- It is well known that the default state of a startup is failure.
- 90% of startups and 75% of venture-backed startups fail.
- But failure doesn’t mean losing: Here are the lessons from 9 entrepreneurs on why failure can help build a business.
Reasons range from improper product market fit, lack of capital, poor partnership, regulatory hurdles to poor hiring and more. These factors often act as multipliers in the startup world. Everything might be going well, but if there is a small hiccup in the system, it could threaten the entire existence of an already vulnerable startup.
It’s important to avoid mistakes, but it’s also worth embracing them and learning important lessons from them to avoid making the same mistakes again in the future. We asked the World Economic Forum’s technology pioneers to reflect on their top mistakes and key learnings. Here’s what they said:
Negative feedback is also useful
Carrie Chan (Co-founder and CEO, Before meat)
However, when we received negative feedback from two investors who decided not to invest in us, it was tremendously helpful in shaping our strategy going forward. The reasons they gave us not to invest in ourselves eventually led to us improving. In this first example, our product idea was challenged. The feedback allowed us to better define and differentiate our product to make it more sellable in the marketplace. Ultimately, we were able to come up with a patentable idea and product concept based on more research data and thought processes.
In the second case, our market strategy was considered suboptimal. But through the feedback, we’ve accelerated our market strategy reform, which has resulted in a growth in our company’s footprint. We are aware that we cannot please every and every investor. But we had to learn to take a bird’s eye view of ourselves in order to find meaningful feedback from investor-specific considerations.
We need solutions to current problems
Karim Engelmark Cassimjee (CEO and co-founder, engzyme)
In the early days of the company, we often created solutions that we thought were great, but which turned out to be very difficult or even impossible to sell. They may have been beautifully constructed, but they didn’t offer as much value as we expected. They were basically solutions looking for problems. What we need are solutions to current problems. Now we always try to develop solutions to problems which are clearly stated by customers.
Leaders need to quickly gain the approval of their employees
Kasim Alfalahi (Managing Director, progress)
In any business, success depends on the organization working together to pursue common goals. For a startup, this teamwork is vital, and the founder plays a central role in building the corporate culture that underpins it. With my colleagues and my team, we developed a set of core values as a framework for how we would work together effectively. Demonstrating these values helps us shape our image of both our partners and our employees. Therefore, all must believe in them and follow them.
While most people are willing to do this, there may be some individuals who are unwilling to change their own established behaviors or ways of working. If you allow team members to continue to work in conflict with your values, you risk undermining the entire organization’s commitment to developing your shared work culture. The realization for me was that I have to act faster to avoid this risk.
Attitude is the key to success and maintaining the founder’s sanity
Ambareen Musa (Managing Director, Souqalmal)
Failure is a regular occurrence in business. You could be hiring the wrong person for the job or not considering important macro factors affecting your business. You might be blinded by extreme growth through fundraising, but end up losing touch with your business.
My biggest mistake was hiring too quickly. My drive and ambition meant I didn’t carefully select the right candidates for my company. I needed the support and needed people so that we could keep growing. But hiring the wrong candidates is a big mistake. As a company, you should try to be sustainable with your own growth. By hiring too quickly, we ended up with chaotic procedures, overspending and no sustainable work culture. My greatest learning is the following: Hiring employees is the key to your success, but also to your sanity as a founder.
Learn to love and embrace change
Natalia Karayaneva (Managing Director, Property)
As a young founder, you devote more time to your career than to your family. They are riskier, more idealistic, but immature in decision-making. This can lead to hiring less experienced teams and taking every little mistake personally. Ultimately, the goal in life of every entrepreneur is to build and create value. I’ve always been a “builder” and loved starting from scratch to change the world.
I switched roles from real estate developer to software developer. As a technologist, I knew the industry could be improved. As I searched for solutions, I discovered that blockchain was the answer I was looking for. It could make the property selling process faster and easier. Blockchain could open everything up to a global market. If I had to give one piece of killer advice, it would be: “Learn to love and embrace change!” Only those who love change can adapt and grow quickly. One of the biggest challenges in our society is that time goes by very quickly and people try to slow it down. Once you embrace the speed and are present, you can only win.
Failure is a path to success
Charles Bark (founder and CEO, Hinounou)
Failure is the path to success. The harder you fall, the more of it you’ll take with you. My biggest corporate failure was in relation to stock allocation. With my startup, we were in the idea generation phase, which is the most vulnerable phase. It is not easy to convert an idea into a tangible and qualitative product – especially in the disruptive innovation industry. We needed experts to help us with this. But such resources are very expensive and our financial resources were scarce at the time. My mistake was to be too generous and too flippant in offering stocks to these experts. Turns out they didn’t have the same passion or long-term commitment that we did. They were only highly qualified consultants for a short time. It’s fair to say that I was blinded by my passion and inexperience. I didn’t understand that these consultants would only support me for a short time on my long entrepreneurial journey. When I finally realized my mistake and wanted my shares back, I had to hire lawyers. The whole process was extremely costly financially, but also difficult to bear emotionally.
Offering shares to Experts is not recommended. I should have taken out a loan to pay for her consulting fees instead. You should only allocate stocks if there is a certain level of commitment and also a large financial investment. An ideal shareholder should buy their shares and demonstrate their commitment by investing time, money and network resources – not just their knowledge.
Failure got me to where I am today
Chrissa McFarlene (Founder and CEO, patient)
Everyone has ups and downs in their life, but I would say failures along the way got me down the startup path and to where I am now. When I entered the blockchain industry as a CEO and founder, I was often met with criticism that often questioned my authority to be there. But it motivated me to take risks and start my own business in a highly male-dominated industry. One of the biggest challenges I faced during this journey was accessing venture capital as a woman and especially as a minority woman. Most of the investors we spoke to didn’t really understand the bridge between blockchain and healthcare or saw our path to revenue. However, it has taught me what it takes to thrive as a startup in this competitive landscape and strengthen our core focus on what we offer as a company.
I believe putting things in perspective is the most important lesson I’ve learned. Now I’m at the forefront of this blockchain technology space, inspiring other women to forge their own path.
Never stop learning or listening
Daniel Nathrath (founder and CEO, Good health)
When we started Ada, I already had extensive business and entrepreneurial experience, and I was confident that these skills and experiences would be easily transferrable to the healthcare sector. But the truth is that healthcare is unlike any other industry and I was a bit naïve about that fact at first. I thought I could enter healthcare with the same rapid transformation and innovation approach that I’ve seen in other sectors, which in hindsight wasn’t the right approach.
In healthcare, “act fast and break things” just doesn’t work. Luckily I had two fantastic co-founders with medical and scientific backgrounds and by working together and listening to each other’s different perspectives and experiences we were able to strike a balance between careful innovation. I think the most important lesson I would 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 become stronger
Meirav Oren (Co-founder and CEO, Versatile)
We failed an important demo, but our ability to stand up and admit the cost of that mistake was a huge win. As an organization, we learned to look for our mistakes in all steps before the demo. This created a level of accountability that supported the team members who were in direct contact with the customer when the demo failed.
I remember going from feeling complete failure to “we’re going to recover and get stronger” in a few hours. I realized that failure is learning and we learned a lot that day. We won that account too and the rest is history.