Failure and Redemption

What’s gone and what’s past help
Should be past grief.

—William Shakespeare – The Winter’s Tale

We give abundant advice to founders about how to make startups succeed, yet we offer few models about dealing with failure.

So here’s mine.

——–

In my experience, living through failure has 6 stages:

Stage 1: Shock and Surprise

Stage 2: Denial

Stage 3: Anger and Blame

Stage 4: Depression

Stage 5: Acceptance

Stage 6: Insight and Change

While I had been part of a few failed startups, none of them had fallen squarely on my shoulders until Rocket Science Games where my business card said CEO. It was there that I lived through all 6 stages and came out the other side a changed man.

Failure

Stage 1: Shock and Surprise

We raised $35 million and after 18 months made the cover of Wired magazine. Wired 2.11 CoverThe press called Rocket Science one of the hottest companies in Silicon Valley and predicted that our games would be great because the storyboards and trailers were spectacular. 90 days later, I found out our games were terrible, no one was buying them, our best engineers started leaving, and with 120 people and a huge burn rate, we were running out of money and about to crash. This can’t be happening to me.

Stage 2: Deny any of it was your fault

In my mind, I had done everything the investors asked me to do. I raised a ton of money and got a ton of press. We hired everyone according to our plan. It was everyone else who screwed up. I did everything right.

Stage 3: Get angry and blame everyone else

This was the fault of my cofounder since he was in charge of game development, it was the engineers who bailed on me, it was the sales and marketing people who didn’t tell me how bad the games were, it was the VC’s who refused to put any more money in the company, it was Sega’s fault for making a bad gaming platform…

State 4: Get depressed

When the inevitability and magnitude of the failure sunk in, I slept in a lot. There were days I’d get up late and go to bed again at 5 pm. I lost interest in anything associated with my past industry. (To this day I still can’t play a video game.)

Redemption

Step 5: Gradually accept your role in the failure

A few weeks after leaving, I began to think about what I should have done, could have done and pondered why I didn’t do it. (I didn’t listen, I didn’t act, I didn’t own my role as CEO, I wasn’t prepared to do what was right or leave.) This was hard and didn’t happen overnight. My wife was a great partner here. I often reverted to Stages 2 and 3, but over time I took ownership of my primary role in the debacle.

Stage 6: Gain insight and change your behavior

This was the hardest part. While I stopped blaming others, understanding what I could change in my behavior took long months. It would have been much easier to just move on, but I was looking for the lessons that would make my next startup successful. I looked at the patterns of behavior, not just at my last company but also across my entire career. I learned how to dial back the hubris, get other smart people to work with me—rather than just for me, listen better, and act and do what was right—regardless of what others thought I should do.

Epilogue

For my next startup I parked the behaviors that drove Rocket Science off the cliff. We established a team of founders who worked collaboratively. When my co-founders and I got the company scalable and repeatable, we hired an operating executive as the CEO and returned a billion dollars to each of our two lead investors.

Now when I listen to entrepreneurs who’ve cratered a company, I listen for their stories of failure and redemption.

Lessons Learned

-Six stages of failure and redemption

-Don’t get stuck in Stages 2, 3 or 4 – move forward

-Don’t skip acceptance of your role

-Get to insight so you can change your behavior—then commit to the challenge of doing it differently the next time.

This essay first appeared on Steve Blank’s blog and is republished by permission.

Author: Steve Blank

A prolific educator, thought leader and writer on Customer Development for Startups, Steve Blank is a retired serial entrepreneur who teaches, refines, writes and blogs on “Customer Development,” a rigorous methodology he developed to bring the “scientific method” to the typically chaotic, seemingly disorganized startup process. Now teaching entrepreneurship at three major universities, Blank co-founded his first of eight startups after several years repairing fighter plane electronics in Thailand during the Vietnam War, followed by several years of defense electronics work for U.S. intelligence agencies in “undisclosed locations.” Four Steps to the Epiphany, Blank’s fast-selling book, details the Customer Development process and is increasingly a “must read” among entrepreneurs, investors, and established companies alike, when the focus is optimizing a startup’s chances for scalability and success. After 21 years driving 8 high technology startups, today Steve teaches entrepreneurship to both undergraduate and graduate students at U.C. Berkeley’s Haas School of Business, Stanford University’s School of Engineering and the Columbia/Berkeley Joint Executive MBA program. His “Customer Development” teaching and writing coalesce and codify his experiences and observations of entrepreneurs in action, including his own and those he advises. “Once removed from the day-to-day intensity of founding a startup, I was able to observe a pattern that distinguishes successful startups from failures,” Blank says. In 2009, he earned the Stanford University Undergraduate Teaching Award in Management Science and Engineering. The San Jose Mercury News listed him as one of the 10 Influencers in Silicon Valley. In 2010, he was earned the Earl F. Cheit Outstanding Teaching Award at U.C. Berkeley Haas School of Business. Despite these accolades, Steve says he might well have been voted “least likely to succeed” in his New York City high school class. Steve Blank arrived in Silicon Valley in 1978, as boom times began. His early startups include two semiconductor companies, Zilog and MIPS Computers; Convergent Technologies; a consulting stint for Pixar; a supercomputer firm, Ardent; peripheral supplier, SuperMac; a military intelligence systems supplier, ESL; Rocket Science Games. Steve co-founded startup number eight, E.piphany, in his living room in 1996. In sum: two significant implosions, one massive “dot-com bubble” home run, several “base hits,” and immense learning leading to The Four Steps. An avid reader in history, technology, and entrepreneurship who seldom cracks a novel, Steve has followed his curiosity about why entrepreneurship blossomed in Silicon Valley while stillborn elsewhere. It has made him an unofficial expert and frequent speaker on “The Secret History of Silicon Valley.” Steve’s interest in combining conservation with best business practices had Governor Arnold Schwarzenegger appoint him a Commissioner of the California Coastal Commission, the public body which regulates land use and public access on the California coast. He also serves on the Expert Advisory Panel for the California Ocean Protection Council. Steve serves on the board of Audubon California, was its past chair, and spent several years on the Audubon National Board. A board member of Peninsula Open Space Land Trust (POST), Blank recently became a trustee of U.C. Santa Cruz and a Director of the California League of Conservation Voters (CLCV). Steve’s proudest startups are daughters Katie and Sara, co-developed with wife Alison Elliott. The Blanks live in Silicon Valley.