5 Reasons to Start a Company That Will Fail

It has happened to all of us.

A friend tells you (after first swearing you to secrecy) about a ‘great’ startup idea.

I couldn’t find a pet sitter last week. I’m going to build a social site that allows cat owners to find pet sitters! Did you know there are 100 gazillion cats in the US?

save-money-cat
You want to be happy for him, but you can’t resist advising him to consider customer acquisition costs, lifetime value, etc.

Alas, the glimmer in his eyes just won’t fade. He’s going to quit his job and work day and night to start his first company regardless.

Before trying to talk him out of the tree (where his cat and revenue model are hiding), consider entrepreneurism in the larger setting: there are intangible benefits to starting a company that will fail.

Five Intangible Benefits from Startup Failure

5. New Relationships
Entrepreneurs engage investors, other entrepreneurs, and customers – people they won’t meet by just talking about start-up ideas, reading blogs, and attending events. Most entrepreneurs discover that people start approaching them with opportunities once they demonstrate the passion and aptitude for startup work.

4. Refined Business Instinct
Financial pressures have a brutal way of giving an entrepreneur insight into the real issues involved in creating value – customers, sales, relationship building, etc. Most quickly understand why the idea matters so little compared to execution.

3. Casting off the Rookie Label
Since most entrepreneurs fail at their first startup, a failure today prepares us for success tomorrow. There is a big credibility leap between people who try once and those who keep at it.

2. New Skills
Entrepreneurs are forced to learn skills outside of their comfort zone. If you’re a programmer, you’ll learn how hard it is to sell. If your a business guy, you’ll finally see why technology never seems to work like we hope it will. These experiences help us understand the challenges faced by co-workers in future jobs.

But most of all…

1. Failure Teaches Us About Us
Entrepreneurship tests us like few things in life. Jobs are trivially easy in comparison. Capital markets have a brutal way of exposing our own personal flaws in blinding bright neon signs before our eyes – frank feedback you just can’t get any other way.

(Me? I’ve learned to not trust everything I think.)

So smile at your friend, wish him the best, never say “I told you so”, and offer to help out any way that you can. He has taken first step on the most likely road to ultimate success.overworked

Oh, and take him out for a beer in 9 months. He’s going to need it… 😉

4 Comments

  1. Paul Orlando January 26, 2010 at 4:48 pm #

    Good post on benefits that aren’t mentioned much. I have, with my pre-launch startup, certainly made contacts with people who I otherwise would not have met under typical corporate circumstances. Best wishes to all of you on your respective startups!

  2. Adam February 5, 2010 at 2:08 pm #

    I don’t know. I prefer the idea of running a start-up so efficiently that you can have 5 or 10 mini-failures, but still enough fuel in the tank that the company still exists. To me, this way, you never really fail – as defined by “out of cash / out of business.” And as much as you say that having a failure under your belt is a badge of credibility, wouldn’t having only successful start-ups under your belt be better?

    • kevindewalt February 5, 2010 at 2:11 pm #

      Adam,

      It is a good point and I think it depends on your circumstance. In the case of multiple founders, advisors, investors – basically an ecosystem around an idea – this is less of an option in many instances. Or if you take technology risk.

      But generally I agree with you. Keep iterating ideas to prevent the disaster.

  3. Alta Karalis March 4, 2012 at 1:45 pm #

    If possible, as you gain expertise, would you mind updating your blog with more information?

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