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In my upcoming book, Startup Communities: Building an Entrepreneurial Ecosystem in Your City, Mark Solon (Highway 12 Ventures) tells the story of a “startup wake” in a section where he gives an outsiders view of the Boulder startup community.
“I’ll never forget one of my early visits to Boulder. After a full day of meeting with startups, I was asked by the entrepreneurs I was with if I’d like to join them and some peers for a “special dinner.” “Sure,” I replied. “What’s special about it?” “It’s a wake” they deadpanned. That dinner showed me that the fabric of this small mountain town was different than anywhere else I’d been. Turns out that earlier that week, a local startup had decided to shut down and the “wake” was the startup community’s way of showing these young, fragile entrepreneurs that it was okay to fail – that the honor was in trying. They made those founders feel good about themselves in a moment that was critical in their development as entrepreneurs. As an aside, in this case the founders didn’t run out of money. After giving it their best effort, they realized their business wasn’t going to be the great success they had envisioned and they decided to return their remaining cash to their investors. The epilogue of that dinner is that the founders had roles at other local startups within a few weeks.”
I was thinking about this last night as I was emailing with an entrepreneur who’s company is struggling. Failure is a normal part of the entrepreneurial cycle and it’s talked about regularly. There are endless stories about the entrepreneur who failed and then created a monster success for his next company. But there’s not enough discussion about how startup communities should embrace failure.
I think this is especially important for first time entrepreneurs in a community. It’s easy to prognosticate about failure when you’ve been successful; it’s much harder to go through it. It’s even more painful when it’s your first time and everyone around you seems like they are doing great, even if they aren’t really but are just putting on a good act. So a natural instinct for an entrepreneur on a failing path is to turn inward, shut down, and withdraw.
If your peers in the startup community (the other entrepreneurs) don’t notice, it’s even worse. Failure sucks – it’s often emotional, physically, and financially painful. When your friends suddenly ignore you, avoid you, or don’t have time for you it just reinforces the pain.
Having a wake for a failed company can turn this around. If you are an entrepreneur and observe an entrepreneur in your community failing, do something about it. Organize a group of entrepreneurs to have a wake. Surprise the entrepreneur who is shutting down his company and take him out. It doesn’t have to be a debaucherous, alcohol laden evening (although it can be) – rather do something that you know the entrepreneur in question will enjoy and appreciate. A nice meal. A quiet conversation. A show of support from his peers. Encouragement. Acceptance that failure is part of the entrepreneurial process.
If you are an entrepreneur in a company that is failing, don’t be ashamed. Most startups fail. What matters is how you handle it and what happens next. Let your fellow entrepreneurs throw a wake for you, let the moment happen, and then get on with the next thing. Life is hopefully long. And, for all the entrepreneurs who are leaders of their startup community, make sure you do everything you can to make sure everyone knows failure is ok.
My first business partner, Dave Jilk, emailed me our original partnership agreement for Feld Technologies. It’s one page.
We incorporated a month later as an S-Corp. It cost us $99 to do this – I remember using an organization called The Company Corporation - we called an 800 number, gave them some information, and the documents were automatically generated and filed. A short letter agreement specifying the equity splits and the boilerplate legal docs were the only legal docs we had until we sold the company in 1993.
As my partner Jason Mendelson told me after I sent him this the other day, “If things go well, it’s fine. If they don’t, it’s a fucking disaster.” And he’s completely correct – in this case things went well so there were no issues.
I continue to try to do deals this way. I lay out the terms, will negotiate a little, but am clear about what I want. If it works, great. If it doesn’t, I move on. Once the simple terms are agreed to, I let the lawyers generate hundreds of pages of documentation to support the deal. I used to read every word on every page myself (I learned that from Len Fassler, who bought Feld Technologies). I still look through the documents, but I only work with lawyers who I deeply trust to do it right (like Mike Platt at Cooley) so I focus on the stuff that matters for the specific deal.
Trust matters more than anything else to me in a deal. Sure, I occasionally get screwed in a deal, but never more than once by the same person. And, for people like Dave Jilk and my dad, I’ll work with them over and over and over again because I trust them with my life.
Keep it simple. It’s much better.
I received at least one email a day last week pitching a politics oriented web startup. The emails start off something like this.
Over $8 billion dollars will be spent on the upcoming 2012 election. The web and social media are critical tools for any candidate. Every candidate will need our stuff and since over $8 billion dollars will be spent, even if we capture a tiny part of that market, we will create a huge company. Did I say that over $8 billion dollars will be spent? Would you like to hear more about the amazing opportunity we have in front of us?
The polite version of my answer has been “Thanks for reaching out but we aren’t interested in investing in the politics vertical market.” But, echoing in the back of my head is “$8 billion dollars? You’ve got to fucking be kidding me.”
I could go on about a rant about spending $8 billion to elect people in one election. But I realize there are lots of different ways to look at this, including the common refrains of “it’s a stimulus for our economy” and “but it’s entertainment, just like football.” And I have no doubt that there are people out there whose immediate response is “but don’t you think your ad-tech related companies make a lot of money off of this?” And as I cycle through the next ten thoughts in my head, I realize that my personal thoughts about this will have no impact on what actually happens.
So instead I just vote with my own wallet and get on board the Howard Schultz Boycott Campaign Donations train. And while I have no doubt that some people can make money creating web services for helping candidates get elected, especially those that include mobile, real-time data, and geo-location, I have no real interest in investing in companies that have the singular goal of helping politicians get elected.
Many of the tech blogs / news blogs that I’m reading are suddenly about deals. financings, IPOs, valuations, and bubbles (or not bubbles). Several years ago, there was a lot more about “how to startup a company”, especially around product, vision, and team. Now a lot of that focus has shifted to deal making and exits.
It was with this backdrop that I read The Lean Startup by Eric Ries over the weekend. If you don’t know Eric, he’s the pioneer of the Lean Startup Movement, building on the great work of one of his mentors, Steve Blank who wrote the seminal book The Four Steps to the Epiphany. Both Eric and Steve have must read blogs and Eric’s new book will join Steve’s as a critical book for any entrepreneur working on a tech startup.
The Lean Startup is focused on the early stages of a company, but apply throughout the lifecycle of any business as all product initiatives, especially new ones, benefit greatly from the Lean Startup approach. We spend a lot of time on this at TechStars and you see a lot of the lean startup principles reflected in the stories in Do More Faster: TechStars Lessons to Accelerate Entrepreneurship. While Eric’s book isn’t out until September, I encourage you to preorder it now and gobble it down when it gets to you.
I’ve been a fan of Eric’s for a number of years ever since I first started reading his blog. We’ve worked closely together on the Startup Visa Movement and I put him on my short list of people who I’d support in any endeavor that was important to him based on his attitude, vision, deep thinking, and great style and approach to things.
As the world becomes fascinated with exits, I’m going to keep focusing on startups because without them, nothing else matters in the entrepreneurial chain. As part of this, I’d like to put together a great bookshelf of “startup books” – books aimed at the startup phase of entrepreneurships.
If you’ve got any favorites, please mention them here and – if I haven’t read them – I’ll go grab them.
Who said March Madness was only for college basketball fans? I’m a proud nerd, am pretty good at basketball, but my college team (MIT) never ahem did much in March so I missed out on the whole March Madness thing in college. So, I’m psyched that I get to play TechStars 2011 Startup Madness this march.
We are picking 64 companies to participate. To qualify, you must enter by March 9th and meet the following requirements.
- Haven’t raised funding of $250,000 or more and haven’t generated revenue of more than $250,000 in a single year.
- Have a live, usable public site or an accessible demo on their home page
- Have not already been in the TechStars program – this is not for TechStars companies or alumni companies
- Must be an internet, software, or hi-tech company
You can nominate a startup on the Startup Madness page or just tweet out the following (replace @ENTRANT with the twitter handle for the company.)
Hey @TechStars, I nominate @ENTRANT for the @StartupMadness Tournament http://tsta.rs/sumadness
And yes, there are awards – a lot of them. Over $25,000 worth. Again, go to the Startup Madness page to see them.
Bring March Madness – of a different kind – to nerdville.