Editor’s note: This article was first published in February 2014. It reports news from January and February 2014, and does not cover his plan to start another company or anything he did afterwards.
Chris Poole, the young entrepreneur behind 4chan, announced the closure of Canvas, an app that had 1.4 million users, looked like a sure winner and had won the backing of major venture capital investors. On 21 January, users saw a message that read: “All good things come to an end.”
Its seven employees, including its 26-year-old founder Chris Poole, had not found a way to make money from what were, until then, 1.4 million users.
Most companies born in Silicon Valley fail. Estimates put it at 90%, yet Silicon Valley glorifies failure with sayings like “fail fast, fail early, fail often”. And yes, we all know that failure is part of success (see how an entrepreneur succeeded after failing 15 times). But try telling that to the investors who backed a company expecting a high return and now learn they won’t see a single cent back…
The truth is that Chris Poole took this failure with a cool head and great maturity. According to Inc.com, he earned the respect of his investors even though he cost them money (3.6 million dollars). He could have proposed another funding round to raise more capital (as many Silicon Valley companies do), but he chose to accept the failure, acknowledging that even if he had received 20 million to carry on, he would not have known how to use it to make the app profitable.
In his words, he simply could not imagine how more capital could have been used to make the company work.
He does admit, though, that in an effort to do right by his investors, keep their trust and pay them back, he kept looking until the very last moment for larger companies willing to buy the app, and that attempt clearly failed.
See also: How to build resilience to failure
See also: Transforming a business and making decisions in difficult situations
According to Chris himself, it was a failure from the start: they had a good idea with a product aimed at a market, but there was no way to turn that product-market fit into something commercial and make money from it.
The commercial side is universal for every company, as is having a business model that can scale quickly, so that if you have investor funding you can pay your investors back without trouble.
That is why, waking up one morning in the middle of the fight for the company’s survival, he saw the future clearly: there would be no happy ending for the company. So he put that energy into being honest with his investors and helping his employees find other opportunities and new jobs, salvaging whatever could still be saved from the company.
Chris Poole was surprised by the understanding and support he began to receive from the investors to whom he was explaining that they would not get their money back.
What is Chris Poole thinking about now?
He admits that failing with this company has not been a pleasant experience. He also says that winding down and then closing a company takes much more work than starting one.
Although he doesn’t know what he’s going to do right now, he does know that he will start another company, drawing on the experience of this failure. In fact, he says we’ll be hearing from him soon.
Failing with dignity
Most entrepreneurs who fail try to hide: they stop answering the phone when the company is going downhill, and the people involved often find out from third parties that the company is in trouble. Chris did the smartest thing, which was to post on his personal blog what was going to happen, call his investors and talk to his employees, as well as send a statement to the press with a proper explanation.
Just as you like to show off in public when your idea has been a great success, you have to face up to it when you fail. This simple act of courage, in which Chris passed with flying colours, is what separates a failed entrepreneur from one who is on the road to success, and for whom failure is just part of success. It’s the best way to limit the loss of trust that follows a failure, also known as “failing with dignity”.
Further reading
- 7 steps to define your market once you have a business idea
- 10 leaders give advice to entrepreneurs
- 9 tips from Richard Branson for entrepreneurs
Featured image: Sage Ross, CC BY-SA 3.0, via Wikimedia Commons.
