There has been some recent talk about failed startups, including Brad Feld's Talking About Failure post, 52 Reviews 5 Reasons for Embracing Failure post, John Battelle's Failure to Fail post, and Andrew Fife's Key Lessons From Cryptine Networks Failure post. I've been around a long time, so I've seen lots of success and lots of failures. I'll be writing about those in the future. For now, here's something completely different.
I spent 7 years doing volunteer service for a top-tier Search and Rescue organization in Colorado: El Paso County Search and Rescue. It was a fantastic experience. EPCSAR covered the region of Colorado that included Pike's Peak, a very accessible 14,000-foot mountain that extends 3,000-feet above the tree-line. I learned a lot about things you don't learn about at work. That experience enhanced my life in some profound ways:
- Search and Rescue does much more than Search and Rescue. We spent 20% of our time doing missions and 80% of our time training (classroom and field) and doing preventative search and rescue education within the community.
- I became a Wilderness EMT so that I would be prepared medically for the patients I may encounter.
- I learned how to be a leader in the field, reporting to the Command structure at base, and how to be a productive component of the Incident Command System that we would put in place when calling in for help by other agencies (like Police, Fire, or other Mountain Rescue Association teams) when we needed additional resources - NOW. It worked amazing well for building very dynamic teams of hundreds of assets (people) within a short period of time (hours) - and kept everything functional and communicating.
- I participated in about 30 missions per year during my tenure.
- While I did get to ride in helicopters on very rare occasions, 99.999% of the time is spent slogging through the brush to find or get to the patient. It's not at all like what TV depicts.
- Helping people matters. The work those volunteers do every day makes a difference in many families.
- SAR Dogs are amazing.
- Above all else, your personal safety and the safety of your team always come first.
- I was personally first to find people that were lost, personally contributed my part to saving a number of lives, and was personally first to find people that were dead (my first real up-close experiences with death).
- It's actually very hard to die out there.
So, what do I mean by that last point?
For that, we need to review the events that lead up to each mission, and the resolution thereof. In addition to the debrief we would do following a mission, there is a fascinating publication that releases each year by the American Alpine Club called Accidents in North American Mountaineering. From the book: "Through analyzing what went wrong in each situation, ANAM gives experienced and beginning mountaineers the opportunity to learn from other climbers' mistakes. From inadequate protection, clothing, or equipment to inexperience, errors in judgment, and exceeding abilities, the mistakes recorded in this book are invaluable safety lessons for all climbers."
This is my personal observation. What is striking to me about these accidents and other search and rescue missions is that, in general:
A mishap in the outdoors is almost always the result of a sequence of mistakes - very rarely is it just doing one thing wrong.
In the Search and Rescue context, that means that we may see sequences of errors like:
- Team did not communicate their plans clearly in advance to all members
- Team starts later than their plan due to unforeseen glitch in the morning
- Team sees bad weather approaching from the West, but decides that they are close enough to make the summit before it hits
- Team still chooses not to retreat even when weather turns significantly worse and they are exposed above tree-line
- Team finally retreats at an unsafe rate of speed, and one member gets hurt in the haste
- Team seeks shelter from the thunderstorm under a large rock
- Lightning strikes nearby causing a ground strike...
- There are thousands of these stories, but the key point is that a significant number of mistakes are made well in advance of the event.
Again, this is my personal observation. I believe the theory applies to VC-funded startups as well:
A failure of a startup is almost always the result of a sequence of mistakes - very rarely is it just doing one thing wrong.
Startups fail not because they do one thing wrong. It's never just the CEO or just the Board or just the Engineering team or just the sales team or just timing. It is often all those things. Sometimes its a team that should not have taken VC funding in the first place (Mistake #1) which causes a huge collection of subsequent mistakes to be made simply because of that, and the end result being bankruptcy. Had the team chosen to bootstrap the business, it may have ended up being a perfectly good small business making $5M/year and cash-flow positive supporting 25 employees and their families.
In the VC-funded startup context, that means we may see sequences of errors like:
- Team did not syndicate the deal to the proper VC's for the market and ended up with an inexperienced Board member
- Team had a first-time CEO that was great at managing up to the board, but had no idea how to manage down, build the executive staff, motivate the employees, or operationally execute
- Team hired poorly because of the large in-flux of Series A cash and expectation of Board members that the organization can scale quickly to meet the product demand
- Team executed according to plan for the most part, but decided the plan was unsound before getting anything to market, switched the plan to a whole different but "adjacent" market ("I thought we were a software company and now we're shipping blade-servers?")
- Team chooses a new market that appears easier to deliver a product to, but ends up addressing a market that is indeed too small to support a VC-funded business, and has a skill mismatch in the organization now
- Executive staff members begin to exit the company - it's no longer a big business opportunity and they took a small percentage of equity because it was supposed to be big
- VC Board finally replaces the CEO with an operationally experienced CEO that doesn't fully know the market, but is smart and experienced and can figure it out
- Board doesn't remove the original CEO from the organization and instead puts them in some "background" job on the executive staff and she/he continues to disrupt
- Team raises more VC money, since they had to to get the new, experienced CEO on board, and the slog continues; it feels like a reset to the employees in the trenches and, since they're engineers, they're smart enough to figure out that they've burned through a lot of cash; the best ones begin to exit as well
- Team makes thousands of excellent decisions and builds some amazing software along the way, but in the end, the market remains small, the VCs become tired, and the company exits with an M&A transaction that is not exactly a needle mover...
- There are thousands of these stores, but the key point is that there are a significant number of mistakes that are made well in advance of the event.
When startups fail, people will always spin a story and point the fingers. Revisionist history is always at work. That is, simply speaking, just part of the process of failure. Accept it and move on.
Now, startups that succeed... Well, stay tuned for a whole 'nother story!
Update: Matt Marshall of VentureBeat is interested in using the second half of this story, specifically, the comparisons of outdoor sequences of mistakes that lead to death with sequences of mistakes at startups that lead to failure. So, please contact me if you would like to contribute your startup story and we can possibly co-author something for VentureBeat!
Tags: VC, Venture Capital, Startups, EPCSAR, Search and Rescue, SAR, Mountaineering, Brian Berliner, brianberliner