While most venture-funded start-ups fail, some entrepreneurs who fail at one can do another that becomes a super-hit, says Ajit Balakrishnan.
I often worry that we do not spend enough time and effort to learn how to fail correctly.
I worry because, in trying to accomplish what you set out to do, whether it is a tech start-up, or, if you are a journalist, pursuing a news story, or, if you are an economist, creating a new model explaining why manufacturing does not take root in India, or, if you are in college, winning the heart of that beautiful classmate seated across the aisle from you in class, the chances are that you are as likely to meet failure as success.
Silicon Valley thinkers are the ones who first started asserting that failure is something that needs to be managed as carefully as success.
Based on his study of more than 2,000 companies that received venture funding, of $1 million or more, in the 2004 to 2010 period, Professor Shikhar Ghosh of Harvard Business School says that, if failure means investors losing all their money, 30 per cent to 40 per cent fail; if failure means not meeting projected return on investment, then more than 95 per cent of start-ups fail.
With these failure rates, failure then becomes a school for future successes.
This empirical observation that the vast majority of venture-funded start-ups fail is often coupled with another empirical observation, that an entrepreneur who has failed in one start-up can at times do another that becomes a super-hit success.
Reid Hoffman, who at the age of 20 founded an online dating site SocialNet.com, which failed, co-founded LinkedIn five years later, which saw success; he is merely one of many hundred examples of this phenomenon.
It is from the experience of Silicon Valley’s venture funding that we have all learned the 'science' of failure and its three edicts: Fail Often, Fail Fast and Fail Cheap.
Fail Often means going out and trying many different ways of doing things.
As you discover what is working, do more of that and do less of what does not work.
Fail Fast means that if something is not working, stop work in that direction.
Fail Cheap means find inexpensive ways to experiment; no failure should be big enough to sink the company.
Rapid prototyping is one way out -- the process of quickly building the main feature of a product or service, this provides a way to get your idea in front of potential end-users.
Getting the idea out of your head and into a working model is an effective process for eliminating initial shortcomings and misplaced design assumptions.
Then, of course, the issue of what constitutes success and what constitutes failure is another dimension of the success/failure issue.
For example, if you are an Indian Institute of Management student today and choose to measure your success by the placement salary level you achieve at graduation you better make sure that you have taken the courses that line you up for a job in the financial services or consulting industries because, at least as of now, jobs in these industries pay 25-50 per cent more than in other industries.
If your heart is set on a nurturing profession such as human resources, you better reset your measure of success away from salary earned to something else, perhaps the number of your recruits that achieve success in later life.
In encountering the world that lies ahead for young people entering the work force today, there are few known rules about what works and what does not work; everyone will be thrown into situations where they will have to try new things, often fail, and from those experiments learn what works.
This new world can be so strange that if you start thinking of all that can go wrong (because none of the formulas for success that you have learnt in college seems to work), you may end up feeling paralysed and unable to act.
If you don’t experiment and accept failure as an opportunity to learn, you will not find the keys to future success.
Thomas Edison tried more than 10,000 times to invent the light bulb; each time it looked ready for the market, but failed.
He first used platinum as the metal for the filament, but it was too expensive a material for the bulb made from it to be sold in the mass market and would, in addition, have required extra thick copper cables to distribute electricity for these bulbs.
He then tried a carbon-based filament which did not last long enough.
After he finally succeeded, he created not merely the electric bulb but also the electricity transmission system, which together laid the foundation of the modern electricity industry.
When asked about his failures, Edison replied that he knew 'definitively over 9,000 ways that an electric light bulb will not work.'
The image is used for representational purpose only. Photograph: Reuters