Failure is all but inevitable in any new venture. Indeed, when I am reviewing the business plans of those seeking backing from us at Balderton Capital, the VC firm, I am careful to remind them that, within the technology and engineering community, just one in 100 new businesses are likely to survive their first year.
Of course one must balance the risk of financial loss and job insecurity but it’s important to have skin in the game if you’re playing to win. My own experience as a former entrepreneur and now an investor and a mentor at the Royal Academy of Engineering Enterprise Hub has taught me that the business leaders who approach their failures constructively are those who are capable of turning their business mistakes into thriving ventures.
Resilience and the ability to learn from failure are important skills that entrepreneurs should not underestimate. Having lived and worked in San Francisco, I see a clear difference in attitude on the other side of the Atlantic. Americans have fostered a culture of sharing and celebrating failure, in a way that Europeans are yet to fully adopt.
So here are my five steps to accepting, embracing and moving on from business failure.
(1) Give yourself time to grieve
Losing a business can not only have a serious financial impact but can also place a significant strain on an entrepreneur’s mental health. Many entrepreneurs define themselves by their startups, so it’s unsurprising that if a business fails, its founder may feel like a failure. Before you try to move on, make sure you take time to rebuild your confidence and self-esteem. Whether it’s a holiday or a stint in another role, give yourself the opportunity to remember the real purpose behind what you’re working towards.
(2) Learn from it
Once you have had time to digest the failure it’s important to reflect and learn from it; take a step back and think about what did and didn’t work. For many tech startups a blind love of the technology is often the root of the problem, unless your technology solves a clear customer problem it is unlikely your business will have longevity.
(3) Speak to those who have failed and come out the other side
Take time to speak to entrepreneurs who have been through similar experiences. During times of struggle it is useful to draw on the advice of those who have successfully overcome similar challenges. It is also vital to continue to maintain relations with the key stakeholders of the failed business. It is important to remind yourself that by virtue of their business, investors expect to lose money, but if an investor believes in you there is no reason why they would not support you in the future. And finally, look for opportunities to be part of a community. The Royal Academy of Engineering Enterprise Hub is one of them, a vibrant source of like-minded engineering and technology entrepreneurs who are keen to help you capitalise on growth opportunities.
(4) Recognise the freedom that comes with failure
Some of today’s most successful businesses, such as Twitter and Dyson, were businesses that managed to successfully pivot or transform off the back of failure. Failure can provide the freedom to experiment and explore a new venture.
(5) Be proud of failure
The fear of failure is one of the main things that holds people back from taking a risk and starting their own business; but you should be proud of your failure – it shows you have had the courage to be different. Of course, blindly celebrating failure for failures’ sake is not helpful. Entrepreneurs must recognise the role of effective leadership and business acumen in mitigating the risk of avoidable failure.
Launching and running a startup is hard. While business failures are sometimes out of our control, how we bounce back and succeed is up to us. If you anticipate challenges and remember to view each mistake as an opportunity then your startup journey will be that little bit easier.