“I spot winners by looking for somebody who went out and tried a business by him- or herself and maybe failed several times, but still has that determination, that love, and that passion for the company. It’s very important to me that somebody has failed.”
DAYMOND JOHN, Fubu founder and star of ABC’s Shark Tank
We’ve talked about things that are preventing you from starting up, whether that’s a hard-to-quit cushy corporate job, or a hard-to-shake uncertainty over whether you’ve really nailed down your brilliant idea.
Chances are, what might be really holding you back the most (whether you admit it or not) is a fear of failure.
But look around. Smart people say we should all fail, fast and often.
In fact, one argument is that failure can be the best teacher. “The benefits of a mistake can be greater than the costs. Failure is simply a departure from expectations,” says Paul Schoemaker, author of Brilliant Mistakes, which challenges the negative stigma often attached to mistakes and failure. “Basically, it’s the world telling you that you didn’t see things in the best way to begin with.”
Failure is sometimes heralded as the foundation of innovation. Mistakes allow for variation far beyond what was expected—you make a wrong turn, but ultimately find a better road to your destination. Thanks to mistakes, we now have such medical innovations as penicillin, smallpox vaccine, pacemakers, Viagra, and many others, according to the book Happy Accidents by author Morton Meyers.
And if you think about it, there’s nothing new about failure in business, writes Inc. reporter Eric Markowitz. “In fact, failure is probably the constant of modern commerce: Companies are launched, they exist for a period of time, and then, well, they pretty much all fail.”
These days Silicon Valley—that legendary breeding ground of entrepreneurs—loves failures, and for good reason.
Why? The most obvious answer is that failure has become inexpensive. Decades ago, starting a business typically entailed borrowing capital from a bank, friends, or family. Opening a physical storefront required lots of capital. Today, the Internet has democratized the process for starting up—building a website and hosting its data, even for e-commerce, are relatively inexpensive.
And while the web has made it easier and cheaper to start up and succeed, it has also made it easier and cheaper to fail.
“Simply put, the risk of failure is dramatically lower than it used to be,” says Brian O’Malley, a general partner at Battery Ventures, a Silicon Valley venture capital firm. “With cloud services and new frameworks, something that used to take $10 million to test out can now be launched for $200,000. This makes it far easier for investors to take risks on unproven ideas and unproven teams.”
Erica Zidel, who started an online babysitting co-op with her husband in 2011, says the Valley’s embracing of failure has a lot to do with maturity and experience—or at least the perception of having them.
“In the start-up world, failure is almost synonymous with learning experience,” she says. “Being a founder who has failed before signals to the community that, one, you’ve done this before, and, two, you’ve gathered information on what doesn’t work and are better armed to create something that does.”
All good reasons not to let failure hold you back. In fact, it might just make you more successful than you ever dreamed.
Since Richard Branson opened his first Virgin Records store in 1972, his Virgin Group has tried to enter a number of spaces, from makeup to vodka. But not every new venture has been a success. Here’s what Branson says he learned from seven of his biggest failures.
1.Student magazine. Branson’s first venture was a magazine run by students. He envisioned the Student brand would eventually include travel companies and banks. When a potential acquisition failed, it was for the best—the acquirer didn’t share Branson’s big vision.
2.Virgin Records’ legal trouble. In 1971, Branson sold discs at Virgin Records that were designated for export—thus avoiding a 33 percent tax. After getting caught, Branson was slapped with a £60,000 fine. After the incident, Branson knew he needed to get more serious about the business.
3.Virgin Cola. Branson tried to put Coca-Cola out of business with the launch of Virgin Cola in 1994. But business fizzled by 2012, and Branson said Virgin made the mistake of not offering something “radically different enough” from Coca-Cola.
4.Virgin Cars. From 2000 to 2005, the Virgin Group had a little-known site where people could buy and sell cars. Branson said he thought Virgin Cars failed because he had the “wrong angle,” and he should have explored an auto business centered around sustainability.
5.VirginStudent.com. A precursor to Facebook and MySpace, VirginStudent, launched in 2000, didn’t gain traction quickly enough, and was shut down in 2005. In a blog post, Branson said the venture did open his eyes to how powerful social media would become one day.
6.Virgin Pulse. Virgin knew that it had to come up with a competing product as Apple’s iPod started to take off in 2004. But by the time Virgin Pulse was out, it was already too late. Branson said the experience taught the team not to be afraid to exit markets too early.
7.Virgin Brides. Branson publicized the 1996 launch of Virgin’s bridal store by dressing up as a bride. By 2005, Virgin Brides was no more. Branson mused that it failed because “there aren’t many virgin brides,” or because promotional pictures of him in a dress (Google it) were a turn-off.
You may say you don’t have an idea, let alone a vision. If this is the case, then consider the advice of bestselling business book author Paul B. Brown.
“The reality is when you dig a little deeper, invariably you find you have lots of ideas—‘Maybe I’ll open a restaurant; maybe a personal shopper service,’” Brown says. In fact, you might have a whole notebook full of ideas—none of which you have pursued. So why did nothing happen?
Maybe you thought none of them were any good. Or maybe you spent all your time trying to refine them, or playing “what if” games, pondering dozens or hundreds of scenarios that might or might not happen.
“In this kind of situation, you would be far better off getting out and doing something, because action changes reality and thinking doesn’t,” Brown says.
When you take action, you understand a little bit more about what you’re trying to create. You gain more knowledge. You learn about opportunities, whether that’s potential partners or even more innovative avenues to follow. By contrast, when you sit alone at your desk just thinking and not acting, nothing happens.
Sure, ideas can arise in a flash of insight. But more often (and more reliably) your ultimate idea will surface and develop through your interactions with other people or the marketplace. You don’t need the idea as much as you need to get started. Worst case? You take a few tiny steps and discover you don’t like what you’re doing. Or maybe you decide it’s impossible. If that happens, you reboot and move onto something else.
In this chapter, we’ve taken an in-depth look at the first stage of your entrepreneurial journey—how to come up with your remarkable, brilliant, kick-ass idea. In the pages ahead, we’ll take a look at the next steps, outlining the typical approaches that entrepreneurs take to get their startup ideas off the ground. We’ll also dive into the practicalities, from choosing a legal structure for your business to obtaining permits and licenses.