“This is like you’re holding a loaded gun to my head and you’re promising that you won’t pull the trigger,” I said to one of our lead investors with regard to their financing agreement which penalized the company’s success at best and, at worst, sealed our fate.
He reassured me that the investment group was as committed as ever to the project and “pulling the trigger” now would be detrimental to them as well.
It had been about four weeks of intense and stressful negotiation and I wasn’t gaining much ground. I signed the document as it was. After all, I had been taking their money for about six months and working out of their office space. And he was right, why would they back out now when things seemed to be moving in the right direction?
About 24 hours later they pulled the trigger.
First, I had to tell my wife. I hated letting her down after over a year and a half of living a start-up lifestyle. A few weeks earlier she had given birth to our first child. We negotiated the date of her induction so that it wouldn’t conflict with a business presentation.
Next, I had to tell the team. I hated letting them down. Many of them had worked for months for free as I shuffled them around Chicago from office space to office space trying to find a permanent home for the company. When we finally got some investors I started paying half salaries and I was even able to put together a modest benefits package. They were now out of work.
Then, I had to tell our customers, our partners and advisors. I had to tell friends. I had to tell my parents, who had also invested. I had to tell my family. I had to tell my wife’s family (ouch!) They all believed I knew what I was doing which I apparently did not. I had let them all down.
When you make the choice to make a living as an entrepreneur you make the choice to fail, accept failure, live with failure and carry on in spite of your fear, which can sometimes be paralyzing—even for the best of us.
When you make the choice to join corporate America you can often blame others around you, blame the market conditions, blame the economy or at least you can set someone else up to take the fall. Sometimes you can avoid failure altogether.
Nobody starts a company thinking they will fail. Eighteen months before my investors pulled the trigger that ended my company I was walking floor-by-floor up 55 East Washington Street, visiting dozens of dental offices with a research survey in hand. My business was going to be a marketing service for the dental industry. I had invested the lion’s share of my life savings because I was confident in the product and the service.
It took a while to get going, but I was feeling great about our progress. We had built a customer base of several hundred users, had a team of eight people and my clients were beginning to see positive results.
But it – and I – failed anyway. Sometimes that’s just how it goes. These are the takeaway lessons my failures gave me.
It’s only through business failure that I became better at business. Maybe the competition beat you or you were wrong about the market or you just couldn’t execute well enough. Business failures, no matter how large, can be chalked up to experience. Learn the right lesson and you become a better entrepreneur as a result. These lessons are good lessons.
I trusted the wrong person.The lessons you learn from this kind of failure are bad lessons. They teach you to be cautious, play it safe, and be suspicious of others. Bad lessons are those that drain an entrepreneur of his or her confidence. Bad lessons rob an entrepreneur of the very things that give them a chance to succeed. Trust is a critical ingredient in any business relationship and, in my case, when a trusted associate covered his own ass at my expense, it cut deep and the scars can seem like they’ll last a lifetime. I’ve always been told that you should choose your investors carefully, which is great advice, but you don’t always have a smorgasbord of choices. But, I now know that I made the right choice at the given time with what I had – at least I could trust myself.
Own It and Get Over It
In my experience it’s best to avoid these people who are now cautious, play it safe, and be suspicious of others (see above). And it’s also best to avoid being one of these people. If you are going to succeed, you have to heed the good lessons and let go of the bad ones. It’s only when you can put the past behind you and forgive those who slighted you can you hope to succeed as an entrepreneur.
You have to keep in mind that in all cases, the failure seen from different perspectives can be quite different. My investors may have thought I failed them. I told them it was going to work, but I didn’t hit all the milestones they wanted and they didn’t continue to share my vision.
In the months and years following the demise of my company, I hired my investors’ companies for consulting and research projects. I referred customers to them and I tried to make up for what they had lost in my company. I felt it was best for me to take responsibility for the failure and try to make good for those who participated.
Shortly after leaving the company, I joined another start-up in the automotive space. In less than a year, the company was sold to an established player and I enjoyed accelerated vesting of my stock options and a very comfortable severance package — enough to refill the coffers and prepare for my next venture.
This is what it’s all about: not whether you fail, but when you do. It’s bound to happen. But, then you dust yourself off and do it all over, again and again.