Tech entrepreneurs and investors gather at FailCon in San Francisco each year, to study their own and others’ start-up failures. I was interested to learn that FailCon is now going global. But with events being held in Toulouse to Tel Aviv, a UK date is notable by its absence.
With half of all UK businesses failing in their first five years, this unfortunately isn’t due to a lack of examples. It is perhaps more likely rooted in the reluctance of UK enterprise culture to acknowledge and admit failure in the first place. This needs to change. It’s simply too common a part of the process of becoming a successful entrepreneur to be ignored. The importance is knowing how to fail well rather than overlooking the risks in the first instance. The lessons I suggest below should help.
Fail before spending big
I see the same issue arise time and again in meetings with entrepreneurs to discuss their business ideas; a failure to do their research, and a lack of sector understanding. It’s very easy to get caught up in the enthusiasm of starting a new venture, and suffer from closed thinking. Genuine passion for a subject and the desire to disrupt your industry are both great, but many entrepreneurs are so delighted to have spotted a gap in the market that they don’t stop to think if there is a market in the gap.
It’s vital to get advice and have others interrogate your idea to help you notice problems with a concept early on, before you take on the costs associated with launch, or think about seeking funding and investment. It’s also essential to build your awareness of the competition, and others who may move into the same space. Even if your concept was unique when it was first conceived, it may not be that way a few months down the line. It can be a wrench abandoning a project after putting so much time and effort into it, but sometimes the best decision is knowing when not to go forward.
Fail for the right reasons
For all the background research in the world, sometimes your ‘big idea’ just won’t catch on – there’s no shame in failure for this reason. What’s much harder to explain, particularly when pitching future ventures, is failure due to poor financial management, operational problems or legal challenges. One of the key reasons for the practical support and coaching that my team offers businesses is to ensure that it’s not simply the management of an idea that causes its failure. Even if you do fail, at the very least you should still be able to demonstrate that you know how to run a business.
Failure will provide new opportunities
But only if entrepreneurs are ready to spot them and are nimble enough to take advantage. One start-up I worked with designed and manufactured on-body motion capture technology. They had significantly overestimated the expenditure on this equipment within the film industry – although plenty is spent on motion capture software, studios don’t need to buy new hardware so often. While making connections and exploring the market, the entrepreneur discovered other opportunities to commercialise their offering, in sports medicine, motorsports, and manufacturing (where the technology could be adapted to capture data and improve the efficiency of production lines). It was only by remaining open to adaption and exploring new opportunities that the company was able to stay in business, and eventually thrive.
Failing is much easier and more productive as a team
Enterprise is far easier when you aren’t on your own. Working with partners who you trust and whose skills compliment your own is not only a good way to mitigate against failure, but can also help to provide a sanity check when things don’t work out as you’d hoped. On your own, it’s very easy to either dwell on what you think you did wrong, or avoid thinking about your mistakes and move on to the next project as quickly as possible. Finding the time to discuss things honestly and directly with partners will help you to analyse your successes and mistakes, decide what will be different next time and the changes needed to get there.
One of the strengths of business incubators is that they provide this opportunity for reflection on failure, in an environment that, while supportive, will challenge your ideas. The long-term relationships we tend to build with our entrepreneurs mean that we’ve seen plenty of examples of people who’ve failed once and come back all the stronger for it.
Don’t hide your past failures
It is all a question of positioning. Experience and failure are different sides of the same coin. While a generalisation, in presenting to investors in the UK an entrepreneur is likely to walk through a summary of the opportunity and offering. They effectively explain how they got there. The enterprise culture in the US means that an entrepreneur is more likely to demonstrate how well they know the sector. In either context, past failures prove valuable when recast as first-hand experience – tell investors about what you have learned on your journey, rather than why you have failed in the past. Turning a negative into a positive in this way, entrepreneurs are able to demonstrate credibility as a more seasoned business professional.
It is time that UK entrepreneurs learnt not to be so scared of failure. All experienced businesspeople understand that you cannot guarantee success. You can make the right decisions, manage your business perfectly well and still fail. By embracing this fact, entrepreneurs can turn adversity to their advantage. A good entrepreneur will understand what went wrong, learn from the experience and avoid failing for the same reason twice.
We don’t necessarily need a FailCon in the UK. But the message we should take from its growth is the benefit of acknowledging failure. How you react to it, and how it shapes what you do next, are the real indicators of success.
Mike Herd is executive director of Sussex Innovation – the University of Sussex’s business incubation service.
Further reading on business failure
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