Melbourne company director, adviser and angel investor Frank Cooper believes Australian investors and venture capitalists are “a little bit more accepting of failure”, but there is still some resistance to supporting an entrepreneur with an uneven track record.
“Attitudes are changing, but there’s still a long way to go before we get to the American acceptance of failure,” Cooper says.
Cooper is vice-president of Melbourne Angels, a private investment group. When considering an investment opportunity in a start-up company, he says, the issue is not whether an entrepreneur has failed in the past, but why that failure occurred.
“If something fails it’s generally pretty clear why it failed,” Cooper says.
“Particularly in an early-stage company where the risks are high there can be any number of reasons for failure: it might be people issues, it could be that the entrepreneur lacked some of the attributes required, maybe the people at board level didn’t provide enough support, or maybe the capital wasn’t enough.
“There are so many reasons why something can fail. If you can identify what it is, well, OK, next time around we can fix that.”
Leadership researcher, mentor and chief executive of Sydney advisory firm The Confidere Group, Anthony Howard, says entrepreneurs and corporate chief executives have something in common: the inevitability of failure.
“Many people fail to grasp that a new small business is a series of failures as you iterate towards a successful business model. It’s not necessarily the big fail, as in the whole thing didn’t survive, but unless business owners understand that success is a series of failures they are likely to buckle at the first hurdle,” he says.
“Similar realities apply when running a major corporation; however, at that level it’s more about execution than searching out a model.”
Silicon Valley entrepreneur and management author Eric Ries has written a best-selling book, The Lean Startup, which encourages corporate executives to think like entrepreneurs – including the acceptance of “productive failure” as an opportunity to learn valuable lessons.
“One of the things I’ve tried to do is to tell companies, ‘Put on your employees’ performance evaluation a concept we call productive failure: How many productive failures did you have this year?’ If someone comes to you and claims that they didn’t fail this year, you know one of two things: they’re either lying to your face or they were incredibly, unbelievably conservative,” Ries says in a McKinsey & Co interview series.
“[Instead] you want to say, ‘Show me a time when you failed but learned something really valuable, or were able to pivot from something that didn’t work to something that did.
“Executive sponsorship of a [project] start-up is about learning and supporting the team and going on the journey with them. It’s not about reviews and evaluation and go-kill decisions. It’s a really different change required at the executive level, at the middle-manager level, and at the line-manager level to do this thing.”
