Startups and failure

October 25, 2016 – 10:26 am

(Wynyard Group, an NZ tech high-growth company [or, perhaps, not-so-high growth] just entered voluntary administration. On Twitter, a friend was adamant bad luck had nothing to do with it. Instead of a tweetstorm, here’s my response in a vintage retro format known as “a blog post”)

You can always look back at every failure and assign one or more causes, because SOMETHING always kills the startup.  And someone is always responsible for the fatal decisions. That’s “pilot error” for startups.

But hindsight is far easier than foresight. Everybody does the best they can with the info and skills they have.  Everyone operates with imperfect knowledge and incomplete control. Everyone. Investors, board, executive, and rank and file all act with imperfect information. They don’t have a choice. The pattern-matching we hate in VCs is just a reaction to the fog of the market. “Maybe past performance will predict future success?”

The hardest part of bringing something into existence is surviving that imperfect information.

In the case of Wynyard, there are almost certainly multiple proximal causes of failure. People at Wynyard undoubtedly said and did things that materially contributed to failure. That doesn’t mean they weren’t unlucky. Even if Wynyard exec repeatedly doubled-down on unsuccessful strategies, the company and investors were unlucky. Unlucky to have the team they had, unlucky not to notice, unlucky that their faith in people was misplaced.

Successes have recognised and recovered from their fuckups before they went broke. Failures didn’t. Do you have the right info, skills, team, board, partners, customers, market conditions to recover before you go broke? That’s luck.

To suggest there’s no luck in successful or unsuccessful startups is just silly.

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