Much has been written about the value of failure in the entrepreneurial sector. But do VC’s value failure and if they do, on their own watch or on somebody’s elses?
Those of us in the trenches understand how likely failure is with every startup we do. The odds are against us from the start. Add the economy, competition, regulation and whatever else can be thrown at you, the odds are low that you will succeed.
Here are some incredible, noteworthy failures:
- Louis Pasteur was only a mediocre pupil in undergraduate studies and ranked 15th out of 22 students in chemistry.
- Henry Ford failed and went broke five times before he succeeded.
- R. H. Macy failed seven times before his store in New York City caught on.
- F. W. Woolworth was not allowed to wait on customers when he worked in a dry goods store because, his boss said, “he didn’t have enough sense.”
- Michael Jordan and Bob Cousy were each cut from their high school basketball teams.
So if entrepreneurs fail and can learn from failure, how do investors look at failure?
Ron Conway and Mike Maples speak candidly about failures in their investments. Mike makes the point that its not the entrepreneur that fails but the business that fails.
His example is extraordinary. He invested in Odeo, the podcasting company, which within 6 months was clearly not going to make it. But rather than demand his money back, he told Evan that he told Evan to take whatever was left and put into his next venture, which was Twitter.
So when you are interviewing potential investors for your next gig, ask them a few questions:
- Describe a recent failed investment and what went wrong and what the team learned from that
- Have you invested again in any entrepreneurs whose businesses failed with you as an investor?
You may get a great picture of what life will be like with that investor when times are hard — and they often are.