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I Failed at 4 Start-ups: Here's What I've Learned

by Tony Chen

Why don’t we talk about failure more?

For some, it’s just too painful. All that blood, sweat, and tears went into something that has turned into nothing. Failing at a start-up mistakenly becomes too quickly linked with “I’m a failure.”

For some, it’s too embarrassing – some of us live in cultures that shame failure. It’s too hard to face your parents / family / community who don’t understand why you didn’t just “get a regular job.”

Part of why I haven't talked about my failure is because the story isn't mine alone to tell. It involves teams, and often involves extremely personal decisions and interactions between founders, customers, and key investors. For some of these folks, I’d take a bullet for them. But, not everyone is comfortable talking about their failures in the same way.

However, I'm in a unique position in that I've failed so many times that I can aggregate all of my failures not to point to any one situation or start-up. Over the last 15 years, I've started 7 companies and failed at 4 of them. Here are a few lessons I’ve learned along the way.

Start-Ups are a team sport. So, get on a great team. Or make one.

Very rarely do you find an entrepreneur who has all the superpowers necessary – many of which tend to work best in tension with another – to pull off a successful 0 to 1 journey. The best teams have individuals who complement each other well. Usually, one person is a big picture thinker/visionary, the other more detailed. One person is more outwardly focused, the other more inward/operationally focused. One person is more technical, the other more commercial. If a start-up is a car, one person is the fuel, and one is the brake – you need both pedals for a fully functional car. And it tends to work better when both pedals aren’t being pressed at the same time. 

Now, creating a founding team can take many shapes and sizes – and it doesn’t always have to look like a typical team of 3 full-time co-founders. Think about “founding team” in a broader context. There may be a lot of people who are quietly pitching in to help, advising on big decisions, connecting you to key connections, even serving as a confidante / therapist – but aren't official "co-founders” – that's okay, too. The goal in the beginning is to attract all kinds of people to be champions for the business. Think of your business as a set of concentric circles, and you are populating seats in those circles all around you. Just pay special attention to your innermost circle. And sometimes the outer circles fill up before your innermost circle does.

Finding a great co-founder is like finding a great spouse.

Co-founders tend to be people you’ve known for a long time. Sometimes, it starts with an epic friendship. One of the most successful ventures I ever started was with a college buddy I’d known for almost 15 years.

History is important, as there’s no replacement for elapsed time to see someone’s true character. How did they respond when things got difficult? When someone broke a promise? When they broke a promise? But it doesn’t have to be you that observed it first-hand. Second-degree connections from your most trusted friends are more important and powerful than most people realize. Take it from someone who was set up on a blind date by a great friend, was engaged in two months, and married in nine months. To elaborate on a common phrase, it’s not who you know, it’s who your closest friends know.

If you are launching a start-up today and don’t have a co-founder in sight, don’t worry. It can still be done. But like in marriage, consider “dating” for a while. Try working on some problems together. Go pitch an investor, customer, or key employee together. Talk about the “real” stuff early – I’ve seen too many co-founding relationships break apart because these harder topics weren’t covered earlier, and the big 4 are:

  • Vision - Are we trying to go to the same place? Are we headed in the same direction?

  • Motivation - What are our primary reasons for doing this? (This one can be different, but I think it’s important to be articulated) Mercenaries and missionaries don’t usually mix. Also, life stage is important to consider – someone who’s single will have different pressures than someone with 5 young kids at home.

  • Values - How are we going to get there? What’s our take on bringing on outside investors, outside advisors? Are we okay doing business with [name your gray sector]? How will we treat our people? Each other?

  • Conflict - How do we deal with conflict? Is one person more of a conflict-avoider? I don’t trust teams that don’t have any conflict – that means they’re not talking about the right things. Conflict is necessary and dare I even say – critical to start-up success. It’s about setting the ground rules for healthy and constructive conflict. 

As a side note, great friends don’t automatically translate to great co-founders. Working styles, work pace (unusually hard to gauge without working together on something!), and goals can oddly be at odds. So, even with great friends - talk about the hard stuff above.

A lot of people also ask about how to split equity. My take has always been that co-founders need to trust each other enough that if anyone feels like the equity splits are getting out of whack, they bring it up. Agree to talk about it openly, and not let it fester. At one point in one of my start-ups, I felt that one co-founder might be straying or becoming demotivated as his equity was too low (because he was too generous initially). The other co-founder and I agreed to actually give this co-founder more equity. Kind of a rebalancing. Equity should be a measure of value created and risks taken. This approach has worked in two other start-ups.

Finding investors is hard. Finding aligned investors is harder.

If finding great co-founders is like finding a great spouse, investors are like finding adoptive parents/uncles/aunts – and maybe even in-laws. Investors have their own stakeholders, values, and agendas. While every investor wants you to “succeed,” the definition of success is important. Spell out what success means – especially with timing, growth, profitability, and impact.

Not all Venture Capital firms are the same. Some are: active vs. passive, financial background vs. entrepreneurial backgrounds, totally financially driven vs. double/triple bottom line driven, first-time fund managers trying to get going vs. fund 3 fund managers pivoting to a larger TAM. And in terms of agendas, make sure you find out if they actually have dry powder to deploy – there are some who are really just getting started and trying to raise capital from LPs, and they need stories / real pipelines to entice their LPs. Others might be done deploying a fund and starting to think about a subsequent fund – or maybe they’ve decided it’s time to stop on-going operations – i.e. zombie funds that are just holding their investments and maybe looking for a portfolio sale. (Aside: we will always be upfront if we have capital to deploy or not.) As I’ve mentioned elsewhere, all money comes with strings - some positive, some negative – usually both. In the end, it’s not the firms, but the humans you’ll be working with. Life is too short to work with jerks, even jerks with money.

The hardest part about start-ups for me has been managing my inner critic.

All of us – whether we realize it or not – have a personal board of directors. Picture 12 people sitting around a table – all of them are different parts of you. All of them are speaking to you all the time and wanting to advise you. A few of them might even be screaming at you. Some are helpful and some aren't. Part of the entrepreneurial journey is to learn how to "fire" the destructive / negative board members – I call them shadow voices.

How do you turn the volume down on those shadow voices – or better yet – replace them with voices of reason and truth? "You're not good enough" and "You don't belong here" spoken to yourself thousands of times over years – replaced with "you've got this" and "you are exactly where you're supposed to be" can make a world of difference with every single decision you make today (and every single relationship you show up for!). The entrepreneurial journey can be lonely and tiring – this is a perfect recipe for even the best of us to have some days that are taken over by our shadow voices. 

I now believe mastering this mental game for entrepreneurs – this deeply rooted inner dialogue within us – may be the most important part of the journey. The more I’ve shared about this honestly, the more I’ve realized that we are all struggling with a lot of the same shadow voices. In my experience, the best way to fight shadows is to (1) shine a light on them by sharing about them; and (2) keep them in front of you (so they can’t sneak up on you). I wrote a bit about my journey to begin to win this battle against my 4 strongest shadow voices in this poem


There’s a lot more that I could write about, but much of it ends up being business advice.  As you can see, the most important lessons I’ve learned in all of my failures have been about the people I surround myself with and the influences I allow into my thought life. For me, it comes down to relationships. This gives me a lot of hope! While there is a whole lot of life out there that is completely outside of my control, I can nurture -- day by day, month by month, year by year – a mindset, a faith, and great relationships to win the war.



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