Failure in Entrepreneurship Should Be Informed and Strategic, Not Random and Unbridled
In the dynamic world of startups, failure is often seen as a stepping stone to success. Events like FailCon celebrate these setbacks, but it's crucial to understand that not all failures are created equal. Venture capitalist Geoff Lewis warns against celebrating an unrealistic image of failure, as it may lead young entrepreneurs to make precarious bets that can ruin their businesses and impact their lives.
Two types of failures stand out: productive and wasteful. Productive failures provide valuable learning, expose flawed assumptions, and help refine the business model or product. On the other hand, wasteful failures result from preventable mistakes, mismanagement, or premature scaling that lead to lost time, resources, and morale without yielding meaningful insights.
Productive failures often stem from experiments with customer demand or product-market fit that yield data to pivot or improve. They help founders understand true user needs or technical limitations and avoid bigger issues later. Wasteful failures, however, arise from issues like premature scaling—expanding too fast without building necessary systems—or feature creep, where unnecessary features complicate the product and slow progress without real usage, leading to technical debt and operational fragility.
To distinguish between productive and wasteful failures, ask yourself: Did the failure deliver actionable insights or corrections that improve the business? Was the failure caused by preventable internal issues like technical debt, feature overload, or premature expansion? Are you building with systems and practices that enable learning and adaptability rather than just rushing to scale? Is there a clear root cause identified that can be addressed to prevent repeat failures? Or is failure resulting from shortcuts, ignoring customer feedback, or poor resource management?
Recognizing and minimizing wasteful failures requires building robust operational systems, disciplined workflows, and resisting undue pressure for uncontrolled growth. This approach turns early setbacks into productive learning opportunities for sustainable success.
Adam Foroughi, a contributor to this article, experienced this firsthand with his company, AppLovin. They made bets that didn't pan out initially, but they scrapped unsuccessful attempts quickly, learning from their mistakes and moving on. Jon Oringer, Shutterstock founder and CEO, advises limiting spending and resources when creating a new product or service to minimize risk.
The idea that failure leads to success is a common narrative in the startup space. However, it's important to remember that taking risks should serve a greater purpose that can be easily identified. Mark Cuban says that failure makes you better, stronger, and smarter, and that you only need to be right once. But Peter Thiel dislikes the idea that failure is a great learning experience and believes it should be avoided.
In the end, it's about striking a balance between ambition and caution. Fear of failure is healthy, and one should aim to fail smart and infrequently. Don't aim for failure in hopes of eventually becoming successful. Instead, make educated decisions based on long-term plans and projections. Failure may sometimes be seen as a badge of honor, but it's essential to remember that productive failure is a valuable learning experience, while wasteful failure can be detrimental.
[1] Tomer, T., & Popescu, D. (2014). The Lean Product Playbook: How to Innovate with Minimum Viable Products and Rapid Customer Feedback. O'Reilly Media.
[2] Ries, E. (2011). The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses. Crown Business.
[5] Lewis, G. (2016). The Rational Lean: A Guide to Starting and Growing a Successful Business. Wiley.
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