5 Successful Startups That Failed & What You Can Learn From Them
It sometimes seems like every entrepreneur’s big bugaboo: failure. The fear of failing stirs up worry and, too often, stops people from ever trying to start their own business at all.
It’s not a crazy concern. There are so many startups that fail, that you never hear about. Many startups–even some with thousands of users and hundreds of thousands of dollars–fail to such an extent that they’re pushed out of business. Fear of failure has long been an important and widely discussed topic among entrepreneurs.
We’ve written about the fear of failure in past blog posts, so I want to take a different tack this time. Failure is as varied as the clothes on a long rack at your local thrift shop: some entrepreneurs fail big, others make minor mistakes, and there’s a whole line of hand-me-down coats and pants and shirts in between. Failure comes in all shapes and sizes.
What Will You Get From This Post?
In this post, we’ll hear directly from five successful entrepreneurs about how they have dealt with failure in their ventures. I reached out to these folks and secured exclusive interviews, large portions of which I’ve included below. The post will also cover the actionable advice that you can draw from the experiences of our interviewees.
Here are the five businesspeople I had the pleasure of talking with:
- Nayeem Hussain co-founded Keen Home, a company that creates hardware and software to improve people’s homes.
- Pippin Williamson launched Pippin’s Plugins, through which he sells add-ons that he has developed for the WordPress content management system.
- Megan Cox co-founded Wink Natural Cosmetics to sell an all-natural eyelash-growth formula that she and her co-founder created while studying at MIT.
- Tim Hwang is among the three co-founders of FiscalNote, a real-time legal analytics platform that has received over $18 million in investment.
- Dan Norris co-founded WP Curve, which sells unlimited WordPress website support to customers who pay a monthly fee.
Each one of these entrepreneurs came with awesome insight, so it’s well worth your time to read this full post. I’ll also highlight the key takeaways in each section in case you’re pressed for time.
(Note that I added all of the bold emphasis in the interview excerpts.)
1. Nayeem Hussain
Keen Home creates products–like their innovative Smart Vent–that aim to make people’s houses more comfortable and efficient. But while all entrepreneurs aim to be efficient with their businesses, failure is anything but comfortable — Nayeem (who, along with Ryan Fant, founded the company) knows this first-hand.
His first failure? Launching a crowd-funding campaign too soon. I’ll let him speak for himself:
Three months into launching Keen Home, my co-founder and I got the opportunity to pitch our company on the Startup Battlefield at TechCrunch Disrupt NYC 2013.
In conjunction with that pitch, we launched a crowd-funding campaign to take advantage of the press coverage we received from the event. In hindsight, our company/product was far too early-stage for us to instill the requisite confidence that we would be able to deliver a working product to backers. We achieved a mediocre outcome ($40,000 raised—hardly a referendum on demand) and were constantly having to explain these results to investors.
If we were to do it over again, we would have waited until we had a well-functioning prototype and a solid team before launching a crowd-funding campaign.
Keen Home’s story counterbalances the oft-repeated and not entirely wrong advice to launch, launch, launch as soon as possible. There are different ways of getting your product out on the market, and you need to be careful with how you approach doing do. Try to go big too soon, and you could end up going bust instead.
Nayeem told me that his other big failure also revolved around timing:
“Bootstrapping,” or self-funding a new venture is critical at the earliest stages of growth. My co-founder and I bootstrapped for approximately 1.5 years before raising our $1.52 million seed financing round.
One mistake we made regarding fundraising was we started pitching investors far too early. About 6 months into founding the company, we began taking meetings with several prominent venture capital funds in New York City. While pitching investors and answering their tough questions taught us how to strategically position our business, it tainted the company in many investors’ eyes.
Oftentimes, it is difficult to change an investor’s early impression of your company. Similar to crowd-funding, timing is critical when you set out to pitch the investment community.
Ultimately, participating in a Techstars accelerator program allowed us to “start fresh” with many investors and also opened up new doors to diverse sources of capital. We really leveraged the buzz Keen Home received from our “demo day” pitch, which led to us finding a lead investors and closing our seed financing round.
What really strikes me about all of this is that Keen Home did hit big challenges with funding early on, but they bounced back and are running strong. Failure isn’t permanent. Indeed, Nayeem said that you should expect to fail:
Failure is inevitable in the field of entrepreneurship.
Eric Ries accurately defines a startup as “a human institution designed to deliver a new product or service under conditions of extreme uncertainty.” Whenever one is dealing with extreme uncertainty, failure is sure to follow. The key is to “fail fast,” learn from these failures, and have the tenacity and belief in your product to move forward.
That is not to say the blind faith and belief in your product is always the answer. Sometimes, the market will give you a strong signal that there is weak demand for your product (i.e. your product might be a solution chasing a problem). In this case, failing fast is beneficial since you can possibly pivot the idea into something that people are actually willing to pay for. Never be so married to an idea that you fail to synthesize what the customer actually wants.
Nayeem learned some powerful lessons in his own experiences with failure, and aptly summed them up for me: “Timing is critical when deciding on launching a crowd-funding campaign and when beginning conversations with investors. Do either of these two things too early and you could severely jeopardize your chances of success.”
- If you plan to crowdfund, ensure that you have the needed capacity and a solid product before doing do. Moving too soon could doom you.
- First impressions matter, so don’t go to investors until you’re really ready.
- Failure always happens. Learn from your failures and pivot to meet the market’s needs.
2. Pippin Williamson
Pippin is an ace WordPress developer whose business, Pippin’s Plugins, has had several years of success since he first started out. He told me that while he hasn’t had any “catastrophic failures” during the course of his business, he has made costly mistakes:
I think the biggest failure, in terms of trying to grow the business and trying to make it successful … was thinking I could do everything myself … For the first four, four and a half years [of the business], I did everything. Everything means I talked to the clients, I built the products, I did the customer support, I did the bookkeeping, I did the taxes, I did everything.
While everything worked out fine in the long run—it didn’t kill the business, it didn’t kill me—it definitely slowed down what I could’ve done early on …
It was a hard-learned lesson that I’m glad I learned: I can’t do everything.
So learning that you should hire an accountant is kind of important. And understanding that to really grow the business, beyond just something that sustains yourself, you have to bring other people in. You have to get other people involved. Whether it’s to do the customer support, to do the accounting, to do extra development, every aspect of the business—you cannot be a one-man show if you want to grow to be something large.
How important was hiring an accountant? How big was Pippin’s mistake of initially not doing so–and how smart was his decision to make that move? As it turns out, you really can’t do everything, as became clear when I asked Pippin if his realization that he needed to bring on other talent was gradual or sudden:
There were certain roles that I felt like I could continue doing myself, and then there were certain roles that, it was pretty clear pretty quickly, I needed to bring other people on [for].
So, customer support, for example. As soon as the business started growing and we started getting more and more customer, it became apparent that I needed help with customer support, simply because there were too many support requests, and I couldn’t handle them all. I would be at my desk from 8-to-8, 8-to-10, 8-to-midnight—some ridiculously long period—and I would still have an overflow of tickets that I couldn’t handle. So it was very clear that I needed someone else.
When it comes to accounting, especially for tax purposes, that was much more of an epiphany. I knew early on that hiring someone to do it was a good idea. But I had the opinion of, ‘Hey, I’ve done this before. I know how this works. Why not do it myself?’ And the epiphany came when I was filing my taxes one year and I realized that according to the data that I had entered, I was about to pay the IRS $120,000 …
I knew that was way too much. Regardless of what the company earned, I knew that the company didn’t owe that much money. I knew that there was something horribly wrong. So the very next day I found a CPA, I hired them, I paid them a little bit of money, and they dropped my tax bill by $100,000 … That was the right decision.
This issue of ego is something that Pippin says could have been catastrophic if he hadn’t changed course and hired other people. But that’s just it: he did change course, averting what could have been a crippling, total failure.
I asked Pippin if he had made any other big mistakes. Yes, he said:
As the business grew, we started doing some partnerships with some other companies that were building similar products, or products that would go hand-in-hand with what we had built (in this case, Easy Digital Downloads). And they started getting into the realm of crowdfunding. So they built an extension of our platform that allowed people to set up their own crowdfunding site, so if they wanted a miniature Kickstarter or they wanted a miniature Indiegogo or things like that, [they could].
It was a pretty cool little system [our partners] had built, but it wasn’t thought out enough, and we didn’t really take the time to figure out if it was a good system, to see if we’d done things right, we just kind of let it be released to the world in a very unpolished form.
Well, that got us into a bit of a situation because it became very popular very quickly, and suddenly we had some crowdfunding websites that were coming up that were successfully raising $100,000, $200,000, $300,000, $500,000.
But the platform was not ready to handle all that … so when they went to go collect all the funds, it would fail. And so we had very unhappy or very worried people in our support system that were saying, ‘We’re trying to collect $500,000 and your system is not working.’
We had some of those experiences where we should’ve taken six months to make sure it was really ready to go before we released it and said, ‘Hey, come build on this platform.’ …
We realized what was happening early enough that we stepped back and we ended up killing the system … If I were to go back, I would either never allow that to launch, or I would take six months to make sure we built it right.
This reminds me of what Nayeem said about timing: it really is everything. Again, while actually launching is important, there does need to be a balance with product quality. You should take the time to really vet your product before putting it in the hands of paying customers.
Pippin echoed another one of Nayeem’s points: failure is inevitable. I swear I didn’t interview them at the same time–I guess it just turns out that there’s some real, underlying wisdom to be had here:
I think you just need to understand that everybody’s going to fail at some point, whether it’s catastrophically or just in a minor setback. Everyone’s going to fail at some point. So you need to accept that.
Just because you fail doesn’t mean that you are a failure. It means that one thing that you attempted failed. And I think that it is a very important distinction, because those are not the same thing at all.
Failure isn’t personal. Failure isn’t about you–it’s about your business. Never forget that.
But attitude isn’t enough. Don’t take your failures personally, but do take them as a chance to take stock:
I think you need to look at [failure] as a learning experience. What are the reasons you failed?
Was it because you didn’t plan it? Like [the crowdfunding app], for example: it failed, or kind of failed, because we didn’t plan it. We kind of built something in a day or two and then released it.
You need to look at it as a learning experience and figure out why it failed, then use that information to say, ‘Okay, here’s how we’re going to prevent this in the future. This is what we’re going to use in our next project, whatever it is. Or this is how we’re going to re-launch the failure. I think if you look at what caused it, you can learn a lot from that.
- You probably can’t do everything on your own. Know your limits.
- Pay attention to warning signs–if you can sense that a course of action is trouble, run the other direction.
- Really test your product before selling it. You don’t want to anger people.
- “Just because you fail doesn’t mean that you are a failure.”
- Mistakes are a chance to learn. Every time you fail, you should figure out why.
3. Megan Cox
Wink Natural Cosmetics, which garnered $80,000 in just the first several months of business, is the brainchild of Miguel Salinas and Megan Cox. They were profiled in Inc.’s list of 2014’s coolest college startups.
When I asked Megan if they made mistakes or had failures early on in the company, to which she replied: “So many.” That’s honest and powerful, so let’s take a look at some of them.
The first big lesson is that if you’re selling some sort of physical product, you need to develop a good relationship and understanding with your supplier:
I had a stock out in my first month of business (not complaining), due to a surprise press campaign. I sold 1000 units overnight. What went really wrong is that I had failed to be proactive and build a real, lasting relationship with my supplier.
When I came back and said “Okay, we sold out. I need more!” they said, “We’re out of aluminum. We can’t make your packaging.” This means I had about 700 people waiting on product that I no longer had a supplier for. It took me 6 weeks to get it together. In the mean time, I had all of these peoples’ money. As a new company with no reviews or press otherwise, many people were skeptical that this was even a legitimate business and began demanding their money back.
In the end, I realized that being more proactive with my customers and suppliers’ could’ve saved me a lot of grief.
But that’s not all. It turns out that she hadn’t correctly priced the product, which created a whole host of extra problems:
I had to increase the price by the time all of my first customers were ready to reorder. I lost about 1/3 of the customers I had just acquired by doing so.
The list really goes on and on regarding mistakes with my customers, but I am hard on myself. We’ve done lots of things right, but when things go wrong it’s so much easier to tell.
That’s a good point. Many of us have a negative internal monologue–it’s natural to focus more on the bad than the good, especially when it comes to our own actions. But that’s not necessarily healthy, and it can be counterproductive. I think that it’s fair to say that part of avoiding failure (or dealing with it when it happens) is acknowledging those times when you do succeed. Here’s an interesting thing Megan said:
I’ve started two businesses now. I wouldn’t call either a home run…yet. Starting your own business is not a cake walk. It’s not about celebrating your genius. Everyone will tell you everything you do wrong, all the time. When money gets involved (i.e. when people start actually paying for your product), the game is totally different.
To get through any troubles caused by your mistakes, Megan says that you need to persevere and work hard, while not getting too wrapped up in things:
I want to say stay obsessively focused, but I know how dangerous that can be. Become obsessed with staying level-headed while you’re focused. Ask for feedback. Talk to your customers often. Find your first, 10th, 100th customer and focus on them. Make sure that your product is fulfilling someone’s need in a meaningful way.
Be resilient. I get told no 200 times before I get told yes, and I have a relatively mature product. It’s all about volume. Get the product in front of as many people as possible and don’t stop. Set deadlines or lines that you won’t cross: e.g. “I won’t take out a loan for this business,” etc. Set those lines early on and stick to them. Sometimes running your own business makes you seem crazy, but you don’t actually have to be crazy.
Keep pushing. In the end, it’s not the most intelligent person who usually wins. It’s the most resilient.
For good measure, here’s one more great thing she wrote:
Do your market research first. Don’t backtrack. Make those first 50 or 100 customers REALLY happy, and KEEP them happy. Keep the communication channel open. Be transparent. Be honest. Your customers will appreciate it.
- If you have a supplier, proactively work to strengthen your relationship with them so that they can help you if you have a sudden spike in orders.
- Cultivate your relationships with your customers. It’s good for them, good for your PR, and just good–period.
- Speak with your customers frequently. Solicit feedback.
- Work hard and keep pushing. Resilience wins the day.
- Remember to stay healthy and level-headed even while working hard.
4. Tim Hwang
FiscalNote seems well on its way to huge success: with millions of dollars in investment and big-name clients like JP Morgan and Uber, this real-time legal analytics platform is cutting a new path through the brush of politics and law.
The software is exciting. FiscalNote aggregates laws and regulations from around the US, and increasingly, around the world, and synthesizes them to try and predict outcomes. It bills itself as a powerful tool for lawyers, lobbyists, and government relations professionals.
But enough about FiscalNote’s success. I got on the phone with one of its co-founders, Tim Hwang, to talk about the company’s failures. Tim did note that “there’s no one major failure where [they] blew everything up.” Instead, he said, the company’s challenges have manifested in the form of small things that they’ve had to correct for over time:
…small things like pricing, for example. We used to have an open pricing model and then we switched to a per-seat model basis, and that really helped us in terms of defining our pricing model and structuring our sales team …
I think the great thing about mistakes is they’re fine as long as you heal fast and you work quickly. So in our case, every time we have a mistake, we do something we call a post-mortem. So we look back and we have a retrospective and say, ‘Okay, well, why did we make the mistake? How can we learn from it? And then how can we make sure that we don’t do it again?
We put in a new process or we think about hiring a new person or whatever the case may be to make sure that we’re moving in the right direction.
FiscalNote erred in its early pricing setup, but that’s no biggie: they pivoted to a new strategy. I think that Tim’s term–post-mortem–works really well. Once you fail, it’s done. That failure is dead, and you can treat it as such: examine the corpse, do an autopsy, and then move on with life. Just keep in mind how that corpse died, and avoid the same mistakes.
I asked Tim to explain in a little bit more depth how he and his team conduct these “post-mortems.” He discussed the general process using the example of sales strategies:
Basically we all sat down as a team and said, ‘Okay, this isn’t a very scalable way to do this. Why are these three customers taking so long to close?’ … And then we’ll go through and we’ll discuss, ‘Okay, well, maybe people are confused about the value proposition. They’re not sure about different feature sets,’ or whatever the case may be. And we’ll try to do a root-cause analysis: why is something happening the way it is?
Then based off that root-cause analysis we’ll try to fundamentally fix the problem. So in our case we went to a three-tier per-seat model basis. We made basic, plus, and pro [pricing options]—and then tried to make that scalable. Since then, we’ve really been able to scale up the business.
Get to the root of a weed and you can rip it out of your garden. The same, evidently, is true of mistakes.
Nayeem and Pippin both said something similar, arguing that failures and mishaps should be seen as learning experiences. As it turns out, Tim agrees almost word-for-word–and he thinks that you should ensure your whole team sees things that way:
Try to get everyone to learn a lesson out of it, because that’s really the value of mistakes. Going through a root-cause analysis really helps you understand … what processes failed, and it also prevents you from band-aiding over the problem.
- Do a post-mortem after every mistake: find the root cause of your failure, and figure out how you can avoid doing the same thing in the future.
- Think creatively about how to avoid reruns of the failure film: you may have to make big changes, like instituting a new process or creating a new position, to avoid repeating mistakes.
- Make sure that your whole team learns a lesson from each mistake. You can grow together.
5. Dan Norris
Dan co-founded WP Curve, a 24/7 WordPress support service. He’s also the author of a book called The 7 Day Startup: You Don’t Learn Until You Launch, which digs into the details of the items we discussed in our chat.
The book’s title encapsulates Dan’s story: after struggling for almost a year to get a business venture into the black, he abandoned it and went with an entirely new idea. Seven days later, he had a business with paying customers. That’s it: success can come from failure.
What was Dan’s worst failure? According to the man himself, it was running a web design and e-learning agency for seven fairly unsuccessful years. It demonstrates something I said way back at the top of this post: if you fail to follow your dreams, if you don’t even start the business you’ve been itching to try, then you’ve automatically failed.
But that wasn’t his only failure. One relates even more directly to the eventual origins of his current (successful) company:
I had a big failure leading up to the launch of WP Curve. The year before I launched WP Curve, I spent a year working on a software program, like an analytics dashboard, and I gave myself a year and had enough money to get through a year, and I got within four weeks to go and I didn’t have any customers. I realized very quickly that the whole thing was going to fail, and that if I didn’t do something within the next couple of weeks I was going to have to get a job.
I had two weeks to go and I had to do something. The other business wasn’t going to work, and I really didn’t want to go get a job so I launched WP Curve on the weekend. That’s how the company started …
I was never intending on launching any kind of support service. I wanted to build a software app and I tried lots of things and it was just very obvious that it wasn’t going to work and that it wasn’t going to be able to provide me income any time soon, so I kind of out of desperation launched WP Curve.
I asked Dan to tell me more about that failure, the analytics dashboard software. He explained some of the reasons that it failed:
It took me a long time to do basic things that in hindsight it shouldn’t have taken me that long … I did things like spend three or four months trying to set up Braintree because I wanted a really nice payment gateway. And the whole time, I could’ve just put a PayPal button on the side and moved on to something more meaningful but I really wanted something nice and slick, and that just dragged on and on and on …
I hadn’t even asked anyone for money in the first six months of the business. It took an entire six months before I even asked anyone for money, and as soon as I did that, that was really the moment I realized that I had a problem, because I only had about ten people sign up out of about 4,000 people who’d signed up to try out the software. That was when I was like, ‘I’m kind of screwed.’
So I spent the next three or four months trying different things, launching different versions of the product, charging more, ditching the free plan—pretty much anything you can think of. And then I go to within two weeks to go and I just realized that it wasn’t going to happen.
But what would happen, of course, was WP Curve. The reason that he was able to latch onto this success is because he was willing to reconsider his goals:
I had previously sold my agency and I wanted to create a startup. I didn’t want to just go and create another agency, so I was looking for something to do that was going to be scalable and I thought that it had to be software [like the failed analytics dashboard], but after realizing that software wasn’t an option because I’d ran out of time, then I had to think about a service, because services have the benefit of being able to launch really quickly …
It was on the weekend. I was with my kids. We were at [an animal] farm thing, and I thought, ‘I’m going to have to do something.’ So I went home and thought of this idea …
I’ve always liked the idea of having something that people don’t have to think about. So I could have said, ‘I’m going to launch a service where you get five hours of web development every month.’ But doing that wouldn’t really have been that interesting. It wouldn’t really have been that innovative. It wouldn’t have really been a startup. It would’ve just kind of been a pivot on what I used to do with my agency. The idea of doing unlimited [support] hadn’t really been done, and I thought, ‘Well, only a certain amount of jobs are going to happen on a website every month, so if other companies like insurance companies can offer people unlimited things, or mobile companies can do it, then why can’t we do it with supporting a website? That was my thinking.
I didn’t think too much through it—I bought a theme for $39 and I emailed my list a couple of days later and launched it and had paying customers on the day.
The email list that Dan had accumulated through his failed company was clearly helpful here, but still, he launched a successful company in a short stretch of time. It was a successful experiment.
And Dan views startups as just that: experiments. He told me that failure isn’t something to anxiously obsess over because, really, entrepreneurship is just a matter of seeing what works. A “failure” is just data on what not to do:
My philosophy is a statement, which is the subheading for my book: you don’t learn until you launch.
I think that captures a way of thinking which is [that] if you focus on launching something and don’t focus as much on planning and asking people how good your ideas is and validation and all of those kinds of things that people get caught up in within the startup world. If you focus on launching something … you’re going to figure out very quickly whether it has legs, and you’re not going to invest a year of your life in something without knowing …
When you’re first starting out, you really want to launch as quickly as possible and figure out if something’s going to work. And if it doesn’t work it becomes more of a scientific exercise rather than ‘I put my whole life into this and it failed.’ It’s more like, ‘Well, I did my best effort to put something up and to try and get paying customers. It didn’t work, so I’ll try something else … I think that if you do it well enough and you execute things well enough, that’s your best chance of finding a hit.
This advice, to launch quickly, does seem to contrast with earlier tips from Nayeem and Pippin, who said that you should really carefully vet your product before launching. (This definitely depends a lot on the specific context involved, but if you have an opinion on the matter as it relates to failure, feel free to post in the comments below this post.)
- If one idea fails, go to the next one–it could be your big success.
- Accept that you might have to change your goals. You may want one type of business, but if the market is calling for another kind that you’re prepared to run, why not go for it?
- Launch quickly–that’s how you learn.
- Starting businesses is like conducting experiments. If something fails, that just means that it doesn’t work, and you can move on to the next thing.
Failure. It seems to stare up at us from every crevice, out at us from every corner–it’s an ominous idea that looms everywhere in entrepreneurship.
But really, it’s not so scary. Sure, failure sucks. But smaller mistakes–and even larger mishaps–are not the death knell of your entrepreneurial ambitions. Failure is a learning experience. Failure is a scientific experiment. Failure is a chance to find a different way to success.
I’d like to thank these five stellar entrepreneurs–Dan Norris, Tim Hwang, Megan Cox, Pippin Williamson, Nayeem Hussain–for taking the time to be interviewed, whether by email, Skype, or phone. I hope that you learned as much from them as I did.
Which key takeaways resonated with you most? What did you draw from these entrepreneurs’ stories? Let us know by posting in the comments below.
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