Editor’s note: This article was first published in December 2014, and the $10 billion valuation it cites for Airbnb is a 2014 figure.
Startups (mostly technology companies) tend to have a very high failure rate: above 90%. Some experts say failure comes from a lack of product fit. Others say it’s because these companies run out of cash.
We shouldn’t forget, either, that many of these companies were doomed from birth: even if they had been given all the funding in the world, they would never have found a way to use that investment to make the business profitable.
However, for Bryan Goldberg, the entrepreneur behind the website Bleacher Report, a company he sold to Turner for $200 million, most tech companies fail because their founders get tired. They burn out and decide not to carry on with the project, as he said in an interview with Business Insider.
Goldberg explains that his company grew very slowly. In fact, too slowly for a startup, where investors are used to seeing big profits or user growth in a very short time. It took Goldberg five years to grow his business, which isn’t bad at all: taking a company from zero to a $200 million valuation in five years is quite a feat. All the more so given that the company we’re talking about is an online media outlet.
This entrepreneur’s main advice for new founders is very simple: stay alive.
If you keep your company alive long enough, even if growth is slower than usual, you may get to watch your competitors close down while you gain recognition in your sector.
Especially with media companies, it takes a long time to build brand recognition with the general public.
Starting an internet company brings plenty of headaches and sacrifice, but one fine day, at a networking event, someone tells you, “I know you guys,” and that gives you the push you need to keep going.
You have to stay alive, stay agile and focus on your mission, being patient and ready to put up with all those headaches.
This mindset has been very common in today’s big tech companies: these are the entrepreneurs who refuse to give up on their idea and stake everything on success or outright failure.
One example is Airbnb, a company currently valued at $10 billion. Few people know that in 2008 the founders had to resort to selling boxes of cereal to fund themselves, because investors didn’t want to put another cent into their business idea.
For Goldberg, failure is purely the entrepreneur’s own choice. Founders could keep their companies alive, rework the idea or make some changes to the business model, but they refuse to do so because they’re already tired, because it has been harder than they expected at the start, because they have freely decided to give up.
At the same time, he says that if you’re completely sure you’re going to fail, it doesn’t matter what you do. If you no longer have the drive to carry on, if you have no hope left, the best thing is to close immediately and return whatever money you still can before you lose any more.
But Goldberg reminds us of one thing: companies rarely fail on their own; “failure” is just a way of not admitting that the entrepreneur is the one who gave up.
My personal opinion
While I love this refuse-to-fail mindset, especially coming from someone who managed to sell his business for $200 million, the truth is that this kind of thinking, applied in the wrong context, can get you into trouble, because we’re talking about the dreaded commitment bias.
Sometimes we find it hard to let go of a business idea because we’ve already put a lot of money and time into it. Sometimes, and investors know this, when you invest in something with a certain outlook and things don’t go as expected, the best thing is to cut your losses immediately, learn the lesson and move on to the next thing.
For every Goldberg who stubbornly keeps going and ends up succeeding, there are many persistent entrepreneurs who later regret not quitting in time.
I think it’s simpler than that: if your company isn’t making a profit and you believe you could make changes to turn that around and increase revenue, keep fighting.
Now, ask yourself this question: “If someone gave me 10 million right now, could I make my company profitable?” That was the question Chris Poole, the young man behind 4chan, asked himself just before shutting down his company Canvas, since he couldn’t see a way to monetise the more than 1.4 million users his app had. We titled that article “How to fail without losing your dignity“, because I think that sometimes it isn’t failing but having the intelligence to recognise that we’ve had enough (a phrase I read somewhere).
In short: Goldberg’s advice is right when applied in general rather than to particular cases. Let me explain. A successful entrepreneur never gives up, but what they never give up is the entrepreneurial path itself. Nor should they regret having failed in earlier projects, although they do have to decide to let go of what isn’t working. And that isn’t giving up. It’s being very smart.
Further reading
- Never give up: the one thing successful people never do
- Why failing in business in Spain is anything but romantic
- 10 reasons small businesses fail at the start
Featured image: Dllu, CC BY-SA 4.0, via Wikimedia Commons.
