Kevin Systrom. Mark Zuckerberg. Larry Ellison. Jeff Bezos. Feel free to fill in more names. Off the top of your head I bet you can think of a dozen or so business successes. These are the poster children of entrepreneurship. They beat the odds. Bet everything and won. This is proof that perseverance pays off, right? Well not always. In fact, not even that often. Depending on what stat you cite only about 1 in 4 companies succeed. Failure is more likely than success, but success stories are more fun to tell. It’s like the lottery. No one ever writes stories about the poor families that gamble their food money on tickets each week. That’s depressing. If there’s a possibility of success somehow we perceive it as a probability of success. Someone has to win and it might as well be you. That kind of mindset is a good thing. We need dreamers and risk takers in order to innovate new things. But we also need to keep things in perspective.
Early in my career I met an entrepreneur who invested more than a million dollars in his venture. One million of his own money. He was firmly committed to seeing his creation through the hard times. Crossing the chasm. Going for broke; believing that perseverance would pay off. $1M could become $10M or perhaps $100M or even a billion. But $1M became nothing. It just went dark. A one million dollars gone.
If you want to join a group of Angel investors, they’ll make sure that you’re an Accredited Investor. That’s more than just a clubby label. It’s a legal Term of Art. An Accredited Investor needs to have a specific level of income and net worth. In other words, they need to be qualified before they can invest. Qualified to lose money. If their investments all go south they won’t go broke. But there’s no such protection for entrepreneurs. You can be sleeping under a bridge and still be chasing your dream. That’s good. The problem comes when entrepreneurs throw bad money after good and perhaps find themselves sleeping under a bridge after chasing their dream.
I’ve been happy to see recently that a few entrepreneurs are willing to tell their stories of failure. When you get a chance, read “Post Mortem of a Venture-Backed Start-up. Lessons Learned from the rise and fall of @Sonar.” The author, Brett Martin, is the former CEO of an “Ambient Networking” service called Sonar. Based on the way many people measure success, they were a rocket ship. They even earned second place honors at the TechCrunch Disrupt show. They were the buzz of Silicon Valley. Brett’s post is a candid and honest reflection on the mistakes they made along the way that led to their “unwinding”. Also read “The Life and Death of the World’s Best Photo Sharing App” in The Verge. It’s a story of a wildly popular photo sharing app called Everpix that just couldn’t make money with their business model. And finally take a moment to read James Altucher’s post entitled “I started 20 companies, 17 of which failed”. Even more interesting than the article are the comments. 500+ people sharing their financial struggles in pursuit of financial success. It’s great that entrepreneurs like Brett and James are choosing to share their stories publicly. Anyone pursuing a speculative business venture needs to understand that it’s just that: speculative.
I’m not writing this post to be a buzz-kill. What fun is it to think about the downside? Not much. The most important thing to learn from this is set goals and milestones that you, your team and partners can live with — and that includes your most important partner, your spouse.
Pursue the vision. Follow your passion. Bet a million if you can. Just be prepared for change it may bring.
Photo via tracy_olson on Flickr