Entrepreneurship is a world full of possibilities and opportunities. But unfortunately, defeats and failure are also part of it. There are no successful entrepreneurs who have not already failed! But how do you deal with that? How do you come out of the low strengthened and manage to learn from failure and build something new?
In this podcast, it's all about failure in entrepreneurship. We quizzed Valentin, an experienced entrepreneur who has already founded several companies and also experienced defeat. Valentin gives us an insight into his experiences and tells us how he dealt with failure
It is not only about the causes of failure, but especially about the process afterwards. How do you find out what went wrong? How can you learn from mistakes and avoid them next time? And most importantly, how do you manage to get back up and build something new despite the failure?
These questions are discussed and highlighted in detail in the podcast. We hope you can benefit from Valentin's experiences and tips, and be inspired to keep going and pursue your goals despite defeats.
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Recognizing that it's no longer working
I've started a couple of companies in the past 20 years. Of those, two have really failed. Two have worked reliably and three "quite okay" When you get to the point where you realize it's failing, there are three categories:
- The "go-to-market" has failed, you haven't made enough sales or the results just aren't there, you can't find a customer, you can't get ahead.
- The product doesn't deliver what it promises. The product team has not managed to meet expectations. The promised added value could not be delivered.
- The failure on a personal level. You just can't do it anymore, you have no drive, and you're burned out. Maybe the other co-founders or people on the core team have dropped out. Changes have occurred that require a new analysis of the situation.
The important thing is that there are always different reasons. The result is the recognition that you really have to change something fundamental because otherwise it will not continue sustainably. That's the bottom line!
The process of learning from defeat
There are several reasons that need to be analyzed. Whether it is the business, the go-to-market, the product or if there is a personal problem behind it.
What do you do when they figure that out? How do you deal with it? What is the process to turn that defeat into something new?
I've tried to analyze this from the experiences we've had.
The first thing to do is to identify the primary major problem. Why is one failing? Is it the company? Is one not finding customers? Can't one deliver the results one promised? Or is it running out of money because you don't have enough sales?
Is there something about it when you clearly don't meet the budget plan? I call it the "go-to-market" strategy. Or is it the product that you can't release, that you can't fulfill it, or the developers can't get it done. Is it too complex or do you have too many dependencies? Maybe it's yourself - do you run out of energy? Or maybe something is breaking, you can't do it anymore with your co-founder or someone drops out who is important. Maybe all you have with each other is discussions and arguments.
I think it's often also that it's not just one point, but it's always dependencies, several things go wrong. And then it comes to a point when you realize, now it's no longer possible.
Then it's important to realize what's the first thing you can solve - the problem needs to be identified. That's the very first thing to address. So it's like the bottleneck-focused strategy. There it describes what it takes for a plant to grow. It always needs light or water. But it always needs more of something or it will drown or wither. If you can identify what it is, then you know where to start.
Once you've identified it and you know where to start and you make a fundamental shift, then the second step is you change the vision there.
And not that you just adjust the vision a little bit. A little more here or there is of no use. But one must change the vision really large.
At the corporate level, at the go-to-market - it's like if you're still convinced you're doing the right thing and you want to stay in that space (you also have the right people) - but you just don't reach your goals. Then the learning is there, with conviction you have to massively increase the vision.
Now that sounds a bit contrary. You have raised money and actually know that you are on the right thing, but it takes longer time, so that one can then find more money or better employees, then the right step is the vision much bigger to set. You double the vision! With that you have a better equity story, you can convince people again, maybe I have to think new revenue streams with. But then you think in a bigger ecosystem and go in with even more conviction.
I've seen that work then. But you also have to have the conviction that it works. Because you're telling a much bigger story. An extreme example is Elon Musk saying "I'm changing the world, I'm going to Mars." Those are crazy visions, but still, that motivates people. He gets more money, in this case from the stock market, and he can make the bigger thing happen.
If you don't see that, if you feel you have to change something, but you don't want to magnify the vision, then you have to implement a hard pivot. Pivot to a completely different field or pivot to profitability, which then has completely different implications.
Either you go all the way and save and do a pivot to profitability or you make the vision much bigger.
If it's with the product, then you have to change the scope. That's always difficult for all product managers or the people who want the product. You have to cut away, modify, see if you can do it outside - maybe work with transitional solutions. And just be clear about what's really fundamental.
Get people there, that developers have a new scope or cross out. What are must-haves, what is really your minimal viable product? That's absolutely elementary.
If it's personal, it matters if it's you. Whether you're an entrepreneur you don't like anymore or you're in line, or is it a co-founder or the relationship within the co-founders. A lot of entrepreneurs get to the point where they can't do it anymore, things aren't working and they don't have the energy. I think it's critical to think about what your long-term outcome is, where do you want to go
Where do you want to optimize? Long term is a little different for everybody. It could be 5 years, 10 years, 20 years - everyone changes over the years. What do you want to have done, what's important to you, where do you want to be afterwards, what do you want to optimize? Only then can you decide how to change. Do you want to have wealth or influence, change the world or improve the world? Or do you want to have a different lifestyle, freedoms and no dependencies? It is essential that you know what you want. Then you can optimize on it.
I have many friends who do seminar, podcasts, selfhelp topics - also Tony Robbins, Tim Ferriss or Stefan Merath, all have chosen an extreme path. Everybody is individual. But you have to have this long-term goal.
You can call it values, you can call it habits, but you have to know where you want to go.
And also that you don't lie to yourself. That you are honest and know what the restrictions are. Entrepreneurship you also have to be able to afford. If you have too much responsibility or financial dependencies, it might be very difficult. Last but not least, you have to be able to do it in terms of your health. There can be strokes of fate there, of course, but in your twenties you have to take much less care of yourself and have much more energy available. In your 30s, 40s, it might be different. The average age of entrepreneurs is 36 and up.
That's where new habits come into play, so you can live healthy, that you eat healthy and have enough recovery time, exercise or get exercise out.
If the problem is more with the co-founders, there always needs to be communication at the end. As in all relationships. It's similar to a marriage in a good Founder relationship. You have to be able to honestly communicate to each other how things are going. That can be ways that you have rituals and do offsides outside of your usual environment and take yourself out of your daily routine. Or planning dinners together every two weeks or a long hike. These are ways to be able to discuss the real true issues of what drives you. That's how you find out if one is alone with the vision and can put in equal amounts of energy or not.
I have always experienced that in Founder relationships sometimes someone is more motivated, sometimes someone less.The good, successful teams have then managed to address this and develop solutions together. And with the bad ones then one has either said goodbye or has no longer communicated and it has then become "toxic."
This has then also miserable Impacts on the companies. There you can always be very open that all outcomes can be possible. In the majority of companies I know, the co-founder teams have changed over time. Someone has left, done something else, responsibilities have changed. Someone has stepped back and taken a smaller role in the company. There is no "one size fits it all" solution. Anything is possible. You have to be able to talk to each other about it.
When trust is gone, you have to say that too and then have co-founders leave. You also have to follow through on that. Everything is possible there. Then once you've identified what it is, once you've changed the vision and the way to solve it, then certainly the approach based on the new vision is what you need to do.
If you have to do a pivot, as we discussed in the other podcast, then you have to fire people. Or if you raise more money, you have to do another fundraising and make appropriate changes in the structure.
You have to motivate people or hire other people. You have to find new markets and work out the revenue streams. Or you have to redesign the product.
I think on the personal, I would consider two things. You have to adapt the way you work to your values. That's also a fluid process. And you have to find ways to energize yourself. Whether it's sports, long walks or hikes. Drew Houston from Dropbox once said what he had to learn, "if the workout isn't in the calendar, it didn't happen." That you also take the time to know, I need to exercise so I can energize myself, so I have something that I can control 100%. Because I can't do that in the company. That you change that and that you also learn to deal with this constant difficulty.
How do you deal with it personally?
This is an extremely emotional topic. Before we maybe go into personal learnings or dig deeper into what it means personally. What's the result of that? What do you gain by going the solution route and getting out of that hole. What change do you call at the end and benefit from it?
It's a learning curve, dealing with problems. You become personally stronger, "What doesn't kill you makes you stronger". You can strengthen your resilience. You can endure more and more. I have that belief too.
Very successful entrepreneurs have insanely high resilience. They can just keep going longer. Accept that they are always close to failure, but deal with it that it's okay. They enjoy that constant challenge because it makes it very intense and you're challenged to the maximum.
They say being an entrepreneur is the hardest thing you can do because you're constantly faced with infinite problems.
That can also be exciting, that you learn more and more from it, that you can endure more. That you can also gain motivation from it again, when you have found a new way or can develop small pieces of motivation and passion from this difficult gait again.
To learn from it and deal with it, even enjoy it, you have to want to. It's not boring, you don't paint lines on the wall and wait until you retire.
The caveat is predominantly that health is insanely important. It's like the gasoline that keeps you driving. You have to find a way that it's sustainable for you and can always supply energy. Otherwise, you're going to break. If you eat poorly, if you don't sleep enough - if you get physical problems, it has a spiral effect of pulling you down. That's the limitation, the guardrail that you have to get a handle on and find a way to deal with that. Then you can actually go forever.
Do you recognize patterns?
You sound like there is a pattern. When you look at your ventures, there is a pattern that there came a moment with almost all companies, okay it could fail. Do those patterns really exist?
At least that's how I've experienced it. Maybe you are lucky sometimes that everything runs and works. That's not my reality and not in my environment.
I think all the companies we see as successful today have had these near-death experiences. It's always relative whether you see it that way. In those seven companies, I would say we got there in every one.
It was often that we had co-founder issues. One left or you even had to sell the company, too early and maybe not on advantageous terms - or you left yourself - but you could also learn something in it. And you can value it and then you can do something new that you might not have been able to do before.
At one company, I learned to build SaaS when SaaS didn't exist. And at the other, I learned how to do better management. At the third, how to build a profitability case. Two of those have become very successful companies. I'm no longer involved operationally, but that fills me with pride.
I see what I've learned and what could be done with it. In the past two years, so much money has been raised to insane terms, of which very many companies are now at the moment where they would have to make the vision much bigger or accept massive changes. We see that ourselves in our environment. It's not easy for everyone. Some of them are not to blame at all. Do I make a big change, do I go into profitability, do I make the vision much bigger or do I have to fundamentally change something in the team?
When you look at it more personally, what would you say is important now, how do you personally deal with it and maybe also a summary, what are the key learnings from it?
I have learned two points in entrepreneurship:
- You can be emotionally attuned to the new vision. You don't always look back and say "I wish I had done this differently". "That's a wrong decision". "Oops, I can't get over that either". Instead, you say to yourself "Now I've learned something." Simply look forward and not back. That's like Matthias Schranner, an FBI negotiator who has worked with hostage takers. In his book, he writes, "The past is not negotiable." So you can't change things that have already happened. You can only change that in the future. Alan Frei also says it so beautifully in his podcast: "It's none of my business what other people think of me." If you care too firmly about what people think, "I shouldn't have done it that way, that would have been a success." You have to let that go. When you do that, you can't get out of it, nobody wants to work with you like that. You also can't motivate people and you don't get paid anymore. You emotionally adjust to something new and then fully develop the passion for it. I think that's a skill that I'm always working on and developing. It helps me get better and better.
- I had to learn to find something that gives me energy. But an energy that I can control. You can only control the results of a company to a limited extent. Macro accidents, economic accidents like Corona, Financial Crisis, Dotcom Bubble, you couldn't control all of that yourself. But then you have to find something that you can control yourself. In my case, that's listening to specific podcasts, hiking, and exercising. For others, it might be self-help seminars or meditation. The important thing is to find something where you have 100% control yourself and that you can always do. It's kind of like a retreat to re-energize yourself and make yourself like a "flying wheel" that always works and can propel yourself. Then you can actually go forever, no matter how long the marathon is.
As a takeaway, what is the most important thing to deal with failure?
To me, it is realizing that entrepreneurship is a perpetual learning process. Entrepreneurship is not you do it and then you succeed. You're learning to deal with those uncertainties, always solving new problems and always facing failure. That's not to take energy away from you, but to develop that joy. You actually see, in there the added value.
Whether then success arrives, whatever is defined as success, to what extent one has it, is then less relevant.
There's also the saying I learned from one of the co-founders of Twitch. That was a very successful startup that they sold to Amazon.
"You have to find the most efficient machine for you on how to turn money into happiness."
Once you find that, you'll figure out how much money you need to be happy. And that's probably a lot less than you feel from the outside. Especially when you read about these Success Stories.
You have to find that machine, and it has to work for you. If you don't have that, then it doesn't matter how you succeed financially or otherwise. And that's why it's more the way that you also enjoy solving these problems and having the impact.