It’s easy to focus on the superlative-stuffed, edited bio of a successful entrepreneur: the story of how they had a Big Idea in the bath, or during mile 26 of the London Marathon, or whilst scuba diving in Mauritius, and went on to grow it into a multi-million pound business that’s disrupted a whole industry.
But the sad truth is that half of all UK start-ups fail within five years, according to research by insurer RSA. The tax system, a lack of bank lending and the cost and admin of running a business are all stumbling blocks for those starting their own enterprises.
There’s a more optimistic way to look at the depressing start-up statistics, though: many of the truly successful business founders we look up to today have at least one entrepreneurial failure behind them. Sir James Dyson spent 15 years (and all of his savings) working on over 5000 prototypes before coming up with the bagless vacuum cleaner that made his name (and his fortune). Amazon founder Jeff Bezos spent years working on failed ideas including an auction website which didn’t work. He evolved that into a site called zShops, which also flopped. It was his next attempt which became Amazon Marketplace. And no one’s doubting that one’s success.
Likewise, Arianna Huffington received almost 40 rejections for her book proposal, and bagged under 1% of the popular vote when she ran for governor of California. But instead of giving up, she launched a website called The Huffington Post which she later sold to AOL for $315 million.
What you learn from failing can help you flourish second (or third, or fourth) time around, according to entrepreneurs who have done just that. Take Scott Phillips, co-founder of Rise Art, an online marketplace which connects handpicked talented artists with casual art collectors. The company is now five years old, has 15 staff and revenues growing at 20% each month – but Phillips’ first venture, as part of the founding team of online video startup, wasn’t so smooth. He spent two years at the business, raising capital from European VC funds and angels, and managing corporate development with the likes of Myspace and Facebook. “But the company quickly floundered, as stronger competition and the rise of user-generated content video sites including Youtube gained traction.”
But Phillips says: “I now think that the failure of the company was great for me personally – it opened my eyes to how hard it is to create a sustainable business.” He advises other entrepreneurs who are starting out to “focus on validating your idea with customers and really understand the problem you solve before launching. Your customers know their needs better than you do, so focus on what they are telling you and validate your product frequently. Then focus on hiring. Get a great team in place – that’s the one competitive advantage you can build that will define your culture and help you beat the odds.”
Then there’s Tim Bowden, who dreamt of being the next Mark Zuckerberg, but alas his social media app Winebook – “an app where you could find others with similar wine tastes to yours and share recommendations” didn’t quite take off. “At the time I had the idea, I was doing some unrelated consultancy work, so I paid a developer to develop the app for me – and she turned out to be a nightmare. Consistently late, and trying to change the specification from my original ideas to suit herself – which meant delays,” the entrepreneur explains. Then a competitor launched a rival app before Bowden bought his to market, and the idea was dead.
Bowden moved on, and made an investment in a smart gas and electricity metering firm. But difficulties with his co-shareholder ultimately led to a “business divorce” and asset split. He now runs the business by himself. “I do everything from business development and contract negotiation to raising invoices and paying bills.” His main lesson? “Choice of partner is key – as are the terms of your partnership. Any agreement that you have with a partner must be written down and signed. Never do business on just a handshake – even if people ‘give you their word’, getting them to write it down in a contract will make them think twice about it.”
Working solo is fine, too, with entrepreneur Cheryl Clarke, whose first business was City Calm, which aimed to help stressed executives “to re-connect, destress and enjoy their day-to-day”. Her business encompassed meditation classes, a retreat, lessons in creative work like journaling, mindful colouring and painting, and walking. “I got a small team together working on the project, and had an assistant – I was subsidising the City Calm business with freelance marketing work. But the business model wasn’t clearly defined, nor was the target market – and with no funding, and no clarity, it didn’t make any money.”
Clarke is adamant, however, that “despite City Calm failing as a business, it was an important stepping point. I learnt some key business lessons – focus is one, and I apply that to my current business, Ginger Marketing, which helps SMEs work on blogs and guest posts. I knew to clearly identify our services so we are upfront about what we offer, and we started getting more clients – in the last four, months we’ve gone from three to 15 clients, with some on the waiting list. I’ve learnt that failure is not really failure – it’s just learning.”
Lucy Tobin is a senior writer at the Evening Standard, author and blogger.