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>>> Hi. I'm Thom Ruhe of the Kauffman Foundation. Welcome to this edition of "Top of Mind" where
today we're taking on the "F" word of entrepreneurship, failure. I'll be joined by entrepreneur, Diana
Kander, who's publishing a series of articles on the subject on entrepreneurship.org.
>>>
I'm Thom Ruhe of the Kauffman Foundation. And I'm here today for this episode of "Top
of Mind" with entrepreneur, attorney, and entrepreneur in residence of Kauffman Labs,
Diana Kander. Diana, thanks for having me here today.
>> Yeah, thanks for having me, Thom. >> Oh, it's my pleasure. So as we said at
kind of the intro I refer to this as the failure edition of "Top of Mind." In the time that
we've known each other and based upon both of our backgrounds in entrepreneurship, you
know, failure and what that means to the entrepreneurial journey and how that affects an entrepreneur
has been something, that well, if you'll excuse me say top of both of our minds. So I really
wanted to have you on today so that you can share with me your thoughts and thinking and
experience on that. And maybe, maybe we should start though getting a little bit of background
about you. >> Sure. So I've been very experienced with
failure in my own entrepreneurial journey. I have raised a large amounts of angel money
to start startups that failed. I have run successful companies that tried to have spinoff
products that didn't find a market. So failure has been a regular part of my entrepreneurial
journey, but responsible for a lot of both the ups and downs.
>> You know, one of the things I've always been impressed with you. First of all, the
confidence that you have and the ease with which you can disclose that. And that's, that's
not common amongst, you know, entrepreneurs. I find that more characteristic of, you know,
entrepreneurs that have been there, you know, multiple times.
>> Yeah. >> I'm sure you've experienced some stigma
in the past. How have you dealt with that?
>> Sure. >> And how is it that you're so confident
and comfortable with that right now? >> So failure is very taboo in the entrepreneurship
space which is very ironic because most people think it's very welcome and a regular part
of being in a startup and being an entrepreneur. But if you think about the media coverage
we receive in the entrepreneurship community, most news stories cover one of three topics;
when a company first launches, when it raises money or when it sells. So that's the vast
majority, like 95 percent of all articles are about those things. And the truth is over
95 percent of those startups are going to fail. And almost none of that failure is covered.
So we're just used to reading about nothing but that kind of lifecycle. Most people think
everybody's lifecycle is to start, get funded and then sell. And that's just not the average
story. So I actually wanted to tell the other part of that story. And so we started a series
of failure interviews. So finding entrepreneurs who had met a lot of the criteria of those
news articles, started huge companies, raised lots and lots of money and then just failed,
just in a very classic way. And they didn't have just setbacks that they overcame to reach
success, they just failed. They tried a lot of things, but they couldn't make it work.
And those are the stories that I want to share with entrepreneurs just to let them know that
it's totally normal and maybe they can use failures from others to avoid their mistakes.
>> You know, that really seems like the lost opportunity, right, that we can't extract
something from those experiences to share with others. So obviously I share your opinion
on that which is why we're enthusiastically supporting this series and trying to share
that. And make failure, you know, I don't know to the extent we can, but less of a stigma
to it. >> Sure.
>> I know there are pockets too, that, you know, not having failure would carry a little
bit of a suspicion that means perhaps you haven't tried enough yet
>> Yeah. >> or you haven't applied yourself out there
enough yet. I wonder if you may, or if you have observed a nuance difference in the way
failure is handled by men versus women. >> Sure. Absolutely. So it's very interesting.
Our interviews have been pretty equally divided between men and women, even though men make
up a majority of startup founders. And it seems like women take failure very personally.
And they take they attribute successes to outside forces like luck or advice from others.
And men are the exact opposite. Men attribute failure to outside forces, like it was totally
beyond my control, I did everything correctly. And they internalize all successes. So whenever
they do have successes it's because of things that they specifically, steps that they took.
So it's actually very interesting to see the differences between the two sexes.
>> That is interesting. It seems almost like probably the better model might be the hybrid
of the two >> Right?
>> right, a little bit of attribution on both ends of those extremes? You know, I have to
say I'm actually not flattered to hear you characterize how males deal with failure.
But I don't know that I would quarrel with you on that. I think you're quite right, myself
included in my own entrepreneurial journey. So, you know, in your interviews have you
noticed any like big common themes or, you know, repeats, you know, in the failures that
are being observed? >> So the major one is that cash is king.
So you need to conserve your cash as long as possible to be able to make mistakes. So
the vast majority of companies that went out of business just ran out of money when they
started figuring out what they were doing. >> Oh really, at that critical point?
>> Right. And that's because they started spending money before they were ready. And
so that leads to the next critical point that almost every one of the interviews we've done
has in common, which is you need to test your business model as early as possible. So most
people think that they get an idea and they go out and raise money and then they execute
on their idea. But really what you're going to end up doing is spending that angel money
kind of figuring out what your business model is. The more work you can do upfront without
spending any money >> Sure.
>> interviewing customers, talking to vendors or suppliers, the further you are, the less
likely you're going to be to fail. >> You know, and we have of course, touched
on that in other publications and things that we've done. I think you're alluding to things
like driving for that minimally viable product. >> Sure.
>> And things that let you get out in the market. I would have to say just from my own
experience in coaching entrepreneurs, it does seem to be a problem. You know, especially
it has been my observation with people with technology backgrounds, right? Boy they want
to tweak, tweak, tweak and get absolutely perfect before they go have their very first
experience with a client. >> Yeah.
>> And it seems like you lose a lot of time and probably spend a lot of money. So that
said >> Well I would just add, I think that one
of the positive things we've seen from the interviews is that they learn very quickly.
So once somebody has a colossal failure where they blow through $3 million trying to start
a startup that is unsuccessful, the next startup they are a lot more cautious. And maybe that's
why VC's love to work with people who have failed in the past or have an experiences.
But they are just a lot more careful with trying to lay the groundwork for their business
model. And they understand what the cash is for.
>> In your discussions and interviews in this case, was there any percentage that became
obvious to you that that failure was like the stopping point for their entrepreneurial
journey? You know, they hit it and they said at that point no, entrepreneurship is not
for me? >> Yeah. I think the more amount of money
that they seemed to have spent, the longer it took to bounce back. So maybe it's a lot
like the numbers in divorce. You know, for every year you're married it takes, you know,
a certain number of months to get over it. I think the same is true for entrepreneurs.
So the more money you spent the longer it takes for you to kind of get over it and move
on to your next venture. >> So reflecting on, you know, what you learned
through these and your own rich background, I mean, I don't think we shared really much
of any of your own journeys and deals that you've done.
>> Sure. >> You've impressed me. I mean you really
do. You have a great resume for as young as you are in this regard. So how do you think
entrepreneurs should deal with failure? What relationship or, you know, pact should they
make with failure? >> Yeah, the best analogy I've been able to
come up with is for entrepreneurs to think of themselves as poker players. So poker players
who play in tournaments are guaranteed to lose hands. It's impossible for you to be
a professional poker player and not lose a hand. In fact, you're going to lose the vast
majority of your hands. But as long as you have cash at the end of the day, as long as
you have more winnings than you do losses, then you're a very successful professional
poker player. >> You're still in the game so to speak.
>> That's right. So that's how entrepreneurs should look at it. That means number one,
they should try to limit the bet the company gambles that they are making. So they should
allow themselves to have enough cash in order to take risks and bets, but that they're not
risking all of their money at once. So >> Not all in.
>> Yeah, if you're playing poker you don't want to go all in on every hand. You want
to be careful minimizing your losses. And it also means that you, that you try to save
money and you gamble with what you can afford to lose. And so the entrepreneurs that I've
seen that are careful about the resources that they are using, those are the ones that
learned a lot from the failures that they've had but have gone on to achieve great success.
>> So, you know, we're talking a lot about failure here. And another area of interest
for The Foundation is, you know, ecosystems. >> Uh huh.
>> And community building around entrepreneurship and having community buy in in this activity.
You know, what, if any, advice do you have on the community level to control a narrative
or to maybe seed a narrative around failure >> Sure.
>> and how that might help in building these ecosystems?
>> Well as I said, failure still is a very taboo subject in entrepreneurship. It shouldn't
be, but it is. Most of community events are about beginnings. And, you know, I can't think
of very many that are about helping entrepreneurs deal with difficult situations. And it's just
not a very accepted practice right now for entrepreneurs to say anything but oh, my startup
is going fantastic, and I'm getting customers left and right, and we're hitting all of our
traction points. Because you're constantly selling to potential investors or potential
customers. And so there's a ton of pressure for entrepreneurs to have just nothing but
positive things to say. But they are not going to get the help they need. They are just going
to spin into a series of mistakes without having actual valuable input.
>> You know, I think I'm going to have to credit you now for an idea, it might be a
terrible idea, we'll see. And we'll let the viewers of "Top of Mind" chime in on this.
But perhaps, you know, something that we can put out there in the community, entrepreneurial
community waters so to speak, I don't know, why don't you possibly hold a wake.
>> Right. >> Maybe have an annual wake for the entrepreneurial
community where, you know, those who have tried and failed can come and share and be
heard and, you know, share the experience so that others can benefit from it. I mean
like I said, that could be a terrible idea, but it seems like you're right on that, it
seems that the creation things, the launch points, finance points, these are the things
that we pay attention to. >> Right.
>> And we're missing a great opportunity to learn.
>> No, absolutely. And to help entrepreneurs before they make the really big all in mistakes.
And I think that's a great idea. It's part of what I'm trying to accomplish with this
failure interview series. Because it's actually a lot harder than you think to get people
to talk about >> Oh, I'm sure.
>> these failures. They are very personal. And my goal is that the more examples of can
show of people willing to talk about their failures the more comfortable people are going
to become about telling others when they are in trouble and reaching out for help. And
getting help. And possibly saving their companies before it is too late.
>> Mitigating those failures. >> Yeah.
>> Well listen, I want to thank you so much for joining me on "Top of Mind" today. And
I have a feeling we're going to be revisiting this topic. You know, if we ever do get to
that point to launch that good or bad idea of a wake, hopefully maybe we can share lessons
on how to do that. So thanks for sharing your story today.
>> Absolutely. Thanks, Thom.