Whilst entrepreneurs on this side of the pond have traditionally been rather risk averse, British attitudes toward failure are rapidly transforming
Back when I left university I did something that was unusual then but pretty common now: I joined a startup. There was a joke at the time about how different nationalities respond when hearing someone is starting a business: the Americans rush to invest, the Chinese offer help in return for shares and the Brits say ‘how brave of you’, whilst secretly hoping you fail.
The United States has long been more tolerant of business failure than old world countries: whilst federal law banned imprisonment for unpaid debts in 1833, Great Britain still had more than 10,000 people in debtor’s jail at the beginning of the 20th century. The US is also more willing to allow companies to fail: whilst still a bad result, failure carries less stigma than in Europe, viewed more as hard-won experience than a black mark. Business builders are more celebrated in the US and there’s less tall poppy syndrome too, rather a feeling of “that could be me”. Thankfully, the old world is becoming more American and for the right reasons.
While Odeo and Glitch aren’t household names, after these businesses failed to make waves, their founders moved on, were backed again and generated a huge amount of value with their next ventures Twitter and Slack. In Europe such ‘recycling’ used to be much less common, creating a lack of experienced startup company executives. This also was compounded the fact that successful British founders would often buy a place in the country and settle down to the life of the landed gentry – something VCs used to call ‘£5m disease’. Fortunately many more successful European entrepreneurs now deploy their skills and capital in new ventures.
One of the reasons for the change in attitudes is that the prize for succeeding in building a business has gotten a lot larger and, unlike during the dotcom boom, Europe has a significant number of valuable successes. There are more than 40 unicorns in tech alone and that’s not counting those in the life sciences. The average time to reach a $1bn valuation is now about eight years, so those founders really have got rich quickly.
Another reason is that we live in a truly wonderful era, thanks to the cloud, cheap communications and fast processors. What makes individuals’ lives easier follows for businesses – you can rent everything you need for an online presence, research markets and competitors for free and communicate with customers and colleagues anywhere for close to nothing. Additionally, in an era of near instantaneous feedback, you also get to see if customers value your concept much more quickly than in the past. As the price of proving a business concept has gone down, so too has the cost of failure
Finally, business builders are increasingly looked on as rock stars. This is partly because more people feel positively about success when the fruits of such businesses benefit everyone’s lives. Jony Ive, Apple’s chief design officer, changed how we interacted with phones and made a huge contribution to the company’s turnaround, while Daniel Ek, co-founder of Spotify, has been billed as the ‘man who saved the music industry’: these are just two of many who receive deserved kudos in Europe.
So whilst we still have a way to go to match America’s smarter attitude towards failure, I’m optimistic. Europe already seems to be responding the incentives of higher returns, lower risk and greater renown.