Good Failure Versus Bad Failure In Startups

Everyone applauds success, but we have very mixed feelings when it comes to failure. The traditional approach has been to hide failures, because failing is considered to be a stigma. This is especially true in India, where if you’re labelled as a failure, you are seen as a good for nothing, who will never be able to accomplish much.

On the other hand, we are recently seeing a celebration of failure. In Silicon Valley, people seem to encourage you to fail, the hypothesis being that if you fail fast, you will learn a lot more, and increase your probability of succeeding in the future. The best way to improve is by making mistakes – but these need to be made in a controlled, systematic and organised fashion. If founders are scared of failing, they will never take bold steps, never try to experiment, and will never consider exploring risky options.

While it may have become fashionable to celebrate failure, I think we can end up carrying this too far! We tend to romanticise failure, and are inspired by stories of people like Steve Jobs and J K Rowling who failed their way to success. The trouble is that you never hear of the far greater majority of stories where the failure just leads to even more failure.

Because failure can be expensive, angel investors try to reduce the risk of failure by helping the founder to craft a workable business plan, and then help him to execute it, by making sure that milestones are met. Investors are understandably upset when the founder fails to make efforts to deliver as promised, and comes up with multiple pretexts for his inability to do so.

Angels are mature enough to understand that the startup journey is full of unknowns, and since it’s not possible to predict what the future holds, founders are likely to make mistakes during their journey. This is acceptable failure, because every startup is an experiment, and they do need to use trial and error to find the right solution. I am happy to invest in a founder who has failed once, if he can show me that this was because of reasons out of his control. In fact, the failure can be a badge of honour, because it provides invaluable experience, and he is unlikely to repeat the same mistakes.

However, not all failure is good, and we can’t pardon every failure. We need to differentiate between failure as a result of foolhardy behaviour, and that which is a result of controlled experiments.

When Is Failure Bad

It’s not acceptable to excuse every failure as being an experiment. Not only can some of these be very expensive, what’s even worse is that we don’t learn anything from them, because they were never planned as experiments in the first place, and the founder then just uses this as an excuse to avoid blame.

It’s great that we’re finally willing to agree that it’s acceptable to fail, but we also need to understand that this failure needs to occur within a well-defined framework in which everyone has put in their best effort. The collapse should not be because of a lack of trying, because this is hard to forgive.

Good failure means that you realise quickly that you are wrong, and this becomes a step on the path to progress.

Being wrong-headed on the other hand, leads to bad failure, because you learn nothing, or you learn the wrong lessons. Wrong-headed decisions tend to lead to more wrong-headed decisions, as you have no systematic guide to what is working and what is not.

Many founders are happy to shift the blame for the failure on someone else – “I could have been the next Facebook, but the investor refused to give me anymore funds!”
Failure should not make you bitter and resentful – and please stop trying to pass the buck – as the founder, this stops with you. The truth is that sometimes bad things do happen to good people. When you find yourself in a hole, the smartest thing to do is to stop digging – sometimes being pigheaded is the same as being stupid!

The truth is that some founders richly deserve to fail, while others deserve to succeed and are just plain unlucky. It’s important not to be delusional, and to look at facts squarely in the eye. This can be hard to do, because emotions run high when doing a post-mortem, and everyone wants to pass the buck. As the saying goes, success has many fathers, but failure is an orphan.

Most founders never recover from the fiascos they encounter on their journey, and this is the sad reality of most failed startups. You need to learn to run low-cost experiments, from which you can recover quickly, in case they don’t go anywhere. Just because one experiment fails, doesn’t mean you are a failure – it just makes you tougher, and you can bounce back and design a better alternative, armed with additional wisdom.

This post by Dr. Aniruddha Malpani originally appeared on LinkedIn and has been reproduced with permission.

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