Entrepreneurship can be lonely, made worse when entrepreneurs don’t feel as if they can be open about the barrage of challenges, hurdles — and, yes, failures.
Entrepreneurship can be lonely.
Made worse when entrepreneurs don’t feel as if they can be open about the barrage of challenges, hurdles — and, yes, failures. — that come along with running a business. In the Boston startup community, talking about failure, even though it’s an inevitable part of risk-taking, is still considered taboo.
A growing number of entrepreneurs and investors think that culture in Boston needs to change.
Failure is ubiquitous in the startup world, they say, with as many as nine out of 10 startups failing. Some venture capitalists even add a history of failure to the list of must-haves when vetting founders and their startups. Chris Lynch, partner at Cambridge venture firm Accomplice, said he won’t invest in any founder who hasn’t previously failed. When entrepreneurs internalize their mistakes and learn from them without placing the blame on others, they become better at running their companies. “It’s just about being honest with it. If you own it, you can change it. And if you don’t own it, you can never change it,” Lynch said.
Investor Maia Heymann, senior managing director of Cambridge-based CommonAngels Ventures, said her hybrid venture firm has tried to build an open and trusting relationship with each of the founders in their portfolio. That’s because they need to feel comfortable coming to the investors when things aren’t going well — for example, when a co-founder is leaving the company, or product-market tests aren’t panning out as expected. “Owning mistakes actually builds credibility, because what it reflects back to the investor is that (the entrepreneur) has internalized it, and therefore they will be smarter, more perceptive or more insightful the next time,” Heymann said.
Sometimes, entrepreneurs’ greatest failures end up defining them, making them better people. Jodi Goldstein, co-founder of a Somerville-based mobile app for wine called Drync, and the managing director of the Harvard Innovation Lab, said she has learned more from her failures than her successes. With fledgling startups based out of the Harvard Innovation Lab, she hopes to instill a culture that is open about failure, since failure often accompanies risk — something that entrepreneurs have to be willing to embrace.
“I would argue that if you don’t fail, you’re not exposing yourself to exciting opportunities,” she said in a previous interview. “Particularly Harvard students — I don’t think many of them have experienced failure and they need to get very comfortable with that because if you want to be an entrepreneur you need to get used to failing every day and innovating, learning and pivoting.”
In this cover story, we have highlighted three entrepreneurs who have experienced the trials and tribulations of entrepreneurship -— and who are embracing risk. Some have gone on to start other companies, while some are taking extended hiatuses. All have experienced failure in some way.
Perhaps the most high-profile business failure in recent months was the dramatic flame-out of Boston-based e-commerce streetwear firm Karmaloop. The 15-year-old company — which in 2013 had $150 million in annual revenue — filed for bankruptcy in the spring, amid speculation that hip-hop artist Kanye West would salvage the company, which had become well-known in the entertainment world as an underground media empire and was the catalyst for launching many musical artists’ careers. West didn’t end up buying the company, though. Instead, it was acquired in part by an existing lender, for $30 million in May. Now on to two new ventures — an e-commerce play and an annual conference for “cultural creatives” — founder and CEO Greg Selkoe looks back on that tumultuous time with mixed feelings. Local news outlets glommed onto Karmaloop’s failure with what Selkoe viewed as maliciousness. But strangers, too, weren’t kind to Selkoe about his company’s very public crash-and-burn. Shortly after his company was acquired, Selkoe attended a party hosted by renowned Silicon Valley venture capitalist Ben Horowitz, co-founder of venture firm Andreessen Horowitz. It was that gathering that helped Selkoe, in the bouts of depression, bounce back.
Entrepreneurs welcomed Selkoe with the kind of authentic congeniality that had become almost unfamiliar to him, after his company’s failure caused him to be treated in Boston as a sort of entrepreneurial pariah.
“In Silicon Valley, they love failure. They celebrate it as much as success. There’s this culture of, ‘You’ve got to try to be the best you can and innovate and learn from your mistakes’ ... It was a really great feeling because I was so bummed out and it was such a different reaction,” Selkoe said in an interview. Still, Selkoe said he looks back on his time running Karmaloop with positive emotions. “I started Karmaloop in my mid-20s and started to have a lot of success, and I hadn’t had any failures (yet) and was very exuberant and believed in constant expansion of the brand,” he said. But he’s thankful for the valuable business lessons he’s learned. Among them: Don’t try to do too many things at once, and don’t be debt-laden. “I want to be more careful with who my partners are and try to be more measured in growth and expansion, and not get too exuberant,” he said. In 2012, Karmaloop had nearly 10 different company divisions ranging from KarmaloopTV to PLNDR, a flash-sale site, and the company borrowed millions of dollars in order to help launch them. Selkoe said he borrowed too much money, and in hindsight, should have focused more on propping up the Karmaloop brand itself, which was booming in popularity. “The big lesson I learned is it’s not smart to finance new ventures with debt … the sad part is that we had a very profitable, successful core business and we should have put our focus there, but there was a lot of demand to try and grab as much market share as possible.” Selkoe lost more than $1 million in personal investments and mortgaged his house in hopes of salvaging the firm. Now, he’s on to new entrepreneurial endeavors with newfound energy, thanks in large part to the Silicon Valley mentality that failure in business doesn’t necessarily mean failure in life.
Selkoe said his experience running Karmaloop has taught him to take less risks, especially when it comes to owing money. But he’s proud of what he’s accomplished, and ready to tackle his next venture-backed startup: a stealthy new e-commerce site that’s not a competitor to Karmaloop.
“I’m not hiding under a rock. I’m still someone who picks himself up and is ready to get back in the ring,” he said.
When to say ‘when’
Dan Siegel knew it was time to wind down his startup, Boston-based Spokepoint, after he asked himself a very personal question: “Do I enjoy what I’m doing every day?” Siegel had some success with his business. In August 2014, the company launched after a beta test of its software with high-profile customers including singer and songwriter Imogen Heap. Spokepoint’s software could analyze thousands of data points to predict whether a journalist would respond favorably to a specific pitch from a startup. The software also allowed users to search for and contact journalists based on topics written about, and allowed users to track whether a pitch was successful or not. But after a year of running the business, Siegel’s answer — and co-founder Paul Lam’s as well — to the very personal question was a very honest one.
“We weren’t enjoying building the business, and we weren’t excited about what it could become. When we were super honest about that, that’s when we knew every minute forward was a waste of time,” said Siegel, an MIT business school graduate. Three big lessons learned from his endeavor with Spokepoint: Be a big-picture thinker, have a support system, and be precise and exact when defining employee roles. One of the challenges entrepreneurs face when starting and growing businesses is how to spend time, Siegel said. He could easily get carried away with writing blog posts and emailing hundreds of customers on a weekly basis, in efforts to gain traction. Instead, he said he should have narrowed his focus and his mission, and maybe set goals for 100 new leads in a week.
Siegel also found that having a support system of likeminded entrepreneurs was crucial, but that the support system should be small and intimate, and the meetings should be frequent. Once every few months, Siegel would get together in large groups with other entrepreneurs from MIT’s Sloan School of Management. But those big groups weren’t conducive to having open, honest conversations about the real challenges facing entrepreneurs.
“If you can meet with someone on a really frequent basis, you get accountability and you get honesty,” Siegel said.
Siegel also said it’s important for an entrepreneur to define each person’s role at the company (and even future employees’ roles) from Day One, so there’s little overlap and so each employee takes ownership over his or her role. For example, Siegel ran into that issue when Spokepoint when both Siegel and the company’s chief technology officer were talking to customers about product.
Now an employee at Boston-based mobile app development firm Raizlabs, Siegel says the way he approaches risk is much different after having been the co-founder of Spokepoint.
“I’m much smarter about taking calculated risks,” he said.
Addicted to the fun and excitement of the startup world, Siegel said he’s not done innovating — something he sees as a strength.
“I’ve now had a couple of different jobs and roles. Working at an early stage startup and building a business from scratch plays to my strengths. I’ve never felt as professionally fulfilled doing that as anything else,” he said.
Focus on the bottom line
Begin at the end. Above all, that was the most important lesson that Jeff Janer has learned in his decades-long history as an entrepreneur.
In hindsight, that was especially crucial at his fifth startup, Boston-based personal organizer mobile app Springpad. In June 2014, the venture-backed company backed by $10 million in funding told its 5 million users that it was shutting down. A culmination of events led to the eventual shut-down, but Janer said ultimately the company couldn’t figure out how to become profitable — something he should have been focused on from Day One.
“We built a hell of a product, but we didn’t really build a business,” Janer said. The hazard of over-indexing on product instead of profitability is especially common among consumer-focused companies, especially those trying to build critical mass. Only focusing on amassing users can get you in to trouble, Janer said. Springpad was a cross between popular web and mobile apps Pinterest and Evernote, and offered mainstream consumers an enhanced “digital filing cabinet” to organize everything from recipes to travel ideas on a user-created virtual notebooks. As part of the monetization plan, the company began offering its users themed, virtual notebooks with tips on topics ranging from cooking to home improvement. When the company was looking to add to its coffers, Janer ran into fundraising problems, saying in a May 2014 interview that “the short story is we ran out of money and out of time.”
Google’s Cambridge office scooped up five of the company’s 20 employees that summer. Janer said there’s one other crucial lesson he took away from his Springpad days: “Surround yourself with 8s and 9s, in terms of people you hire,” he said. investing in top-notch talent is worth it in the long run, even if it costs a little more. “If you calculate the opportunity cost versus biting the bullet and saying ‘I’m going to hire the best and brightest,’ it makes a huge difference,” Janer said. Now, Janer is taking a hiatus from entrepreneurship. He’s now running a CEO peer advisory group in the Boston area that consists of between 12 and 16 non-competing CEOs. Many of them are facing challenges Janer had faced while running Springpad.
“It’s really easy to lose sight of the end when you’re faced with the tyranny of the urgent,” Janer said. “You’re out there every day, putting out fires, pivoting, and if you don’t keep that North Star in mind, it’s kind of tough.”