Why failing can help build business - Lessons from 9 entrepreneurs
- It is widely known that the default state of a startup is failure.
- 90% of startups and 75% of venture-backed startups fail.
- But failing doesn't mean losing: Here are the lessons from 9 entrepreneurs on why failure can help build business.
The reasons vary from wrong product market fit, depletion of capital, bad partnership, regulatory hurdles to bad hiring and many more. These factors often function as multipliers in the startup world. Everything could be going well, but if there's one minor hiccup in the system, it could threaten the whole existence of an already vulnerable startup.
Have you read?
It is important to avoid failures, but it is equally meaningful to embrace them and learn important lessons from them to avoid replicating the same mistakes in the future. We asked the World Economic Forum’s Technology Pioneers to reflect on their most meaningful failures and important takeaways. Here is what they said:
Even negative feedback is useful
Carrie Chan (Cofounder and CEO, Avant Meats)
When we did receive negative feedback from two investors who chose to not invest in us, this was still tremendously useful in shaping our strategy for the future. The reasons they gave us to not invest in us eventually led to us improving. In this first example, our product idea was challenged. Through the feedback, we were able to better define and differentiate our product to make it more sellable on the market. Ultimately, we were able to develop a patentable idea and a product concept based on more investigative data and thought process.
In the second case, our market strategy was considered suboptimal. But through the feedback, we accelerated our market strategy reform which led to growth in our company’s footprint. We're aware that we cannot please everybody or every investor. But we had to learn to take the bird eyes’ view on ourselves, to find meaningful feedback from the investor-specific considerations.
We need solutions for actual problems
Karim Engelmark Cassimjee (CEO and Cofounder, Enginzyme)
In the company's early days, we often developed what we thought was great solutions but proved very difficult or even impossible to sell. They may have been beautifully engineered but did not provide as much value as we anticipated. They were basically solutions looking for problems. What we need are solutions for actual problems. Now we try to always engineer solutions for problems clearly stated by customers.
Leaders need to swiftly gain staff buy-in
Kasim Alfalahi (CEO, Avanci)
In any business, success depends on the organization working together in pursuit of common goals. For a startup, that teamwork is vital, and the founder has a pivotal role in building the company culture which underpins it. With my colleagues and team, we developed a set of core values as a framework for how we would work together effectively. Demonstrating these values help us to shape how we are seen, both by our partners and by our employees, so it needs everyone to believe in and follow them.
Despite most people buying in, there may be a few individuals who are not willing to change their own established behaviors or ways of working. Allowing team members to continue to work at odds with your values risks undermining the commitment of the whole organization to the development of your shared working culture. The learning for me was that I need to take action faster to avoid that risk.
Hiring is key to success and maintaining founder's sanity
Ambareen Musa (CEO, Souqalmal)
Failure comes regularly in business. You could hire the wrong person for the job or not consider important macro factors impacting your business. You could be blinded by extreme growth through fundraising, but ultimately lose touch with your business.
My biggest failure was hiring too fast. My drive and ambition led me to not carefully select the right candidates for my business. I needed the support and needed people so that we could continue to grow at all times. But hiring the wrong candidates is a big mistake. As a business, you should try to be sustainable with your own growth. By hiring too fast, we ended up with messy procedures, overspending and no sustainable work culture. My biggest learning is this: Hiring is the key to your success, but also your sanity as a founder.
Learn to love and embrace change
Natalia Karayaneva (CEO, Propy)
When you are a young founder, you’re more dedicated to a career rather than a family. You’re riskier, more idealistic, yet immature in decision-making. This can result in hiring less experienced teams and taking every small failure personally. At the end of the day, every entrepreneur’s life goal is to build and create value. I have always been a “builder” and loved starting from zero to change the world.
I switched roles from being a real estate developer to developing software. As a technologist, I knew the industry could be improved. When I looked into solutions, I discovered blockchain was the answer I was searching for. It could make the real estate sales process faster and easier. Blockchain could open everything up for a global market. If I had to give one piece of killer advice it would be: "Learn to love and embrace change!" Only when you love change can you adapt quickly and achieve growth. One of the biggest challenges in our society is time runs really fast and people tend to try to slow it down. Once you embrace the speed and be present, you can only win.
Failure is a pathway to success
Charles Bark (Founder and CEO, Hinounou)
Failure is the pathway to success. The harder you fall, the more you'll take away from it. My biggest entrepreneurial failure was in regards to share distribution. We were at the ideation phase with my startup, which is the most vulnerable stage. It's not easy to convert an idea into a tangible and qualitative product – especially in the industry of disruptive innovation. We needed experts to help us with this. But these kinds of resources are very expensive and our financial resources were scarce at the time. My mistake was to offer shares to these experts too generously and too easily. It turned out they didn't have the same passion or longterm commitment as us. They were merely highly skilled consultants for a short period of time. I guess you can say I was blinded by my passion and inexperience. I didn't understand that these consultants would only support me on my long entrepreneurial journey for a short amount of time. When I finally realised my mistake and wanted to get my shares back, I had to employ lawyers. The whole process was extremely costly financially, but also hard to endure emotionally.
Offering shares to experts is not recommended. I should have taken a loan to pay their consulting fees instead. You should only distribute shares if there's a level of commitment and a big financial investment, too. An ideal shareholder should purchase his shares and demonstrate his commitment by investing time, money and network resources – not just his or her knowledge.
Failing got me to where I am today
Chrissa McFarlene (Founder and CEO, Patientory)
Everybody has ups and downs in their lives, but I’d say failures along the way led me to the path of startups and to where I am now. Going into the blockchain industry as a CEO and Founder, I was oftentimes met with criticisms that often questioned my authority to be there. But it has motivated me to take risks of starting my own company in an industry majorly dominated by men. One of the biggest challenges that I have faced during this journey is getting access to venture funding as a woman, and especially as a minority woman. Most investors we talked to didn’t really understand the bridge between blockchain and healthcare or didn’t see our path to revenue. However, it taught me what it takes to perform as a startup in this competitive landscape and strengthen our core focus of what we provide as a company.
I believe that putting things into perspective is the main lesson I have learned. Now, I am a leader in this blockchain technology space, inspiring other women to pave their own paths.
Never stop learning or listening
Daniel Nathrath (Founder and CEO, Ada Health)
When we founded Ada, I had significant business and entrepreneurship experience already, and I was confident that these skills and experience would be readily transferable to the healthcare sector. But the truth is, healthcare is unlike any other industry, and I was a bit naive about that fact at the beginning. I thought I could enter the healthcare space with the same rapid transformation and innovation approach I’d experienced in other sectors, which in hindsight was not the right approach.
In healthcare, ‘move fast and break things’ just doesn’t work. Luckily, I had two fantastic cofounders with medical and scientific backgrounds, and by working together and listening to each others’ different perspectives and experiences, we were able to strike a balance of careful innovation. I think the most important lesson that I’d pass on is that, as a founder, you should never stop learning, and never stop listening, because you definitely don’t have all the answers.
Transform failure to grow stronger
Meirav Oren (Cofounder and CEO, Versatile)
We failed an important demo, but our ability to stand up and to admit the price of that mistake ended up being a big win. As an organization, we learned to look for our mistakes in all the steps prior to the demo. This created a level of accountability which supported the team members who were directly interfacing with the client as the demo failed.
I remember going from a sense of complete failure to “we will recover and grow stronger” in a few hours. I realized that failure means learning something, and we learned a lot that day. We also ended up winning that account and the rest is history.