A badge of honour

Keep trying: Success rates for entrepreneurs rise with multiple attempts.

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 it is 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 snakes. I was so compelled by the vision of a waterfall and confident I could find it 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 and 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 programme to go to Silicon Valley to immerse themselves in one of the world’s most innovative and entrepreneurial hubs.

In one of the workshops, a Stanford University professor who is 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 finding co-founders.

This realisation 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 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 a small equity stake of a highly valued startup) is way better than owning a big piece of nothing.

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

According to a Harvard Business School paper on performance and persistence in entrepreneurship, first-time entrepreneurs have only an 18% chance of succeeding in their first startup.

A first-time entrepreneur who has failed, will have a 20% chance of success in the 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.

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 level 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. Research 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 10th 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 honour, battle scars from your own startup war story.

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

  • Cheryl Yeoh is the CEO of MaGIC, the Malaysian Global Innovation & Creativity Centre.

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