Last week, I got a chance to host Vinod Khosla at the Nasscom Event (#nasscompc)where we got to talk about “failure“. Since he’s one of the few who has spectacularly monetized his approach to failure, I asked, “As an investor, you can handle 9 out of 10 companies failing, provided the 1 that succeeds makes up for the rest. But an entrepreneur has only one company – how does he or she look at failure?” His response along with my own savouring of the bitter failure and lovely flavours of success, is what I would like to explore with you today.
You’ve been working in startup-mode for months, even years now. You’ve had your ups and downs but never broken through the clouds. You keep hearing about the FlipKarts and Snapdeals basking in glory – once upon a time, it used to motivating but now it only frustrates you. You’ve hardly spent any time with your family and are burning yourself up slowly. You and your partner are arguing over stupid things. No, it’s not been all bad, you rationalize. After all, you do have some customers who like your product and every time they send you a positive mail, you’re perked up for the whole day. But then again, reality returns when you’ve to pay those bills and they are piling up.
What should you do? Should you declare failure and move on? Keep going, hoping that sun will shine again next week, when that investor who promised to call back, actually calls back? Are you a failure or a genius about to be discovered?
Americans wear failure as a badge of honor. The hottest hotshot and the spectacular flameout will show you their battle scars, with equal pride. At home here in India, we’re not exactly crazy about failed people. This is important because we get nearly 100% of our inspirational material from the USA and we have to understand we’re different. My poor entrepreneur uncle comes to mind – he was an inspiration for me growing up, ridiculously hard working, taking big risks but didn’t end up rich. The kind of social pressure for him to give up and get a “real job”, would make a great story of its own.
Given all that, what should you do? Not get started at all? Once you’re started and you hit a speed bump, stop? Or keep going?
Back to Vinodh Khosla. To paraphrase his response:
1. If you’re freaked out about failure, stay home. There is no such thing as a fail-proof venture. But if you venture out, take on something big so that if you succeed, it was worth it.
2. If you’ve taken the leap and are in the middle of it and still failing, you’ve to look into the details, very objectively, analyze why you’re failing.
3. Here comes the tough call – is it fixable or is it better to quit and try again? I will give you my perspective on this multi-crore-rupee question.
Step 1 is obvious – if you’re still debating whether or not you can handle failure, you should attend some excellent forums or meet people who can motivate you. And if all of this still not getting you pumped up, you should stick to your cushy corporate job and enjoy other things in life. There’s nothing wrong with this – it’s far better to know who you are up front, than discover it later. And discover you will, very painfully!
Step 2 and 3 are tricky, yet absolutely necessary. Whatever your business is, once you’re in it, you have to realize you control very little. The business environment, competition and market forces are formidably unpredictable. So, start with looking the macro-factors first
1. Are you in the right market segment? You can run a tight ship but ifyou’re sailing against the market winds, you’re more likely to fail than the guy running a leaky ship but pointing his ship in the right direct
2. Are you too early to the market? eg. NFC a few years ago was cool but too early.
3. Or too late to the party? If you want to take on Flipkart on books, you better have something very, very compelling. Google was not the first search engine and iPhone not the first smart phone. Just much, much, better than what was there.
4. Is there a market correction going on? Think 2001 or 2008 bubble-burst.
5. Do an objective evaluation of the competition. Are they growing and you not? How do you stack up, realistically? What can you change?
If you’re broadly in the right space and you’re not the 53rd Groupon-clone, then start looking inward.
1. Do you have a good relationship with your partner(s)? Do you really respect them? Be very, very honest.
2. Do you have the right mixture of skills or is everyone like you? I’m pushing because this is the biggest “internal” reason for most failures. Here, I’d advise getting an external opinion as it’s hard to be clear-headed. Especially if you’re atechie and your world-view of sales & marketing is “necessary evil”.
3. Is your product good enough for the customers? Though it’s great to delight customers, having the absolute best product is not always the only key to success. Again, if you’re a techie, you need to watch out for the marginal returns on adding the last bell and whistle feature or re-architecting your platform yet again for the 3rd time – just because you CAN, doesn’t mean you SHOULD.
4. So, if you’re over-engineering your product instead of trying to sell, or selling too low, this might be an area to fix.
5. Are you pinching every paisa and running a tight ship? Really, you can’t squeeze any further?
Even if you’ve answered all of the questions honestly and things seem okay, you still need money in the bank to get through. There is no easy money out there – but there is enough, if you’re realistic about your valuations and get someone to help refine your pitch. But the answer is clear – you’ve to get through and not give up.
I can tell you one thing – fear of failure is the biggest reason you’ll succeed. The heart palpitations, sweaty palms & butterflies in the stomach you feel are the most potent weapons that make you work harder than your competition; the adrenaline in the blood that makes your synapses to fire even faster, giving you that creative idea in the shower, is your edge. If someone tells you they have no fear of failing, you should question their chances of success.
Coming up with a simplistic formula on when to give up, beyond the broad rules, istricky without looking at the details. I can only tell you my own experience and point out that shutting down is theright thing to do in many cases.
My first startup was a success but was in a niche market – given we put in 4 years of blood and sweat, we probably violated Vinod’s “Was it worth succeeding?”rule.
My next startup was a great team on paper but we just couldn’t get along and we shut it down in 6-months. I hated going into work every single day – it didn’t require very deep analysis to see it was the team. Though supremely painful, failing quickly was the best business decision I ever made in my life. It allowed me to start Snapfish with three great guys. We got way morethings wrong than right – but we were paranoid enough and the team we hired terrific enough, to make Snapfish the largest and most profitable business in its space today.
Now that’s my made-in-America battle scar for you!