A playbook for failure: fail fast and face up

Orla Browne, December 11, 2017 5 min read

This article was originally posted on the Tech City UK website.

Failure can be an awkward topic in the tech industry. Who wants to air their dirty laundry in public by talking about their failed startup when they’re trying to attract investment for their next? Popular opinion would have it that we’re more prudish about discussing or even celebrating failure in Europe than our friends across the pond, but we tried to put that right on Wednesday with the third episode of Tech Nation Talks, dedicated to shining a spotlight on slip ups. Here we highlight the main recommendations to founders, from a Forward Partners investor, the Founders Factory CPO, and the COO and Head of Communications from a former UK tech giant.

Falling from grace

The elephant in the room at the start of Wednesday evening was the story of a UK unicorn turned phoenix, a veritable menagerie of metaphors in the form of Ve Global, formerly Ve Interactive. Ve Interactive, a Future Fifty company, very publicly went into administration in April of this year. Once valued at $1.5bn, Ve was bought for £2m in a pre-pack administration deal that saw virtually the entire senior management team leave, and broad-sweeping redundancies, as the company restructured in the face of massive debts. Seven months on, Ve Global’s International Head of Communications, Danny Bartlett, opened up publicly for the first time about their downfall and consolidation (“I was brought in to help the company IPO, it’s pretty laughable now!”), in an attempt to show what they’ve done in the face of disaster, and share their learnings with an adolescent ecosystem in need of a safe space for messing up.

Ve’s particular recipe for failure has been well-documented elsewhere, and by Danny’s own admission only compounded in scale by Ve Interactive’s propensity for boastful claims like ‘Britain’s tech flagship’, and ‘the fourth largest data collector in the world’, but for brevity we’ll stick to take aways – what steps they took when they hit rock bottom.

Transparency, longevity, perspective

In Danny’s playbook, the first thing you’ve got to do is admit when you’ve royally messed up, the headlines will be saying it anyway. It’s important to talk publicly about serious failings at some point, but initially Ve had to prioritise internal communications. So, understandably, disgruntled were the workforce, that as Danny put it “the FT had become our new staff intranet; we only found out what was going on when it was published in Kadhim Shubber’s Alphaville column.” By being open with staff you can stave off departures of key talent, get everyone working in the same, new direction, and avoid creating an influential cohort of anti-brand ambassadors in your redundancies.

Ve’s plan is to think long term. “There’s a pandemic of pace in the startup ecosystem” according to Danny; you have to think further ahead if you’re to get through the present. It’s particularly important if you need to entirely rebuild your brand, which is why they didn’t try to do everything at once, but focussed on internal comms to create the stability needed to redevelop the company.

It sounds harsh considering the scale of the situation, and the fact that many people lost their job, but Danny maintains that you need to keep perspective – “nobody died”. If you’re going to get out of the situation with your sanity, and as many jobs as possible intact, you need to keep perspective and work with what you’ve got. For more from Danny on the fall and rise of Ve, you can read his piece, from unicorn startup to tech phoenix.

Recipes for disaster

Following Danny’s keynote, our panel for the evening were tasked with a tough one from the outset, with moderator Yessi Bello Perez, Editor of UKTN, asking “why do startups fail?”.

Matt Bradley, Investor at Forward Partners, was quick to say that there are many co-morbid factors, but ultimately, and it might sound simple, it’s that people aren’t buying what you’re selling. That can be as a result of many things, but often it’s that the founders haven’t done their customer research. You have to make yourself vulnerable to negative feedback.

Justus Brown, Chief Product Officer at Founders Factory, kept it short and sweet by saying it’s talent, and timing. David Marrinan-Hayes, MD and COO at Ve Global, agreed, saying it’s not just about the why, or the what, but the when. David also suggested that we might need a ‘framework for failure’. He referenced the founder of Secret who wound up the company and gave the money back to investors when he saw the writing was on the wall, rather than waiting til they’d burned through the cash. It would take a lot of parties to change their behaviour, he says, but maybe it shouldn’t be all exit or die.

Re-watch the livestream of the event on periscope.

Running out of cash

While the ultimate nail in a business’s coffin might be running out of money, that’s never the cause of death itself. As Matt Bradley put it, in 99 out of 100 business plans the aim is to run out of money on the runway, “and as an investor we bet on that plan!” Over the time of executing the plan you should be able to prove something, but planning to run out of money isn’t the problem, the problem is not being able to prove your product.

David observed that life science, energy and robotics startups are likely to fail bigger, as they require more capital to get off the ground in the first place, but it doesn’t make them more likely to fail. B2C startups can start off with relatively little seed capital, there are just different quantums of risk for different sectors. Justus explained that each sector has it’s own set of challenges. No sector is more likely to fail than another, they just have different risks.

Attitudes to failure: Europe vs. Silicon Valley

The inevitable comparison of European startup culture to the US’s mature sector was brought up, with Yessi querying whether they’re better at failing. Matt pointed out that they’re more experienced in it. There’s been more failure and more success. “There’s more rubber on the road. People are more accepting of alternative outcomes.”

On a practical level David pointed to the differences in regulation. There’s more personal risk in Europe, particularly outside the UK. In France, your personal bank accounts can be closed if your business fails; there’s more on the line, which influences attitudes to failure.

Justus agreed: “There’s a different culture in each market.” He put forward that risk aversity is proportionate to the size of the ecosystem; people are more cautious in Berlin than in London.

Talent squeeze/opportunity

The whole panel acknowledged that finding and retaining talent can be a challenge (“amongst our portfolio more and more people are offshoring talent” – Matt, “Product Managers and Product Designers are like hen’s teeth” – David), but Justus was cautiously optimistic. He said the number of AI and deep tech startups in London shows that there’s great talent in the UK. “An iOS app might be harder to build in terms of resources than an AI backend. We’re a couple generations behind, but the talent is there, we just need to nurture it.”

Fail fast and face up

Asked for their nuggets on failure, Justus succinctly offered “Much like fixing a bug in code, do it early.” He said that real tests and questioning should come first with your customers before you’ve built the product, then at the prototype stage, and again before you make your first hire. Culture can also help deal with problems of uncertainty and responsibility. In a larger startup, if there’s a helpful blurring of roles at the top it can mean that everyone can bring solutions to problems that aren’t ‘technically’ in their remit. If the worst happens, Matt counselled to face up to it, don’t run away. And David, the most experienced on the matter, advised that “you’ll need honesty and bravery”. In life as in business I suppose.


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