Silicon Valley event highlights lessons to be learned from business failures
There’s an old saying that you learn more from failure than from success. But to do that you have to talk about it openly, without fear.
No one does that better than Silicon Valley. On a recent trip to San Jose, Calif., I attended a Day of the Dead event at the Computer History Museum in nearby Mountain View. Named for Mexico’s annual celebration of the macabre, this “failure wake” drew 200 techies, from raw startups to Valley veterans, to honour fallen companies and botched business plans. To set the tone, moderator Marguerite Gong Hancock brought along a sock puppet from Pets.com, the poster child for dot-com disasters.
Before the stories started, attendees were encouraged to create paper tombstones in memory of their favourite failures.
The honoured dead included the usual suspects (Netscape, Napster, AskJeeves, Webvan) as well as less known ones such as Clinkle, Parse, Lupe and Akimbo.
A few of the obituaries seemed premature, such as Twitter, Groupon, and, yes, BlackBerry, but let’s put that down to the Valley’s gallows sense of humour.
Why make a fuss over business failures? There is no success without struggle. A notice on the tabletop cemetery quoted longtime Valley author Michael S. Malone: “Outsiders think of Silicon Valley as a success story, but in truth it is a graveyard. Failure is Silicon Valley’s greatest strength. Every failed product or enterprise is a lesson stored in the collective memory.”
On this night, three speakers shared their favourite post-mortem memory.
“So many failures to choose from,” lamented Bill Reichert, co-founder of Garage Technology Ventures, who worked in startups for 18 years before becoming a venture capitalist.
He talked about joining a company 25 years ago trying to build a microcomputer with a 10-inch touch screen — a tablet, as we call it today.
“We built that product,” Reichert crowed. When he showed the prototype to banks and law firms, he said, “Everybody drooled” — until they learned it would cost $4,999. Later, prominent venture capitalists declared the product a toy — “and the air went out of the company.” Most of the team moved to Apple, where they developed another too-cooltoo-soon product: the hand-held Newton. Reichert’s lesson? “We knew we would have notebook computers one day. But technology takes a lot longer than we frequently think or hope.”
The next speaker, Kim Polese, sympathized: “Every Silicon Valley success story is built on the mulch of dozens of products that never saw the light of day.” Known in the roaring 1990s as Silicon Valley’s “It Girl,” Polese left a senior role at Sun Microsystems in 1996 to found software developer Marimba, which was later sold for US$239 million. For her horror story, Polese recalled the origins of Java, which suffered several near-death experiences before becoming Sun’s foundational web technology: “We wanted to build the software platform of the future for a networked world that didn’t yet exist.”
Every Silicon Valley success story is built on the mulch of dozens of products that never saw the light of day. Java got its start when Sun co-founder Scott McNealy convinced a team of disenchanted employees not to leave the company, but to stay and create something great. “They built an amazing platform,” Polese said.
“As product manager, my job was to make it ubiquitous.”
But there was no broad distribution system yet — except IBM’s personal computer format. Sun, which produced advanced workstations, recoiled at the concept. “We don’t port technology to the PC,” Polese was told.
Sun was set to cancel the project. “But we didn’t want to give up,” Polese said. So her group reached out to independent developers and convinced them to build an ecosystem by writing applets for Java. “We rewrote the software to support interactivity in the web,” Polese said.
That created a new industry standard, and a culture of collaboration that survives today.
“You cheated,” grumped Reichert. “You lived in the end.” But Polese’ story addressed a higher theme: the fine line between success and failure.
It’s not just persistence that makes the difference, but marshalling new ideas and resources to build more value, faster.
E-sports phenom Justin Kan then told a story that proved learning from failure is all that really matters. The five-time entrepreneur is best known for founding Twitch.tv, the gaming/ live-streaming firm acquired by Amazon in 2014 for nearly a billion dollars. But a decade ago Kan was a university student trying to create an online calendar that syncs with Gmail.
In short order, he and his co-founder hired an unskilled programmer; tried to teach themselves programming using Google; ignored user feedback and advice; mismanaged a buyout offer; and ended up listing the company on eBay — for US$50,000.
In the end, it fetched US$250,000 in a last-minute bidding war. Kan paid off his investors, but the remainder barely covered the two partners’ time. “That’s when we started Justin.tv (a live-streaming video channel), which turned into Twitch.” So perhaps failure’s true value lies in stress-testing founders so they’ll win big next time.
But not every failure is destined to be a winner. “Everyone thinks they are resilient,” Reichert said. As venture capitalists, “we look for deep resilience. You have to think long term and focus on creating value, not making money. That’s the key to getting you up in the morning.”
Still, entrepreneurs can’t develop deep resilience in a vacuum. Canadians need to share more collective wisdom about failure. And why it’s a beginning, not an end.
Failure is Silicon Valley’s greatest strength. Every failed product or enterprise is a lesson stored in the collective memory.