Founding a tech company is similar to rolling dice: Will you continue getting the numbers you need or will you eventually come up short? Try as you might to do all your homework, there are simply no guarantees when it comes to starting a company.
While the odds are not as bad as the rumored "9 out of 10 stat" would have you believe, they're still not great.
As reported by Fortune, the number of venture-backed startups that fail (i.e. companies that provide a 1X return or less to investors) has rarely risen above 60 percent during any given year. The data comes from Cambridge Associates, a global investment firm that tracked the performance of venture investments in 27,259 startups between 1990 and 2010.
Unfortunately, more than half of all startup founders find themselves penning a "post-mortem" at some point. While this may seem like a bad thing, failure isn't always frowned upon.
Tech entrepreneurs are surprisingly forthcoming about communicating mistakes made on the road to success. In fact, publicly assessing what one could have done differently has become a common way to "give back" to the greater startup community. The more stories you read of famous founders, the more you realize the act of dissolving a company is never a total failure.
The valuable lessons you learn from closing shop are often the stepping stones of your next success. With that said, saying goodbye to a business you built from the ground up is never easy.
Serial entrepreneur Steve Blank told Fast Company, he navigated through "six stages of grief" after closing the doors on his video game company, Rocket Science Games:
- Phase 1: Shock and Surprise
- Phase 2: Denial
- Phase 3: Anger
- Phase 4: Depression
- Phase 5: Acceptance (of his role in the failure)
- Phase 6: Behavioral Changes
"While I stopped blaming others, understanding what I could change in my behavior took long months," Blank said. "It would have been much easier to just move on, but I was looking for the lessons that would make my next startup successful. I looked at the patterns of behavior, not just at my last company but also across my entire career."
In this article, we will look at some of the lessons learned by six startup founders who failed before finding success. The key takeaway? As Winston Churchill famously said, "Never, never, never give up!"
6 Startup Founders Who Failed Before Succeeding
1. Jeff Bezos, Founder + CEO of Amazon
Amazon may be a household name today, but getting there wasn't easy. Bezos made some colossal mistakes getting the company off the ground (and even more after the company launched).
Like many startup founders, Bezos was go, go, go. Unfortunately, the prioritization of scaling quickly led to some costly oversights. Soon after launching, a few savvy consumers discovered how to take advantage of a technical glitch that allowed them to purchase a negative number of books that resulted in free credits. Talk about a good deal!
Bezos made another classic mistake when the company began selling toys. He completely over-estimated demand for the Christmas season, haphazardly purchasing and storing more than 100 million toys in the company's warehouse. Afterwards, Amazon ended up giving away 50 million toys due to space constraints. Though the path to Amazon's success was not easy, Bezos successfully pushed through numerous setbacks and went on to grow one of the most successful companies of the modern era.
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2. Christina Wallace, VP of Branding + Marketing at Startup Institute
In 2012, Christina Wallace joined forces with former Harvard Business School classmate Alex Nelson to found Quincy Apparel. The company's mission was to create clothes for women that fit perfectly in the chest area.
The startup kicked off with a bang, hosting a fancy press party complete with cupcakes, champagne, and Uber car service. However, despite receiving a ton of free national publicity, Wallace was forced to send her customers a goodbye email just 10 months later. Wallace's key take away was to be just as open with her friends family about her failures as she was her successes. She told Fast Company:
"After it was all over I spent three weeks straight in bed. Then after 21 days of sleeping, crying, I put on my big girl pants and rejoined the world. Startups are not just what you read in the press. The real story is much more volatile and human, and we do our community a disservice pretending otherwise."
So, what went wrong? Wallace's number one selling point, a perfect fit, ultimately didn't deliver. The company received a large amount of returns from customers who weren't satisfied with their customized clothing. Additionally, as reported by Business Insider, Wallace ran into a common fundraising problem. While many investors are eager to fund an early Seed investment, fewer are willing to throw millions into a Series A for a startup that hasn't shown significant traction. Unable to procure additional investments, Quincy had no choice but to shut down. She has since learned from the experience and parlayed it into a robust career at the Startup Institute.
3. Evan Williams, Co-founder of Twitter
Before co-founding Twitter, back in 2005, Evan Williams was involved with a podcasting platform called Odeo. He started out as an angel investor in the startup, before taking on a principle role alongside Odeo co-founder Noah Glass.
The startup went as far as raising a Series A before closing its doors after the release of iTunes. Seeing they would not be able to compete with Apple, the guys turned their attention toward a side project that went on to become Twitter. There are many versions of the "what really happened story" floating around online, with many suggesting co-founders Noah Glass, Jack Dorsey, and Florian Webber were the real enthusiasts of the platform, while Williams was initially skeptical.
Regardless, William is most definitely credited with advocating for the entire team to begin working on new ideas as soon as Odeo began to go south. The Twitter story illustrates that the greatest successes can often come after the greatest obstacles, so long as you keep innovating.
4. Reid Hoffman, Co-founder of LinkedIn
Before there was LinkedIn, there was SocialNet: An online dating and social networking site that launched in 1997. SocialNet, the brain child of young Reid Hoffman, was created with the intention of providing users with opportunities for professional networking, roommate matching, and dating.
It appears the platform failed because the public wasn't ready for it, and because Hoffman was a little scattered in terms of defining its ultimate purpose. Nonetheless, Hoffman completely credits the failed experience to his ultimate success with LinkedIn. As he told Business Insider:
"If you're not embarrassed by your version one release, you released it too late. One of the things I learned from that whole experience, was that you should focus on one domain that really matters to people and just do that really well."
Think of the biggest tech startups of the decade: Facebook, Twitter, AirBnB — instead of trying to be the best at everything, they aimed to serve customers in a clearly defined way. Clearly defining his value proposition with LinkedIn is what allowed Hoffman to thrive and build what is now a hugely successful company.
5. Nick Woodman, Co-founder of GoPro
We have all heard of GoPro: The digital camcorder company that has turned tethered cameras into a clever way for dog owners to experience the world through Fido's eyes. But how many of us are familiar with FunBug?
Discounting the VCs who sunk costs in the venture, probably not many. FunBug.com was a gaming and marketing platform developed by GoPro co-founder Nick Woodman. Although the concept ended up being a complete miss (the startup was categorized as one of Silicon Valley's biggest failures on the now defunct f**ckedcompany.com), Woodman used the experience as fuel for his next project.
"I was so afraid that GoPro was going to go away like FunBug that I would work my ass off. That’s what the first boom and bust did for me. I was so scared that I would fail again that I was totally committed to succeed."
For Woodman, committing to success meant working 18-hour days as the startup's truck driver, salesman, product designer, and customer service rep. Another noteworthy fact? The idea for Woodman's home run came on the heels of an extended surfing vacation, proving breaks are indeed good for business.
6. Melanie Perkins, Co-founder of Canva
While Melanie Perkins didn't "technically" fail before founding Canva, she did receive more than 100 "no's" before funding the startup. As a university design instructor, Perkins had a bird's eye view of how the internet would soon change the design industry. Wanting to be a part of that movement, Perkins came up with the idea for Canva, an online graphic design platform.
After three years of work, and more than 100 pitch deck revisions, the designer procured a $3 million investment to scale her startup. As Perkins told Elle:
"At some point, I realized that if I was going to accept investment, statistically speaking I had a pretty high chance of failure. I made a conscious decision to start a company anyway, knowing that there was a high probability of failure. If you have a crazy, wild dream, the best thing you can possibly do is to get started."
Today Canva is still going strong; The Webbys recently dubbed the platform "The easiest to use design program in the world." Had Perkins let those failure stats stop her, she would have missed out on the satisfaction of creating something enjoyed by millions.
Fail Fast and Move On
How many times did Edison fail before making the light-bulb? Thousands.
Had he thrown in the towel, mankind may have been deprived of one of the greatest inventions of all time.
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Our philosophy: Quality begets quality. Surround yourself with like-minded individuals who are navigating similar challenges on the road to exit, and you can't help but grow more quickly.
Come see if the RocketSpace community is the right fit for your tech startup.