by a poor product can be extremely difficult. How likely are you to hire the same mechanic that overlooked a blown gasket while changing your oil the next time you need to take your car in for repairs? (I hope this situation isn’t ridiculous… I know nothing about cars!)

At Tenbo, we followed this guidance to the letter, perhaps to a fault. We were fully invested in making sure we had every piece of the puzzle in place before focusing on sales and business development. We were logging operational details like deployment times and app crashes while averaging a single job per week. Instead of making sure we had totally nailed our product, we should have been hitting the phones and calling clients. Or coming up with a marketing strategy. Or building a network of strategic partners.

Lesson 2: Future-Proof Your Ideas

So much of the success of a business depends on the barrier to entry in a market. If there is one thing that my experience at Tenbo taught me, it’s that if the service or product you provide doesn’t require specific skills, relationships, capital, or special licenses/certifications, chances are that someone smarter or faster than you will replicate your business model. While there is typically an advantage associated with a first-mover, don’t expect that it will be enough to get you over the finish line. In other words: build a moat around your business.

At Tenbo, we built multiple moats. The equipment we operated and the software programs we used were expensive and required a significant outlay of capital. The skills it took to fly a drone safely were difficult to develop and required time and practice. Our most effective moat was that companies flying drones for commercial purposes needed an FAA Section 333 Exemption and individuals needed a Part-107 pilot certification, both of which required knowledge of FAA rules and guidelines. A complicated process for receiving authorization to fly in specific areas (a process we had become adept at navigating) ensured that projects in these protected airspaces could only be conducted by an established and expert company like ours. Less-qualified operators became barred from poaching our projects by undercutting our prices.

Over time, the effectiveness of our moats began to wane. The cost of software and hardware was reduced by an order of magnitude. Drone manufacturers developed new products with built-in comprehensive failsafe systems which made them safer and easier to fly. In April of 2018, the FAA rolled out a new automated airspace traffic management (ATM) system that allowed pilots to get immediate approval to fly in protected airspace, eliminating our advantage in areas that had previously required knowledge-intensive applications. Our idea simply wasn’t future-proof.

Lesson 3: Busted Lock? You Have Been Robbed!

Occam’s razor is a principle in philosophy that argues that the simplest explanation is often the best explanation. If you come home after work one day to find the lock on your front door busted and the door violently knocked in, the simplest explanation is that you have been/are currently being robbed. It doesn’t make sense to assume that a friend was out on a run and, while passing your house, knocked down your front door to borrow your bathroom for a few minutes. Similarly, when your front door has been violently knocked in, you put yourself in real danger by choosing to ignore the likeliest possibility simply because it’s a scary thought.

In hindsight, the erosion of our moats was clear and yet we avoided seriously addressing the issues. In late 2017, we lost two contracts to a competitor with a “drone-in-a-box” solution — a product that allowed clients to manage their own data collection without a need to schedule times for our field crews to deploy to their site. Our own workflow (from flying the drone, to processing the data, to delivering a final product to the end-client) became vastly simplified — something that suggests that the technology was becoming more accessible. The rollout of the FAA automated ATM was the last straw; the new platform aligned with other industry trends pointing to a fragmented future market of individual freelancing drone pilots servicing companies in their local regions.

In light of this information and the trends in the industry, steps could have been taken to pivot or build new moats. With our in-depth understanding of the drone services market, we could have pivoted by investing in software development that fit the needs and budget of small service providers or created consulting or educational classes for aspiring freelance pilots. If we wanted to build more moats, we could have invested in top-of-the-line technologies like drone-based LiDAR or built partnerships with organizations involved in the research and development of a national ATM system.

Lesson 4: Show Your Cards

This one is simple and I can’t stress it enough. Don’t hide parts of yourself or beat around the bush when it comes to hard discussions, especially when interfacing with your own team. Sure — there is a time for strategy when you are trying to land a big contract or sell a new product, but don’t let that political or strategic mindset exist within your organization. Nobody wins. Appreciate it when your peers provide feedback. Assume that they are not being vindictive, but rather are seeking to help. In the same vein, ask your coworkers if they would appreciate feedback on their own performance. If they say yes, deliver the feedback in a thoughtful and frank way because that’s the only way to get your point across.

Be honest and vulnerable, and your coworkers, employees, and supervisors will probably return the favor. And if they don’t, then at least it takes less effort to drop the pretenses and just be yourself. You will find that you aren’t nearly as defeated at the end of each day.

Lesson 5: Perception Matters

I have always enjoyed work. Creating a product or service of real tangible value is so much more meaningful to me than a letter grade on a transcript. The opposite side of that coin is that watching something that I built fall apart has been way tougher than I expected.

I feel a combined sense of loss and wonder: loss that we didn’t have what it takes to keep the company afloat, but wonder that we all got such a deep practical learning experience in the first place. Casting a critical eye on my past year has helped me grow and learn. But I feel optimistic about my next opportunity in-spite of my experience at Tenbo, not because of it.

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