Startup Stories Part 4: Failure is a Badge of Honor

Here’s the 4th part of my bi-weekly column with The Star Metrobiz. Read the original post here. Hope this helps.


Having been back in Malaysia for the past 10 months, I noticed that each time I talk about failure in an interview or to a group of entrepreneurs, Malaysians seem aghast at the very notion of it. And then after a moment, they’ll have a revelation that failing is not so bad after all. Perhaps it’s a cultural thing, but we are often too afraid to fail as we perceive it as detrimental to our future. It’s much easier to stick to status quo because its certain and familiar. We stay in the “safe zone”, not daring to venture out into the unknown. 

I was born naturally adventurous. When I was six, I would sneak out my Cheras house to explore the forest hill out back – all because I heard there was a waterfall on top of the hill. I didn’t care if I got lost or that there were cobra warnings, I was so compelled by the vision of a waterfall and confident I could find it, so much so that I convinced neighbouring kids to venture out with me (without parental permission). I probably wouldn’t have the guts to do it now for fear of getting lost and snakes. No wonder they say we should have childlike faith, their naivety. Children act as though they have nothing to lose and take chances because they have yet to experience as much hurt or failure. The moment we limit children from exploring, they miss out on the opportunity to excel and learn.

My little adventure? I ended up finding a teeny weeny waterfall on top of the hill, and the receiving end of the cane. 

In November last year, a group of Malaysian entrepreneurs were selected into the MaGIC e@Stanford program to go to Silicon Valley to immerse themselves in one of the most innovative and entrepreneurial hubs in the world. In one of the workshops, a Stanford University professor who was also a serial entrepreneur and Venture Capitalist, boldly declared to the class that more than half of them would eventually fail. Silence fell in the room, some gasped “Oh gosh, he shouldn’t say that!”. I then stood up and said “Well, if half of you failed, then it’s an opportunity for the other half to convince you to join the more successful team!”. The vibe of the room then changed, as if it was a light bulb moment when they saw failure in a new light, a revelation of the potential of combining teams or as co-founders. 

This realization is actually very important, and such is the mindset and culture in Silicon Valley, where weaker startups get absorbed into more successful ones. The reality is that there is more supply than demand for the same products and services. A healthy ecosystem allows for entrepreneurs who didn’t make it the first time round to get recycled back into the system. It’s okay that you’re no longer the founder – owning a small piece of a big pie (having small equity stake of a highly valued startup) is way better than owning a big piece of nothing (when your equity is worth nothing). 

In fact, failing is viewed as a badge of honor in the startup realm. Investors actually prefer to invest and even double down on entrepreneurs who are able to pick themselves up and go at it the second time as it exhibits qualities of resilience, resourcefulness, and passion. Ideally, these entrepreneurs would then apply learnings to the second venture, so they avoid the same pitfalls.

According to a Harvard Business School paper, Performance Persistence in Entrepreneurship, first-time entrepreneurs have only an 18% chance of succeeding in their first startup. A first-time entrepreneur who’ve failed, will have a 20% chance of success in their next startup. Finally, all else equal, a successful venture-backed entrepreneur has a 30% chance of succeeding in their subsequent venture. Strange but true, entrepreneurs who have failed are more likely to get funding (from the same VC firm) than their successful counterparts.

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There are two ways to read this data. Through pessimistic lenses, the odds are low (which is true); alternatively with an entrepreneurial mindset, even veterans do not have the magical recipe for success, placing first-time failed entrepreneurs on an almost equal playing field as veterans. Among those who’re willing to try again, the odds of success rises. 

And this isn’t limited to tech entrepreneurs. A study done by Francine Lafontain and Kathryn Shaw that studied the successes and failures of retail entrepreneurs between 1990 and 2011, found that of the first-time entrepreneurs whose businesses shut down, the tenacious 29% who decided to try again were more likely to be successful the second, third, and even tenth time around. Their success rate increased with the number of past failures. The researchers argue that experience, even when it’s not positive, is invaluable – entrepreneurs learn effectively from mistakes, as well as from successes. 

So fellow Malaysians, don’t count the failures out quite yet – take it as a badge of honor, battle scars from your own startup war story.

“Failure is the opportunity to begin, again. Only more intelligently” ~Henry Ford

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