ENTREPRENEUR SPECIAL...................... Rising Above Failure

Rising Above Failure 

FailCon, a platform for tech start-ups, helps entrepreneurs overcome the shame of failure and use the learnings to start afresh

    Ask any angel investor or venture capitalist, and they’ll tell you that the chances of a start-up succeeding are less than 10%. The circumspect among them will say it is less than 1%. More pithily, as a senior partner in an India-focused venture fund who evaluates start-ups on an almost daily basis puts it: “You have better odds of winning at Russian roulette than this. It’s a suicidal equation.”
    There has been enough anecdotal evidence to back the low success rate of start-ups, and a recent study by the Harvard Business School’s Shikhar Ghosh has validated what most within the ecosystem already know. Ghosh’s study says that at the least, 75% of all start-ups fail, depending on how you define failure. If failure means liquidating all assets, with investors losing all their money, an estimated 40% of high-potential US start-ups fail. And if failure is defined as failing to see the projected return on investment — say, a specific revenue growth rate or date to break even on cash flow— then more than 95% of startups fail, according to Ghosh’s research.
    Whichever way you look at the numbers, one thing is clear: the risk of failure of a start-up is much higher than the potential for its success. So why don’t entrepreneurs, venture capitalists, investors talk about failure more? Or at least, more openly? Surely, failure is a valuable piece of learning? Certainly FailCon, a global forum for failed entrepreneurs to discuss the experiences and lessons they learnt from unsuccessful ventures, seems to think so.
Sharing Stories
FailCon was started in 2009 in San Francisco by Cassandra Phillipps, an event planner for start-up events, and Diane Loviglio, a cleantech start-up founder, as a one-day conference for technology entrepreneurs, investors, designers and developers to study their own and others’ failures and prepare for success, in line with the “fail fast, fail cheap” concept whose proponents argue that it’s better for entrepreneurs to realize early on that their idea isn’t working and move on to something else.
    In a format similar, though not identical to the TED talks, it is now produced independently in different countries under licence and profit sharing, funded by a rough mix of ticket sales and sponsorships. It was held for the first time in India last year to limited success, but the producers haven’t lost hope and are hosting another FailCon this June or July in Bangalore. India is one of the 12 countries that will host a FailCon in 2014.
    “I actually think countries that have growing founder communities and are not yet opening up their eyes to the value of failure are the most important places to host this event,” says Phillipps, speaking from California. “You can’t have a successful entrepreneur community without supporting risk-taking and the failure that can come along with it.”
    Phillipps says last year’s event had “a small but passionate crowd”. Some of the sponsors last year were The Indus Entrepreneurs (TiE) and Seedfund, but the local producers are trying to rope in Microsoft this year.
    “It is hard to get people wanting to put their name on failure or ready to see the value of it, but those who attended responded saying it was incredibly valuable and a good first step with the community. Now we just need to get the word out to help it grow,” says Phillipps.
    According to Team FailCon India, “With the tech start-up ecosystem still young in India, it is important that entrepreneurs and investors develop the right mindset towards failure; that it’s an important part of the start-up journey. We can’t afford to be cagey about our experiences with failure and see it as a taboo subject. We have to share our stories of failure with our colleagues.”
Stigma of Shame
This is all very well in principle, but in a country like India, where failure still comes attached with a certain amount of social stigma, a healthy attitude towards failure may amount to wishful thinking. I found entrepreneurs in the Silicon Valley better able to carry off their failures with elan — in fact, entrepreneurs who have a failed start-up (or two) under their belts, wear their failures almost as a badge of honor — and they are valued for that experience. But most Indian entrepreneurs, despite holding Valley counterparts as their role models, treat their failures more as a matter of shame than a true-life learning experience. And going by the number of ex-entrepreneurs that I spoke to in India who didn’t want to be quoted in the context of failure, I’m inclined to think that the loss of social capital still counts for a lot.
    “In India, social pressures and stigmas may be more pronounced. The amazing thing about Silicon Valley is the ability to share knowledge, especially around failures, and that people respect someone for trying and learning from their failures. The rest of the world basically derides failure rather than trying to learn from it,” says Pankaj Jain, currently venture partner, 500Startups, a Bay Area-based seed fund and accelerator.
    Jain relocated to India in 2007 to set up an online marketplace for domestic and unskilled labour — drivers, nannies, cooks — “a real life MBA, better than Harvard”, he says wryly. “The product was called Semblr. We had a site up and did a small pilot and realized the operational challenges needed a different type of expertise than I had. I tried for a long time to find a mentor and a co-founder but to no avail...Eventually, I ran out of money,” he says. He moved back to the US in 2013, and is using the skillsets he gained from his start-up experience in India to his advantage — in evaluating, funding, incubating and accelerating other start-ups.
Different Generations
Jain is probably right about the way Indians look at entrepreneurial failure and how it is different from the Bay Area. According to Phillipps, “the Valley is unique in its attitude towards failure. India is more like Tokyo or Paris,” where more traditional businesses have existed for generations. She should know, having co-produced Fail-Con from Tel Aviv to Tokyo. In a way, the response to FailCon holds a mirror to society’s acceptance of failure and learning from it. India, she says, is new to the concept of valuing failure and learning from it. “But the entrepreneurial community in India is beginning to unify and find its voice.”
    Founders need to understand the value of innovating quickly and pivot when faced with failure. “Failure doesn’t mean that you should stop trying. It just means you should start exchanging stories of what didn’t work and when you decide it is time to let go,” she says. “Entrepreneurs need to hear from each other that it’s okay to fail, it doesn’t mean you’re worthless. You’re just like the rest of us, learning from our mistakes and building something bigger next time.”
    Phillipps agrees that there is a greater stigma towards failure in India “for two reasons: the start-up community is relatively new, so the wider business community doesn’t understand its ethos, including its attitude towards failure. And in countries like India, the wider business community is older and more traditional.” This feeds back into the same loop of not understanding how to deal with a failed business. It’s almost like a generational gap, made wider because the old are older and the young, younger.
    “If you are an entrepreneur, you have to be prepared to fail well, fail intelligently and apply those lessons to your next attempt,” says Phillipps.
Learning From Failure
But not many ex-entrepreneurs will go for that next attempt, at least not immediately. Their risk appetite “declines dramatically with failure in India”, says Ritesh Banglani, director, Helion Advisors, which advises Helion Venture Partners, a $605-million fund focused on early-stage ventures in India.
    “We have the ability to track entrepreneurs over time, and most ex-entrepreneurs react [to failure] by joining large corporations or multinationals which provide them with salaried jobs and a stability that they may have missed,” says Banglani. “This could be due to family reactions, loss of social capital, or just plain loss of [financial] capital, where they’ve burnt through their savings and are done.”
    Jain agrees. “Generally, I think the short-term risk appetite goes down after failing. Most people retreat into a ‘safe’ job afterwards.” However, in the Valley, because there are enough support structures in place, failed entrepreneurs have the ability to share what they’ve learned, get feedback from others, and be given a chance by others. A virtuous cycle gets established this way. “With broader community support available, a failed founder begins to find her risk taking appetite growing again and an ecosystem willing to support the next act,” adds Jain.
    But another pitfall that Banglani warns against is blindly applying the fail-fast, fail-cheap protocol to startups in countries like India, where the lead time for a project to reach fruition may be longer, due to its intrinsic red tape and bureaucratic nature, where ventures naturally take longer to take off, even though the cost may be lower.
    “If you give too much emphasis on failure, you are bound to fail. Sometimes a long runway is needed for a project to take off and giving up too early and too easily can also be equally problematic. There is a certain tension between early failure and the value of persistence that needs to
be recognized,” says Banglani. And although most entrepreneurs agreed that there was a value to learning from mistakes, they wouldn’t go so far as to say that failure should be celebrated.
Stepping Stone to Success
“The fear of failure should drive people to succeed as entrepreneurs, but shouldn’t prevent them from becoming entrepreneurs in the first place. However, even if a great entrepreneur does fail, the immense learning from that deserves to be shared with others,” says Jain. “Generally, I think the idea of sharing failures and learning from them is a great idea. Too many people are embarrassed to talk about their failures. If we can help them get past the social stigma of failing and share their learnings publicly, a great many people stand to benefit.”
    But here’s one thing that should be heartening for ex-entrepreneurs and those who are struggling with their start-ups: investors and backers actually have more confidence in someone who has a failure or two under his belt than a young, first-time entrepreneur. The assumption here is that generally speaking, people learn from their mistakes and more importantly, it is better to have tried and failed than not have tried at all.

Jyoti Pande Lavakare  ETM140511