Project Peak Theme 2: Failure is a Good Thing!
A version of this story appeared in American City Business Journals. Interview with Joe Colopy, CEO of Bronto Software.
My recent TED talk, “If there’s a mountain, Climb It!” that studied the correlation between those that climb the 7 Summits and entrepreneurs who start companies successfully, gave birth to seven themes. In this segment, I share theme 2 – failure can be a good thing!
First-time success is lucky. First-time failure is the norm. Give yourself permission to fail. Few failures are fatal and often clear the path to success. In fact, many companies now seek those with a resume that includes failures as well as successes.
6 in 6
Failures often inspire entrepreneurs to start businesses. Being a part of 6 companies in 6 years that crashed and burned, and hitting “rock bottom,” Kevin Przybocki of Austin stepped back to think about what he really wanted to do next.
Over the six years, he learned a lot of lessons. One was of trust when they did not find the right investors. He learned an ethical lesson when “investors who had promised to fund us, instead stole the idea from us.” Another was customer concentration where “one large customer, an educational institution, decided to take what we were providing in-house. Sunk the company.”
Przybocki cites another lesson that troubles many entrepreneurs – lack of focus. In the late 90s, with a big name venture fund, Kleiner Perkins, behind them, they “bounced around and morphed ideas – added this, that. Switched courses too soon. We were spending too much money and not getting customers. The crash came, we didn’t have a good customer base, so went broke. We had a first time CEO, lack of leadership, had smart people who didn’t know how to manage a company, line up the team in the right direction and motivate people.”
From these lessons, Przybocki did a situation analysis and decided when he co-founded Anue Systems in 2002, “better not count on raising outside money. Investors were on the sidelines, and not investing.” Learning from a string of events that didn’t go so well enabled Anue to grow to $42M in revenue without outside capital and an exit in 2012 for $145 million in cash.
Add Rigor to Gut
Stephen Malik, founder of Medfusion of Cary, believes in embracing failure and to encourage his employees to fail. He speaks of his many “notorious failures. So many, hard to pick out the juicy ones.”
Being a naturally “quick draw, fire – aim type of guy,” Malik has learned over the years to apply a little more rigor than just going by his intuition and gut. In an entrepreneurial setting, many opportunities arise that one can get very excited about. Failure happens when “you get ahead of your headlights.”
To be less likely to fail, Malik developed a process “to slow down and take a 360 degree look at things.” While no one likes failure, he doesn’t want to avoid it, rather “be smarter about what you do.” He brings in advisors, people with different mindsets, “perhaps a little more conservative” and listens to them.
He now advises his team “to slow down and bring in cynicism and questioning.” He’s quick to add that his version of “slow down is take an extra day or two.” He doesn’t want to get buried in the process, rather avoid the mistake of investing too soon in products, which is difficult when you “live in the future.”
He recounts in the first half of Medfusion’s first life, in 2003, when he had 50 employees and introduced an eStatement ability. People weren’t ready for this; he was too early. So he had a hard decision and had to make “pretty significant” cutbacks. In ensuing years, Medfusion recovered and exited to Intuit Health in 2010 for $91 million in cash before Malik bought it back in 2013.
He said “you become careful when you are spending your own money. Make sure you’re right before plunging into an expensive project. And every software product is expensive if you want to do it right.” Malik adopted a ‘lean’ approach where he would “take a little more time up front. Do we really need to spend that $150,000? Maybe we ought to pause for a minute. And take more time to make the decision whether to spend.”
He concludes, “Don’t let failure knock you down. It’s your mindset. Ask what did you learn? And what are you going to do differently?”
Avoid ‘Science Fair Projects’
Joe Colopy, co-founder of Bronto Software of Durham which sold in the spring of 2015 to NetSuite based in San Mateo for $200M, does not look at things in the ‘binary sense of succeed or fail.’
When you’re raising capitol, which is critical for a lot of businesses, you have more of an investment view. You need to spend this money and it’s either going to work or not. When you start something organically and grow through self funding like at Bronto, you work in such iterative small movements that you are failing all the time, but the failures are so small, that you’re constantly bouncing around.
If I look back and think of key mistakes, one is, taking a long time to get Bronto started. I didn’t take a salary for three years. Half that time, I was working on some predecessor products that became Bronto. That dragged out a lot longer than it should have and was a kind of failure in terms of time.
That year and a half of working on a product could have been one month and the reason it dragged out to a year and a half is because I didn’t really know what I doing, and I didn’t really bring the customer into it. It’s easier to work on ‘science fair projects’ when you don’t have any customers or anyone giving you their opinions.
Earlier in the company, even though we didn’t have much money, we were probably too cheap with things and under invested in certain aspects of engineering and marketing that cost us a lot of time. We were penny wise, pound foolish, too conservative. We would have grown faster and avoided a lot of pain.
You learn by making mistakes, by listening and trying to be very, very self-aware. With time, you realize what type of role you’re best at and decide to keep on playing or move aside. What you see in a lot of companies that stall is leaders who are either not self-aware or don’t want to make that change. This is particularly true with product people. They like developing the product and they never can quite get away from it so they often don’t hire leaders underneath them, then empower them enough to actually run with it. It ends up capping their growth.
Reframe and Persist
At Microsoft, Kimberly Jenkins wanted to do business with Harvard. “If you were in the university market, Harvard would be the epitome. I went to Harvard and they wouldn’t buy one Microsoft product. I got really riled up. I used every skill I had to try and get into the door and get them to listen to me. At the end of the day they were buying the products of companies that were local to them where they had relationships with the alumni that created the programs.” And Bill dropped out…and Lotus was headquartered just down the street.
“I was competitive. I really went after it, but didn’t win the business. Part of what I’ve learned with failure is to reframe the situation. What can I get out of this that might be helpful? I learned from Harvard to spend a lot of time listening. What is it you don’t like about this? What do we need to fix in order for you to give me your business? What I did with Harvard, and then I started to do it with everybody else, is I engaged the professors there in doing beta testing. Microsoft got all this debugging or free, and Microsoft was notorious for having pretty buggy software.”
Microsoft didn’t know what hit them. This was the best thing that could have happened because academicians want to lift the hood and tinker and figure out what the problems are and fix it. Microsoft was getting tremendous service from people who would keep it all proprietary. They wouldn’t steal it and start their own company, but they would make Microsoft products better. Faced with years of “failure” of not winning Harvard’s business, Jenkins reframed and rallied Harvard and other universities to engage in helping problem solve and through the process built mutually beneficial relationships. Eventually that led to business with Harvard. Also it didn’t hurt that Lotus didn’t last. Jenkins comes back to the point about persistence – “keep at it.”
About the Author
A graduate of MIT and Harvard Business School, Ueng served on management teams of five emerging growth tech companies before founding Savvy Marketing Group in 2003, recently rebranded to Savvy Growth. Having served on adjunct faculty at UNC Kenan-Flagler and Fudan in Shanghai, Ueng has been named one of Audrey’s 8 Asian-American Women of Influence.