A Few Thoughts on Angel Investor and Entrepreneur Failure

With COIN’s Glorious Failure Innovation Challenge (their summit on August 28-29th) and some recent posts on risk and entrepreneurial failure by Venture Capitalists, Brad Feld and David Gold, I’ve been doing a lot of thinking about the role of entrepreneurial failure in our startup community. I’ve been pretty vocal about how my entrepreneurial failure has shaped me, but thanks to some words of wisdom from Carrie Van Heyst, she challenged me to think about how adversity to failure affects the broader global entrepreneur community. Here are just a few of the things I found:

  1. The Global Entrepreneurship Monitor has identified cultural adversity to failure as one of the key indicators of a country’s entrepreneurial potential. They have conducted a study to estimate the percentage of the population who view a fear of failure as a barrier to starting a business.
  2. In Sweden, their conformist culture is both a positive and a negative entrepreneurial force. It is not widely acceptable to be “different” and failure comes at a high social cost. However, once something starts to take off, their herd mentality makes it REALLY take off. Additionally, the country’s generous welfare system reduces the feat of financial failure for entrepreneurs and enables them to make more financial risks.
  3. A fear of failure is also a significant barrier to innovation within large corporations. This is also a plus and minus for startups. There are fewer opportunities to start a business within corporations, but corporations are likely acquirers because buying innovation allows them to innovate without taking the risk of early stage failure.

Through my exploration of failure, I am starting to think that a fear of failure and a willingness to fail are equally important factors of success. Which……probably explains why the US falls right in the middle of the The Global Entrepreneurship Monitor failure adversity scale. You have to be comfortable enough with failure to get started, but if there isn’t enough to lose, it is hard to keep going.

What do you think? And how should this shape our role and strategy as angel investors?

Should we only invest in entrepreneurs and fund managers who have a track record of success?

Would you invest in people who have only experienced failure, but have learned from their mistakes?

How many failed investments should we as investors allow ourselves to make?

….Any thoughts would be appreciated.

In closing, I’d like to pass on a few inspirational thoughts on failure that others have passed on to me:

From my mother: “You can’t finish a race unless you start, and walking is the worst case scenario.”

From my father: “If you don’t fall, you aren’t trying.”

From my lifelong friend Lauren Snyder: “I’m not lost. I know I am going the wrong direction.”

From Thomas Edison: “I have not failed. I’ve just found 10,000 ways that won’t work.”

From Winston Churchill: “Success is the ability to go from failure to failure without losing your enthusiasm.”

And lastly, from successful entrepreneur, Len Fassler (Brad Feld’s Mentor): “Just remember – they can’t kill you and they can’t eat you.” (unless you watch the local news :))

Any words of wisdom from you? 

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2 Responses to A Few Thoughts on Angel Investor and Entrepreneur Failure

  1. Morey Bean says:

    As an entrepreneur and long standing member of the business community who has met with both stunning success and staggering failure I’m glad that the venture capital community is paying attention to the attributes of failure as a topic, and I’m sure that the conversations will continue via the routine and essential topic of risk and reward which are balanced in the decisions about whether to support an entrepreneur or not, launching him/her toward success and failure.

    It’s also very important to bring failure to bear as an OK topic of discussion to the entrepreneurial community, although culturally and socially we’ll always be fighting the fear of rejection in our public discussions of failure, that disclosure of our failures will potentially be perceived to be a sign of weakness and/or incompetence and used against us, which unfortunately (but naturally) became part of our psyche on the playground as 7 and 8 year olds. Hence the anonymity in the blog post that Brad mentions.

    I’m hoping that the conversation moves on to include more community discussion about the rigor of passion and purpose as the source of partnership between entrepreneur and investor as the foundation of the investment ecosystem, where the here and now of decision making that happens every day in the lives of entrepreneurs can provide fruitful lessons for all of us. Not the “Oh I’m excited about this!” passion, but the basic and measurable assumptions that we’re making that determine success and failure, as we try every day to carefully gauge with our actions how long it will take for change to occur in our customers’ and clients’ buying behaviors that we hope will bring profit to what we’re working toward sooner than later. I think that discussions of rigor and learning and change will be much more powerful and enduring than those of failure. These positive discussions will help us feel connected and allow us to be more focused on positive purposeful ways of separating our customers from their money. I think better investment decisions will result as a consequence of talking about willful energy and the future, not of failure and the past.

    I’m a firm believer that the entrepreneur’s ability to bring this measured passion to bear in the here-and-now of the marketplace as their ultimate measure of competence, a characteristic that should perhaps be the biggest determinant of a decision about whether to invest or not.

    I think too that the well established cultural and social value of a second chance attitude should be brought to bear, where a shared comfort in learning from our mistakes can be found, helping realize a beneficial sense of belonging to our community, which is one of our most important needs.

    One of the celebrations of this purpose and passion became part of my life as recently as last night on the patio of the St. Julien as my sweet and lovely wife Debra and I danced to Sambadende! We blew our weekend wad imbibing in a wonderful celebration of our life together, where we’re both sharing the rigors of purpose and passion, day in and day out. It was also reaffirming to see some of the Unreasonable Institute ‘investment community members’ dancing the night away too, as they took some time to have some fun after what I’m sure was another successful Summer Institute, full of passion and purpose. Is that celebration methodology in the Handbook of Successful Entrepreneurship? Hell no. Is it a measure of success? Hell yes.

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