To increase the risk profile of a region known better for slow growth than economic dynamism, the business community needs to get more comfortable with failure.
To do that, nearly 10 local entrepreneurs spoke about a crushing defeat in the business world they experienced as part of #Failfest, an event that was part of Philly Tech Week Presented by AT&T, held at the offices of the recently renamed Baker Hosteler law firm in the Cira Centre and attended by more than 80, most of whom were young, first-time entrepreneurs, judging by a show of hands. Embracing failure isn’t new — not even locally — but the focus here was spanning the scale.
The event included a welcome from Terry Hicks of Ben Franklin Technology Partners, the state-backed investment group, which also sponsored the event, that too put its endorsement on the idea that failure has touched all great visionaries with a series of famous quotes. From Hicks and Jeff Rosedale of Baker Hostetler, the event featured a slew of entrepreneurs.
Jameel Farruk, who decided to close the apartment rental startup inHabi that he cofounded and now works at Callowhill design agency Brolik, talked about how “reality is bigger than vision,” and how you need to tell yourself when it’s time to pivot and move on from your original idea.
“Breaking up and walking away from your startup is the hardest thing you can do as an entrepreneur,” he said.
He also brought up an important topic: Mitigating risk. As an entrepreneur in a bootstrapped tech startup, investors want you to not only prove your concept, but they want you to have traction.
His idols who helped him through the hardest moments in his entrepreneurial career are the founders of another local company, RJ Metrics, who have grown from just two people to more than 40 and just opened new offices. Farruk’s said in closing, noting that he had focused on startup leaders from other cities that he had no connection: “pick the right idols for you.”
Karina Sotnik who worked for an international telecom company in Silicon Valley in the late 1980s came to Philadelphia in 2002 only to find out that, “Tech was dead so I pivoted and opened a retail store for my European accessories export / import company.”
Sales were great but the cash flow was not. Transportation and workers overseas were too expensive for her model, so she had to close down her business. Now she runs a consulting practice focused on providing mentorship, consulting and advice to academic incubators.
Prasanna Krishnan worked at Microsoft on a file and data storage system that was before its time and never took off.
“When a large project gets delayed, it’s a dangerous slope. People start to jump ship and the product never gets released,” she said of being on a Microsoft project that never shipped.
Now with SmartyPAL, she thinks about whether or not an idea is good, but also is this the right time for it. “I focus on MVPs and hypothesis. And I would much rather fail before raising any money.”
But timing remains the biggest hurdle to successful entrepreneurship, she said: “It’s easier to know what is a good idea than when it is.”
Mike Krupit was part of the music legacy that was music ecommerce site CDNOW during the dot com boom.
Having been CTO, CFO and then CEO, he helped raise $10M from a pair VC firms in 1997 and though sales were growing, the firm lost money on each shipped CD. They paid $22 million for an exclusive marketing deal with MTV, among others.
After an IPO, CDNOW spent most of its money on customer acquisition. Now, particularly early on, Krupit advised “Don’t pay to play.”
CDNOW ended up selling to Bertelsmann at the end of the line for $117 million. He said letting your competitors dictate your strategy is a poor way to run your company. As he has advised about revenue plans, “Don’t put all your eggs in one basket. Have a plan B. Be ready to pivot before you have to.”
For Lucinda Duncalfe, now the founder of RealFoodWorks, her biggest professional failure consisted of having $12 million in annual revenue and $10 million in the bank for Destination Software but being forced to liquidate admit the dot come bubble bursting frenzy by a board that didn’t agree with her vision.
“I wasted five years of my life, and let a lot of people down.” She quoted a famous entrepreneur who said, “We left no skid marks when we went over that cliff.”
Luckily with all her experience she was able to land many consulting gigs to keep her going until she sold her next company for $28 million. Her advice: “Life goes on. Learn how to manage your emotions.”
Documentary filmmaker and longtime Philadelphia civic leader Sam Katz talked about his running for public office four times — three times losing a mayoral race and once losing the Republican nomination for Governor against Tom Ridge.
“For the last 60 days of the campaign [against Ridge] I didn’t even want to get out of bed because I knew I was going to lose,” he said. “Nothing is inevitable. Everyone supports you until you fail. Their lives keep going. But you hit a tree and fall down.”