Tag Archives: Failure

Startup Land : the Zendesk adventure from Denmark to Silicon Valley to IPO

Many of my friends and colleagues tell me that video and movies are nowadays better than books for documenting real life. I still feel there is in books a depth I do not find anywhere else. A question of generations, probably. HBO’s Silicon Valley may be a funny and close-to-reality account of what high-tech entrepreneurship is but Startup Land is a great example of why I still prefer books. I did not find everything I was looking for – and I will give one example below – but I could feel the authenticity and even the emotion from Mikkel Svane’s account of what building a start-up and a product means. So let me share with you a few lessons from Startup Land.


The motivation to start

“We felt that we needed to make a change before it was too late. We all know that people grow more risk-averse over time. As we start to have houses and mortgages, and kids and cars, and schools and institutions, we start to settle. We invest a lot of time in relationships with friends and neighbors, and making big moves becomes harder. We become less and less willing to just flush everything down the drain and start all over.” [Page 1]

No recipe

“Along the way, I’ll share the unconventional advice you learn only in the trenches. I am allergic to pat business advice that aims to give some formula for success. I’ve learned there is no formula for success; the world moves too fast for any formula to last, and people are far too creative—always iterating and finding a better way.” [Page 6]

About failure

In Silicon Valley there’s a lot of talk about failure—there’s almost a celebration of failure. People recite mantras about “failing fast,” and successful people are always ready to tell you what they learned from their failures, claiming they wouldn’t be where they are today without their previous spectacular mess-ups. To me, having experienced the disappointment that comes with failure, all this cheer is a little odd. The truth is, in my experience, failure is a terrible thing. Not being able to pay your bills is a terrible thing. Letting people go and disappointing them and their families is a terrible thing. Not delivering on your promises to customers who believed in you is a terrible thing. Sure, you learn from these ordeals, but there is nothing positive about the failure that led you there. I learned there is an important distinction between promoting a culture that doesn’t make people afraid of making and admitting mistakes, and having a culture that says failure is great. Failure is not something to be proud of. But failure is something you can recover from. [Pages 15-16]

There are other nice thoughts about “boring is beautiful” [page 23], “working from home” [page 34], “money isn’t only in your bank account, it’s also in your head” [page 35], and an “unconventional (possibly illegal) hiring checklist” [page 127]

I will quote Svane about investors [page 61]: “I learned an important lesson in this experience – one that influenced all of the investor decision we’ve made since then. There is a vast spectrum of investors. Professional investors are extremely aware of the fact that they will be successful only if everyone else is successful. Great investors have unique relationships with founders, and they are dedicated to growing the company the right way. Mediocre and bad investors work around founders, and the company end in disaster. The problem is, early on many startups have few options, and they have to deal with amateur investors who are shortsighted and concerned with optimizing their own position.” [and page 93]: “Good investors understand that the founding team often is what carries the spirit of a company and makes it what it is.”

And about growth [page 74]: “Even after the seed round with Christoph Janz, we were still looking for investors. If you’ve never been in a startup this may seem odd, but when you’re a startup founder you’re basically always fund-raising. Building a company costs money, and the faster you grow, the more cash it requires. Of course, that’s not the case for all startups – there are definitely examples of companies that have come a long way on their own positive cash flow – but the general rule is that if you optimize for profitability, you sacrifice growth. And for a startup, it’s all about growth.”

In May 2014, Zendesk went public and the team was so extatic, many pictures were tweeted! The company raised $100M at $8 per share. They had a secondary offering at $22.75 raising more than $160M for the company. In 2014, Zendesk revenue was $127M!… and its loss $67M.


There was one piece of information I never found neither in Startup Land nor in the IPO filings: Zendesk has three founders, Mikkel Svane, CEO and author of the book. Alexander Aghassipour, Chief Product Officer and Morten Primdahl, CTO. I am a fan of cap. tables (as you may know or can see here in Equity split in 305 high-tech start-ups with founders, employees and investors shares) and in particular studying how founders share equity at company foundation. But there is no information about Primdahl ‘s stock. I only have one explanation: On page 37, Svane writes: “the thing about money is, it’s happening in your head. Everyone processes it differently. Aghassipour adnSvane could live with no salary in the early days of Zendesk, but Primdahl could not. It’s possibly he had a salary against less stock. I would love to learn from Savne if I am right or wrong!

Click on picture to enlarge

If you want to be a high-tech entrepreneur, don’t read this. Or should you?

Is this a strange time or am I growing old? The point is my recent readings were not optimistic views of high-tech entrepreneurship or of Silicon Valley. I just think of
– Horowitz’s The Hard Thing about hard Things,
– Morozov’s To Save Everything, Click Here (which is so negative, I have not written a post yet!)
HBO’s Silicon Valley – nice & funny but slightly depressing.

In a way there’s always been creations which were not absolutely optimistic, but there was always some positive point. I think of
– Bronson’s The First $20 Million Is Always The Hardest,
– Edwards’ I’M Feeling Lucky – Falling On My Feet in Silicon Valley,
– the very good Harboe Schmidt’s The Ultimate Cure or
– even very short and funny The Anorexic Startup by Mike Frankel.


Now I just read No Exit, Struggling to Survive a Modern Gold Rush by Gideon Lewis-Kraus (thanks David!). The passion, the excitement have disappeared. The entrepreneurs are honest enough to show they are exhausted. And the gold rush again will have more casualties than winners.

I initially thought it was a fiction, but the author is a journalist for Wired. That’s why my initial reaction was it’s not a good work, I could not see the style, the rythm. After I understood it was not fiction, I was less negative, thought it’s not the best document I’ve read. But here are some interesting quotes/lessons.

“The Valley has successfully elaborated the fantasy that entrepreneurship – and, more broadly, creativity – can be systemized; this is the basic promises of accelerators (Ycombinator et al.) that success in the startup game can be not only taught but rationalized, made predictable.” (31/847 – Kindle reference) and later “Silicon Valley’s most bought book, Eric Ries’ The Lean Startup, is a spirited pamphlet of winning exhortations to hunger, speed, agility, and unsentimentality. Almost every founder in Silicon Valley has read the first 30 pages of that book.” (618/847) If you do not know the book, it’s about spending little and pivot fast and I agree there is something wrong about all these fantasies. Indeed even Steve Blank agrees now. Check Blank’s statement about learning entrepreneurship.

Even worse, “[…] the Series A crunch. Due in part to the rise of startup accelerators like Y Combinator, as well as to the surplus capital washing around the Valley from recent IPOs, it has never been easier to raise a small amount of money, say $1 million. And it has never been easier to build a company—especially a web or mobile product—from that small amount of money, thanks in part to the proliferation of cheap, easy development tools and such cloud platforms as Amazon Web Services. But the amount of “real” VC funding (i.e., Series A rounds) to be allocated hasn’t kept pace. The institutions that write the big checks, those that might support and sustain real growth, can survey what a hundred companies have managed to do with a small check and put their real money on the propositions that promise the greatest yield with the least risk” (41/847) and “The problem in 1999 was that to get $5 million you didn’t need very much. You needed one or two Stanford résumés, an idea for a prototype, and a live body to give the money to.” It’s hard to get that $5 million now in part because it’s so easy to get $500,000, especially if you’re coming out of an accelerator. One way to look at it is that the $5 million that went to one company of 10 people in 1999 is now going to 10 companies of two people. You’ve lowered the bar 10X” (753).

And the consequences are slightly different… “The Valley is the place where the astounding success of the very few has been held out to the youth in exchange for their time, their energy and, well, their youth” (60). “You know the odds on any given company’s success are long, but that’s why you make a lot of bets. In the first dotcom boom, the risk was largely carried by the investors. Now that the financiers have gotten a grip on the market, and specialized engineering knowledge has become a commodity, the risk has been returned to the youth” (760). “The worst thing is that these guys get their funding tomorrow and are stuck doing this for another year. So far, they only lost one” (778).

His comments are right, but isn’t this true of any bet you make in life, becoming an artist, a scientist. You can go for a safer life for sure. Lewis-Kraus is pessimistic, he sees the people who do not win. And this exists anywhere people try. I have more optimistic views. Even if I know it is a tough experience… I prefer what Latour said of his experience with Everpix: “I have more respect for someone who starts a restaurant and puts their life savings into it than what I’ve done. We’re still lucky. We’re in an environment that has a pretty good safety net, in Silicon Valley.”

A final quote I liked (related to my previous post about age): “There’s been a lot written recently about the age divide in Silicon Valley, but even the more thoughtful pieces — such as those in The New York Times Magazine and The New Republic — tended to miss the obvious: Older people don’t typically work at startups because they have families and can no longer stomach the perpetual crisis. It’s exactly the same reason that people in their fifties tend not to be magazine freelancers or underground-club bassists. As one investor put it to me, When I see a 40-year-old in a Series A meeting, I want to pull him aside, put my hand on his shoulder, and tell him to just go get a job.” (706).

PS: it’s still a challenge for me to read an e-book all the more with these references which are not pages anymore. So I cheated, created a pdf and printed the stuff to take notes and later copy/paste the pdf…

Lessons from Failure: a rare and interesting account from Everpix

Two EPFL entrepreneurs asked me what I thought of the Everpix story. If you do not know it, you should read the following links:
– A very good article from the Verge: Out of the picture: why the world’s best photo startup is going out of business. Everpix was great. This is how it died.
– A very detailed account of the Everpix story by its founders on Gifthub with tons of documentation and archive: Everpix-Intelligence

I knew some actors: Pierre-Olivier Latour is an EPFL alumnus whom I met during my Index years and again in 2006 when I visited Silicon Valley with the future founders of Jilion. Neil Rimer, one of the investors in Everpix was my boss before I joined EPFL.

From left to right, Zeno Crivelli, Pierre-Oliver Latour, myself and Mehdi Aminian in 2006 in Silicon Valley.

The story will certainly feed the recurring debate about taking VC money or not, and I think it is a bias debate! You can read my recent posts about Founders Dilemmas, which address the issue:
– The Founder’s Dilemmas – The Answer is “It depends!”
Swiss Founder’s Dilemmas
Again taking VC mmoney is not an easy thing. It is tough to get and when you have it, the constraints increase. You can watch the video Venture Capital Is a Time Bomb from the founder of 37signals if you do not know what I am talking about.

I think the debate is biased because it is not about VC vs. no VC. Not many entrepreneurs have the choice of not taking investor money (Business angels are not that different from VCs.) It is about do you want to have an impact and grow (then you often need investors) OR do you want to control and stay independant. And it is often OR not AND… I know many people (including entrepreneurs and investors) disagree with me. My recent experience has not changed this belief that I’ve had for 15 years.

You should read Founders at Work if not already. One of them claims: “VCs? you can’t live with them, you can’t live without them.” I think this is closer to the truth. He said exactly: “VCs are an interesting bunch; you can’t live with them, you can’t live without them. They are instrumental in your success because they give you money and a really strong endorsement. They have this mafia-like network of connections and they help you with deals and find the right executives. They are really working your case. In my experience, it rarely happens that they turn against you, because you’re a team and if the team isn’t working, the company will likely fail. Occasionally, when you’re a screw-up, they’ll have to make a tough decision and fire someone, but that’s rare in my opinion. Because they wouldn’t invest in your company if they didn’t believe in you and your team. So I’ve always had a good experience working with VCs.”

So back to Everpix. I do not really have a point of view as I did not know the details. But let me quote both actors from The verge article: “The founders acknowledge they made mistakes along the way. They spent too much time on the product and not enough time on growth and distribution. The first pitch deck they put together for investors was mediocre. They began marketing too late. They failed to effectively position themselves against giants like Apple and Google, who offer fairly robust — and mostly free — Everpix alternatives. And while the product wasn’t particularly difficult to use, it did have a learning curve and required a commitment to entrust an unknown startup with your life’s memories — a hard sell that Everpix never got around to making much easier.” “It succeeded in every possible way,” said Jason Eberle, who built the web version of Everpix, “except for the only way that matters.”

While the investors point was: “While the product was clearly superb and had a very small but very loyal following, we were not comfortable enough with the other aspects of the business to kick up our level of investment,” said Neil Rimer, adding, “Having a great product is not the only thing that ultimately makes a company successful.” There is the remaining issue of how much value creation VCs want and can all entrepreneurs address it: “You guys seem to be a spectacularly talented team and some informal reference checking confirmed that, but everyone here is hung up on the concern over being able to build a >$100M revenue subscription business in photos in this age of free photo tools.” Said a partner at another firm: “The reaction was positive for you as a team but weak in terms of whether a $B business could be built.”

The debate will no doubt continue, but it is close to what can inspire me this story. Not to forget the conclusion of Latour: “I have more respect for someone who starts a restaurant and puts their life savings into it than what I’ve done. We’re still lucky. We’re in an environment that has a pretty good safety net, in Silicon Valley.”

Europe, wake up!

This is a short text I wrote in 2012, and my friend Will from Finland had made comments about it which I added. Thanks! I read it again this morning and thought it might be worth publishing it now…

Intel, Apple, Microsoft, Oracle, Genentech, Cisco, Google, Facebook, Skype. You probably know these companies. They were at the origin of major innovations for our societies. Maybe you are less aware of Niklas Zennström and Janus Friis, Mark Zuckerberg and Dustin Moskovitz, Larry Page and Sergey Brin, Leonard Bosack and Sandy Lerner, Bob Swanson and Herb Boyer, or Larry Ellison but you know much better Bill Gates and Paul Allen, Steve Jobs and Stephen Wozniak, Bob Noyce and Gordon Moore. They are entrepreneurs; the founders of companies that were all start-ups one day in the not-so-distant past, but are global titans today. Europe does not seem to understand the importance of high-tech innovation produced by these young entrepreneurs. Skype is the exception in the list and the Americans were able to produce hundreds of such success stories. Why have we failed and what can we do to change the course of history?

Innovation is a culture where trial-and-error and uncertainty have huge roles. Failure, unfortunately or maybe fortunately. Just as life! The European culture in all its diversity has provided welfare to its citizens since the end of World War II. Ironically, the comfort-level we all appreciate will actually accelerate its end. A culture can only live with creativity and renewal. As a recent article in The Economist illustrated it well [1], we Europeans are no longer able to innovate, our businesses are too old, at least in technological innovation (e.g. Nokia or Alcatel) and we do not create enough innovations. The causes are probably numerous, but fear of trying is the most serious. And I’m not sure that we are aware of it. Do many Europeans understand that innovation through high-tech entrepreneurship is critical? I fear that we would rather have well-educated children to enter the large established firms than creative individuals willing to try their luck. Worse, what models do we have?

Bob Noyce was a model and a mentor for Steve Jobs.

In this unique place, Silicon Valley, thousands of entrepreneurs try each year. “The difference is in psychology: everybody in Silicon Valley knows somebody that is doing very well in high-tech small companies, start-ups; so they say to themselves “I am smarter than Joe. If he could make millions, I can make a billion”. So they do and they think they will succeed and by thinking they can succeed, they have a good shot at succeeding. That psychology does not exist so much elsewhere” wrote Tom Perkins, co-founder of the legendary Kleiner Perkins fund.

Europe is not fully unconscious of the problem. In 2000, the Lisbon agenda proposed by theEuropean Union had the ambition to make of Europe in 2010 “the most competitive knowledge-based economy”. This has been a total failure. A variety of support mechanisms were created, but the Europeans seem to have forgotten that innovation is primarily a question of adventurers, pioneers – these types of people by definition are not looking for safety and support. Entrepreneurs live on their passion. “Launching a start-up is not a rational act. Success only comes from those who are foolish enough to think unreasonably. Entrepreneurs need to stretch themselves beyond convention and constraint to reach something extraordinary” says Vinod Khosla, another Silicon Valley icon. A start-up is a baby whose founders are its parents. Not surprisingly, founders often start the adventure as a couple, because they have the intuition it will be difficult and they need more than one mind and body. They are often migrants. Probably because migrants do not have any existing network or “right” connections in the new places where they have settled, they simply work passionately on their innovation, again raising the probability of success. Half of the entrepreneurs in Silicon Valley are not Americans. Why are we afraid of that opportunity in Europe? Silicon Valley is an open culture where even competitors like Apple, Google or Facebook talk and cooperate. This is REAL open innovation, not high-level top down roadmaps, but grassroots, bottom up collaboration. Interestingly, entrepreneurs are often young. While this is not always the case, youth does not give up on creativity easily, largely because they have not lived through the many failures that the rest of us have. Silicon Valley is a unique place in the United States that no one could replicate. And yet every state, every region of Europe is desperately trying to create its own! Let’s work together. By no longer seeking to create the Holy Grail, one unified “European technology cluster”, and by instead deciding to cooperate on a practical level to enable innovators rather than trying to do the work for them. While our egos are still too large to give up our dreams of global domination, at least let us work together without unnecessary waste! In a recent talk [2], Risto Siilasmaa, the young chairman of Nokia, called for a similar reaction and added that “entrepreneurship is a state of mind, which implies pragmatism, ambition, dreams, perseverance, optimism and give-up-&-start-again attitude”. Without a large ambition, it is not worth trying.

One concrete area to focus on is creating an infrastructure where risk-taking investors can thrive. Entrepreneurs cannot succeed alone. Very early in the innovation process they need investors to enable them to embark on the adventure. America has created the best tool out there so far, venture capital: former entrepreneurs who become the supporters of the next generation once they have already succeeded, financiers who have “been there and done that” [3]. These VCs know the start-up culture because they have been there! This experience complements the expertise provided by others who have spent years in large corporations; a perfect storm of competence and culture is needed. It also requires employees who also digested this culture, employees who can take a stake of the future success of the company through stock options. I said stock option, the word that became a bad word, the tool to fatten those who do not deserve it. Stock options should go to those who try. No doubt it will also require some labor flexibility for start-ups as they face uncertainty and rapid cycles. But it should not be assumed that the absence of these mechanisms is the cause of our failures. It is the absence of this culture of innovation that hurts us. Do not be afraid of failure. Failure is the mother of success, says the Chinese saying. Does the child successfully ride the bicycle on her first attempt?

Failure will always be part of innovation. This is why we need a critical mass. In one single place or not, in Europe. And failure should not be stigmatized. I think everyone interested in innovation needs to experience the Silicon Valley culture, to spend time to understand. Weeks or even months. Without fearing that our children will not come back. It is better to try out there than be safe back here. They will return to teach us, at worst, and at best return to set up Europe’s future growth companies! We also need to support high energy mobility among entrepreneurs across European hotspots, as we have done very well for our students. Universities are still critical once the students have left to provide landing zones for mobile entrepreneurs. You may criticize me for being too fascinated by the American culture and technological innovation. “Europe has other ways to innovate,” I am often told. It innovates with large corporations such as Airbus or with German- or Swiss-like SMEs, or in services. And you believe that US companies do not?! I am told that venture capital is in crisis, that Silicon Valley innovates less, and that may well be true – outside of the web, creativity seems to slow down. Schumpeter, the great economist, has built a theory where large established firms die and are replaced by new entrants when they do not innovate anymore. Why would the twenty-first century be different from the previous one? Maybe … but our energy, aging, health problems are not going to require new innovations and new entrepreneurs? I do think so. Europe needs a new ambition, a new enthusiasm and we Europeans are aging. We owe this to our children, to our youth. From primary school onwards, let us our children express their creativity, let us teach them to say no, and tell them that this is positive. A career is meaningless unless it includes passion and ambition. Let us not encourage them to follow the paths of certainty that may be deadly. Steve Jobs in a wonderful speech in 2005 [4], indicated that we were all going to die one day, and before that day, we needed to stay hungry, to day foolish. Let us follow his advice. Let us help our children!

Hervé Lebret supports high-tech entrepreneurship at EPFL. He is the author of the blog Start-Up, www.startup-book.com.

[1] Les Misérables – Europe not only has a euro crisis, it also has a growth crisis. That is because of its chronic failure to encourage ambitious entrepreneurs. The Economist, July 2012. www.economist.com/node/21559618.
[2] Risto Siilasmaa at the REE conference. Helsinki, Sept. 7, 2012.
[3] Do not miss the movie SomethingVentured which describes wonderfully and humorously the early days do venture capital, www.somethingventuredthemovie.com.
[4] Stay Hungry, Stay Foolish. ‘You’ve got to find what you love.’ http://news.stanford.edu/news/2005/june15/jobs-061505.html.

Again a few key points:
• Europe is behind USA and Asia in innovation.
• Entrepreneurs are not considered heroes in Europe.
• Trial and error, uncertainty, and failure are integral parts of innovation
• Our high level of comfort will accelerate its own end (again creative destruction).
• Fear of trying is the most serious problem with innovation.
• Europe’s 2000 mandate to become the world’s leading knowledge based economy has failed.
• Open Innovation is bottom up, not top down.
• Youth are creative because they have yet to experience failure.
• We must create an infrastructure where risk-taking investors can thrive.
• All students that show interest and ability in innovation should experience the Silicon Valley Culture. We should not worry that they will no come back.
• Europe’s leading universities can be the game changers, the catalysts, by agreeing on what is important (what innovation, what education, what tech. transfer) and investing in it.

The Dream of Silicon Valley

This is my translation (well Google translation) of a very good article I read in newspapers La Tribune de Genève (pdf here) and 24 heures (pdf here). I am not sure I have the rights to do such a transaltion. I will do it the Google was and hopefully the news papers will not complain…

If you do not want to read it all, here are just two short quotes: “Some explain the excitement that prevails here because of a feeling of urgency, says Christian Simm. We must go quickly, people know they cannot work 80 hours a week for twenty years.” and
“You want to know the secret of Silicon Valley? asks Fadi Bishara, head of the incubator Blackbox. Failure is not an issue. It is completely accepted. It is even considered an apprenticeship.”

The Dream of Silicon Valley
Can the Lake Geneva area reproduce the ecosystem of the U.S. technology hub ?
by Renaud Bournoud

Often imitated, never equaled. The famous ecosystem of Silicon Valley, near San Francisco, is one of the most dynamic regions of the world. The success stories of Google, Apple and Facebook continue to fascinate, even on the Lake Geneva. But on paper, this Eldorado for innovation has much in common with our region. In a similar geographic area, a large bean sixty kilometers long, the two countries are ranked in the world’s most successful regions. If Silicon Valley is based on the prestigious universities of Stanford and Berkeley, the Lake Geneva can count on the EPFL, the Universities of Geneva and Lausanne or the IMD, the High School of Management. In both cases, the density of highly qualified people is high. Even daily commuters from Silicon Valley experience the discomfort that we know well . They also wait for hours in traffic jams. U.S. Highway 101, which irrigates the valley is as congested as the A1, between Lausanne and Geneva. Housing is also a concern that we share with them. The real estate prices are well above the U.S. average and have nothing to envy to those on Lake Geneva. So what are the ingredients that make Silicon Valley so special?


Demographic factors

A century ago, the orange groves reigned as kings over this corner of California. Now the land has nearly four million people. More broadly, the population of the San Francisco Bay is the size of that of Switzerland. The presence of reputable universities brings a lot of talent, as well as the attraction of the region. Silicon Valley Community Foundation considers that 60% of the engineers were born abroad, many of whom are from Asia. But the valley also attracts many Americans. “Here we are at the extreme west of the United States. We cannot go further, says Christian Simm, founder of Swissnex (note: the Swiss Agency for Promotion of Science and Innovation) in San Francisco. People who consider Boston too quiet come here to create. Because everything seems possible.” This density of great talent pool is ideal for company recruitment. A startup like Square, active in payment systems, could recruit 600 programmers in less than four years. This would not necessarily be feasible in the Lake Geneva region. These people have often come alone and can concentrate fully on their work. “Some explain the excitement that prevails here because of a feeling of urgency, says Christian Simm. We must go quickly, people know they cannot work 80 hours a week for twenty years.”

Cultural factors

A they arrived alone in Silicon Valley, people are quite willing to meet others, creating a culture of networking. Many networking events are regularly organized, like the Start Up Weekends. They also exist here, but in smaller proportions, simply because the population and the number of start-ups are lower. “It makes it easy to find a partner to build a startup,” says Ahmed Siddiqui, one of the organizers of Start Up Weekends Bay Area. “Here the world lives around the field of technology , explains Alexandre Gonthier, the boss of PayWithMyBank in Redwood City. I met my partner at the playground where I watched my children.” Not only can we can find a future partner in the sandbox, it is also easy to cross the pundits of Silicon Valley at random from a barbecue party. They are available and are ready to play mentors for younger people. “It is not as easy to meet bosses in Europe … Unless they learn that you are installed in Silicon Valley. There, the doors open,” notes Alexandre Gonthier. Contacts are natural, and the mentality towards failure also has a role. “You want to know the secret of Silicon Valley? asks Fadi Bishara, head of the incubator Blackbox. Failure is not an issue. It is completely accepted. It is even considered an apprenticeship.” And if the project does not fail, it will soon be on the market. “The minimum viable product” is the leitmotif of the Silicon Valley. “We need to create something simple that you can use right away,” says Solomon Dykes, the founder of the start-up Dotdoud in San Francisco. “I would add that the idea is not very important, Fadi Bishara continues. Googje invented nothing, there were already search engines. What matters is the “packaging”, how the project is sold.” It’s the reason why storytelling is used a lot to sell. These stories also serve to develop an entrepreneurial spirit. Many myths have grown from Silicon Valley. There is the famous story about the birth of startups in garages. Like, for exampl , Google, which had rented a garage, whereas it had already raised $ 1 million.

Financial factors

Good idea or not, nothing is possible without money. The region of Silicon Valley attracts 46% of venture capital in the United States, according to the Bay Area Council Economic Institute. This happens especially much earlier in the development of projects than here.” If, after a year , the start -up has not found funding , we believe that we need to move on,” adds Jeff Burton , director of Skydesk , an incubator located on the Berkeley campus . “For us, the institutional money comes much later, said Joao Antonio Brinca, representative of BCV board at the Foundation for Technological Innovation in Lausanne. Financing through venture capital funds typically occurs between the fifth and seventh year of the project life. “The sums involved are not the same. A young company of Lake Geneva can hopee to raise between 300,000 and 600,000 francs for its first round of funding. In Silicon Valley it is at least twice. So there is a gap between the first efforts of startups to exit the academic world and the interests of investors . This longer period may explain the difficulty of transforming research into marketable products. Another advantage of Silicon Valley is its close proximity maintained between universities and private firms. In this regard, the Lake Geneva is still lagging behind. But it would be wrong to say that nothing is done about it. EPFL has worked in recent years to attract firms in the area of innovation, so that they mingle with the start-ups. But again, the structures of the same type that abound in Silicon Valley are favored by the scale. The density of start-ups produces a unique emulation world. Also keep in mind the economy of scale to explain this difference. A U.S. start -up happens in a domestic market of 320 million potential customers. In Switzerland, an emerging company has to deal with a much smaller market, divided into three languages and twenty- six cantons.

This article was produced as part of a tour organized by BCV for ten young Vaudois.

What makes an entrepreneur great? (according to Max Levchin)

Ashort quote from Max Levchin taken from the latest issue MIT Technology Review. Q: What makes an entrepreneur great?

A: I don’t think entrepreneurship can be taught. I don’t think it’s like: “Do these five things and you’ll be an entrepreneur.” And by extension, I don’t think it’s: “Do these five things better and you’ll be a better entrepreneur.” Everyone I know has their own style. The unifying characteristics are all the same: drive, inability to play well with others, decisiveness, general indifference to reason on occasion. Entrepreneurship is this weird process of constantly flying blind, by the seat of your pants, and also of constantly projecting this extreme confidence that everything is going to be just fine. And the only way you can do it is you have to believe that it really will be. So it’s the continuous ability to suspend your own disbelief, basically. —Max Levchin, a founder of several companies, including PayPal, who was an Innovator Under 35 in 2002.

Levchin on Entrepreneurship

In addition I just read an interview of Bernard Dallé, General Partner with Index Ventures in Entreprise Romande, in the same special issue dedicated to failure where I wrote a short note entitled “Does the Swiss culture tolerate failure?”. Bernard is asked about common features of entrepreneurs. He just says: “Often they are not attracted by money. They are not afraid of failure. Their goal is to have an impact on society.”

Does the Swiss culture tolerate failure?

Here is my fourth contribution to Entreprise Romande. I realize now it is often about failure and innovation. This new article maintains the tradition. And because it was a special issue about failure, let me provide a translation of the editorial.


Entreprise romande – July 5, 2013 – Véronique Kämpfen, rédactrice en chef:

Tolerance for failure favors growth

We are not all equal vis-à-vis failure. The fact is confirmed by a detailed study published by Barclays in late 2012. First, Europeans have more difficulty seeing failure as positive (69%) than Americans (71%), Asians (80%) and Middle Easterners (91%). Second, entrepreneurs have a less negative attitude towards failure than the rest of the population. They often think that failures have shaped their character, that this event has taught them a lot and they were able to bounce back quickly. Entrepreneurs are also far more optimistic than the rest of their fellow citizens. This phenomenon is described in the medical literature: it seems that a high number of successful entrepreneurs are characterized by a genetic form of psychiatric bias, which predisposes them to be creative, enthusiastic and somewhat less apprehensive vis-à-vis risk taking. John Gartner, the psychiatrist at the origin of this study, highlights the specific features of these characters: “Having that kind of confidence can lead to blindness when facing risk, because these individuals do not believe they can fail. (…) However, if they fail, they will not stay down for long and will soon be energized by a completely new idea”.

More generally, the Barclays study shows that tolerance for failure is essential to growth. The process of “creative destruction”, that is obsolete ideas, technology and business models give way to new impulses, is essential to economic progress and job creation. For this process to be effective, we need entrepreneurs who want to take risks, and an environment that supports their efforts. Until now, Switzerland seems to have done OK, as evidenced by its economic health and its high ranking in terms of innovation and competitiveness. As the Swiss are not the champions of tolerance for failure, they must be supported by appropriate framework conditions and encouraged so that those who have the entrepreneurial spirit may try … without taking too much risk! These topics are covered in great detail in the Magazine Entreprise romande. The taboo of failure and bankruptcy is analyzed in all its forms and put into perspective with practical advice and testimonials from entrepreneurs. Happy reading … enjoy the summer!

and here is my contribution:

Does the Swiss culture tolerate failure?

“The Swiss Society gives us so many slaps in the face through education that we are afraid of being creative, because we show then our weaknesses. By expressing our dreams, we do an intellectual striptease; it is feared that others see them as bad, not good, not nice and not fair.” So speaks Elmar Mock, inventor of the Swatch and founder Creaholic. The Swiss school system is indeed not known for its creativity. The famous (in French speaking Switzerland) « faut se gaffer » (“don’t be goofy”) might make you smile. Our teachers too seem to give more importance to the rigor than to the creativity of our little darlings. The room for error is unconsciously repressed. If one accepts the idea that innovation is above all creating in situations of uncertainty, the statement is worrying. Yet Switzerland is world champion of innovation in almost all global reports. Is there a contradiction?

Innovation is a subtle thing. Innovation is not limited to invention and innovation is not about technology only; it is the result of a process, following which are created products, services or new processes that will have to demonstrate that they answer a (commercial or non-commercial) need. The process leading to innovation is long, unpredictable and hard to control, innovation cannot therefore be planned and we have to accept failure.

Clayton Christensen, a professor at the Harvard Business School, built a theory explaining the process of disruptive innovation, the one innovation which allows the emergence of new revolutionary products such as the Internet, the mobile phone, but also the low-cost airlines, the one innovation which also allows new players to emerge and replace their older competitors. According to Christensen, disruptive innovation cannot occur within established institutions. The best companies are listening to their customers and those only want to improve existing products and will rarely desire new products. The U.S. has seen more than 80 major new companies emerge since 1970, and France, only 4. And Switzerland?

Switzerland is world champion of innovation firstly because the framework conditions are excellent. Everything is done for businesses to succeed, minimizing barriers and constraints. Then, because there is a culture of work well done. Apprenticeship, in the early years of training, helps in maintaining this tradition and Swiss companies are known to be listening to their customers in order to improve existing products in the right direction. But what kind of innovation are we talking about? Probably not about the one which enables technology breakthroughs. No, rather of a different type of innovation, incremental innovation, made of “gradual, continuous improvement of techniques or existing products; usually incremental innovation does not fundamentally change the dynamics of an industry, or does not require a change in behavior,” according to wikipedia. Switzerland is champion of incremental innovation through a dense network of highly performing SMEs. Failure is relatively absent, when the attention to every detail is permanent. But is it enough?

Not only the Swiss school system is not known for its creativity, but furthermore our academic spin-offs create few jobs. If we accept the corollary that innovation is a source of growth and new jobs, we might not be as innovative as it might be desired. We are obviously efficient for incremental innovation, but certainly not as good when it comes to disruptions. Except for one example that comes easily to my mind, the Swatch. But Nicholas Hayek was not the product of the Swiss culture! I could add Nespresso, but Eric Favre, inventor of the product, had suffered a strong initial reluctance from Nestlé to the point of saying: “The Swiss economy lacks real entrepreneurs!” The difficulty of integrating risk and radical innovation can make anyone short-sighted when experiencing ongoing changes and cause much bigger failures, as evidenced by the grounding of Swissair, which was seen as a national trauma. The United States has lost TWA and PanAm, but Americans have invented the concept of low cost airlines with Southwest or JetBlue, which have happily replaced the old players. In Europe, EasyJet and similar companies only followed the American model.

The Swiss start-ups never die. They have a survival rate of 90% after 5 years. Whereas across the Atlantic and even in Switzerland for traditional businesses, this rate is less than 50%… This may mean, quoting Xavier Comtesse, that “startups are protected by the academic system or federal funding.” Because failing is an unacceptable stigma? Or because taking risks, an inevitable cause of a greater failure rate, would be too dangerous? Without being so pessimistic, I would add that our start-ups are often excellent engineering offices, with great know-how. With a service business model eventually outweighing new products, the company survives without significant creation of jobs and without growth. I often asked entrepreneurs who failed to share their experience. A real failure! Our experts and mentors do not grow our young entrepreneurs in this direction, and I have heard it so often that I almost got used to it. Our business angels have a great distrust of more aggressive venture capitalists and they fear their more binary approach of “make it or break it. ”

Daniel Borel, the iconic entrepreneur: “In our industry, if we do not innovate constantly, if we do not have the courage to take risks, we disappear. This is why I prefer to get into seven projects even if it means failing three, as not to fail in anything, by chance, having focused on a single project.” […] “We only learn from our failures, rarely from succcess. Success can be your worst enemy: it makes you think you are strong, very strong; you could even walk on water. And it is at this point that you drown. ”

The Swiss culture has certainly a very small tolerance for failure. It promotes a type of innovation (incremental) which may explain its strengths. Its network of strong SMES is probably the result of this conservative and demanding culture. There is reason to be proud of it. But I like the quote from the former star of Hockey, Wayne Gretzky: “I skate to where the puck will be, not where it was.” The question is whether Switzerland will be tomorrow at the right place to get the puck …

Failure is a learning experience

This is my third article in the journal Entreprise Romande (and thank you to them for editing my work and for the opportunity given to talk about topics that are dear to me.)

Every entrepreneur knows that failure is an integral part of business: a contract breach, a lost customer, a unsatisfactory hire… So why is failure so stigmatized in the European culture, and especially in Switzerland? Freeman Dyson, ths famous physicist explains it more clearly: “You can’t possibly get a good technology going without an enormous number of failures. It’s a universal rule. If you look at bicycles, there were thousands of weird models built and tried before they found the one that really worked. You could never design a bicycle theoretically. Even now, after we’ve been building them for 100 years, it’s very difficult to understand just why a bicycle works – it’s even difficult to formulate it as a mathematical problem. But just by trial and error, we found out how to do it, and the error was essential.” The example of the bicycle is just perfect: who would blame a young child for his multiple drops wjile learning who to ride it?


Silicon Valley is known for its tolerance for failure, which, far from being a stigma, is even valued. “In Silicon Valley, if we had not tolerated failure, we would not be able to take risks and we would have many fewer entrepreneurs than we have today. If you fail for good reasons, that is to say almost all, except to be corrupt, stupid or lazy, then you have learned something that will make you more useful,” says Randy Komisar, based in Silicon Valley, as are the other people mentioned in this article. “You’d be amazed at how many investors prefer to back someone who has tasted the bitter fruits of failure. In failing you learn what not to do. Get your skin in the game and there is no failure—you have opened your mind to growth and yourself to reinvention,” adds Larry Marshall.

The fear of failure has deep roots. The school system encourages the child not to try or say anything if she does not know the answer rather than testing hypotheses, for fear of reprimand. Experimentation, creativity, the “process of trial and error”, are never quite encouraged in favor of more rational disciplines. “Indeed, we have psychological and intellectual difficulties with trial and error and with accepting that series of small failures are necessary in life. “You need to love to lose”. In fact the reason I felt immediately at home in America is precisely because the American culture encourages the process of failure, unlike the cultures of Europe and Asia where failure is met with stigma and embarrassment”, says Nicolas Taleb, essayist of Lebanese origin and writer of The Black Swan.

The European start-ups do not fail! Their survival rate is 90% after 5 years of existence. But is it good news? In the first months of Google,co- its founder Larry Page considered a success rate of 70% of individual projects was ideal. Asking for more, “we would take too few risks.” And failure is so digested that Americans have created the FailCon (a conference on failure) in 2009. By sharing their experience of failure in public (because failure is still a taboo even in the United States), participants learn from their peers and leave strengthened. The famous entrepreneur and investor Vinod Khosla admitted to have failed more often than he was successful. “Failure is not desirable, it is just part of the system, and it is high time to accept it.” Would this explain why we do not create any Google Switzerland and Europe?


Nevertheless, the failure will always be unpredictable. “Of course, business, just as life, is never a smooth curve. Failure can come as quickly, and more unexpectedly, as success. But true success is management of failure. Every time you hit a bad patch you must be able turn your fortunes around. That’s why it’s important to be always prepared for failure and build strong teams. To be a successful entrepreneur, venture capitalist or philanthropist, you must bring together people who know there will be problems, love to solve problems, and can work well as a team.” … “It reminds me not to be too proud. I celebrate failure — it can temper your character and pave the way for great achievement.” notices Kamran Elahian.

So, should we be not afraid to fail? A short and most moving answer comes from Steve Jobs, who – we must not forget – failed to grow Apple in the 1980s: “I didn’t see it then, but it turned out that getting fired from Apple was the best thing that could have ever happened to me. The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything. It freed me to enter one of the most creative periods of my life.” And even better: “Remembering that I’ll be dead soon is the most important tool I’ve ever encountered to help me make the big choices in life. Because almost everything — all external expectations, all pride, all fear of embarrassment or failure – these things just fall away in the face of death, leaving only what is truly important. Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart.”

When will a FailCon be organized in Switzerland?

A Chinese student introduced me to a few years ago the following proverb: “Shi Nai Bai Zhi Gong Cheng Mu”, which means “failure is the mother of success.” Asia might learn perhaps faster than Europe this important concept.

The Venture Capital Secret: 3 Out of 4 Start-Ups Fail

In a recent article from the WSJ (thanks Greg :-), it is claimed that Venture Capital is much less succesful than thought: 3 Out of 4 Start-Ups Fail. Well I am surprised by the surprise. I did some copy paste of the paper below, and I put in bold the things I found interesting. You should jump there and come back here!

I have done my analyis in the past. You can go back to by 2’700 stanford related companies (slide 9 of the pdf) or more anecdotically to Kleiner Perkins first fund.

So yes, there is a lot of failure in VC and the numbers do not count so much. It might be that in the past, there were fewer failures than today, and the reasons would be numerous, but the important point in the paper is the following: “the truth is that if you don’t have a lot of failures, then you’re just not doing it right, because that means that you’re not investing in risky ventures”



From the WSJ article:

It looks so easy from the outside. An entrepreneur with a hot technology and venture-capital funding becomes a billionaire in his 20s. But now there is evidence that venture-backed start-ups fail at far higher numbers than the rate the industry usually cites. About three-quarters of venture-backed firms in the U.S. don’t return investors’ capital, according to recent research by Shikhar Ghosh, a senior lecturer at Harvard Business School. Compare that with the figures that venture capitalists toss around. The common rule of thumb is that of 10 start-ups, only three or four fail completely. Another three or four return the original investment, and one or two produce substantial returns. The National Venture Capital Association estimates that 25% to 30% of venture-backed businesses fail.

Mr. Ghosh chalks up the discrepancy in part to a dearth of in-depth research into failures. “We’re just getting more light on the entrepreneurial process,” he says. His findings are based on data from more than 2,000 companies that received venture funding, generally at least $1 million, from 2004 through 2010. He also combed the portfolios of VC firms and talked to people at start-ups, he says. The results were similar when he examined data for companies funded from 2000 to 2010, he says. Venture capitalists “bury their dead very quietly,” Mr. Ghosh says. “They emphasize the successes but they don’t talk about the failures at all.”

There are also different definitions of failure. If failure means liquidating all assets, with investors losing all their money, an estimated 30% to 40% of high potential U.S. start-ups fail, he says. If failure is defined as failing to see the projected return on investment—say, a specific revenue growth rate or date to break even on cash flow—then more than 95% of start-ups fail, based on Mr. Ghosh’s research.
Failure often is harder on entrepreneurs who lose money that they’ve borrowed on credit cards or from friends and relatives than it is on those who raised venture capital.

“People are embarrassed to talk about their failures, but the truth is that if you don’t have a lot of failures, then you’re just not doing it right, because that means that you’re not investing in risky ventures,” Mr. Cowan says. “I believe failure is an option for entrepreneurs and if you don’t believe that, then you can bang your head against the wall trying to make it work.”

Overall, nonventure-backed companies fail more often than venture-backed companies in the first four years of existence, typically because they don’t have the capital to keep going if the business model doesn’t work, Harvard’s Mr. Ghosh says. Venture-backed companies tend to fail following their fourth years—after investors stop injecting more capital, he says.

Of all companies, about 60% of start-ups survive to age three and roughly 35% survive to age 10, according to separate studies by the U.S. Bureau of Labor Statistics and the Ewing Marion Kauffman Foundation, a nonprofit that promotes U.S. entrepreneurship. Both studies counted only incorporated companies with employees. And companies that didn’t survive might have closed their doors for reasons other than failure, for example, getting acquired or the founders moving on to new projects. Languishing businesses were counted as survivors.

Of the 6,613 U.S.-based companies initially funded by venture capital between 2006 and 2011, 84% now are closely held and operating independently, 11% were acquired or made initial public offerings of stock and 4% went out of business, according to Dow Jones VentureSource. Less than 1% are currently in IPO registration.

—Vanessa O’Connell contributed to this article.
Write to Deborah Gage at deborah.gage@dowjones.com

What’s a start-up worth, or reflections on Facebook’s IPO fiasco

Here’s my 5th contribution to EPFL‘s “start-up of the month

When its IPO was announced last February, everyone agreed that Facebook was worth somewhere in the ballpark of $100 billion. Today, Facebook has lost 40% of its value – how is this possible?

Facebook a perdu plus de 40% de sa valeur

Facebook, unfortunately, isn’t an EPFL start-up, but the controversy surrounding its overvalued stock market debut (Initial Public Offering, or IPO) nonetheless provides a good opportunity to discuss the value of a start-up, in particular, spin-offs from EPFL laboratories.

A company’s value cannot truly be measured scientifically, even though there are techniques that try to do this via revenues and profits – Logitech and Swissquote, who have historical connections with EPFL, are measured like this. The law of supply and demand rules here: the value of a company is the product of the number of shares and the price per share. Companies listed on the stock exchange are thus hostages of the market and its moods.

When companies are not listed on the stock exchange, as is the case in the majority of start-ups, they can still be valued. Interested readers can learn more in the article “Equity Split in Start-ups.” When EPFL start-ups like Eelcee, Abionic, Aleva and Kandou (see previous articles) recently announced they were looking for financing, they were valued by their investors, even though there was no market in which to buy shares. Switzerland, however, provides some information via the registre du commerce (commerce registry) in which each start-up registers the change in its number of shares. From there, if you know the amount of money that has been raised, you can deduce the price per share and thus the value of the company. But I personally wouldn’t make the calculation, out of respect for the discretion desired by the entrepreneurs and the investors.

Again, value is just a subjective thing that depends on the good will of the investors. Facebook, like Google ten years ago, didn’t completely abide by Wall Street’s rules, by which a company agrees to be under-valued at its IPO so that the ensuing trading result in an upward curve. So far, it’s just simple speculation, and we’ll have to wait several years before we know whether or not Facebook’s IPO was a failure or not.

Our start-ups have a similar problem. I’ve known many entrepreneurs who prefer that their companies have the best possible value when they were looking for funding. They forget that the only real value is that which is created over the long term by their products or services, and that the value of a company is a very volatile thing, as Facebook just illustrated so well. Entrepreneurs tend to retain the lion’s share of their companies, even though by doing this they also seem to be ignoring Logitech founder Daniel Borel’s advice: “We prefer a little pie that we control completely to a big pie that we only control 10%, and this can be a limiting factor.”

I’m convinced (even though I’m often wrong) that Zuckerberg’s impact will be similar to Brin and Page’s. Here in Switzerland, I hope that local companies are created whose value is on a par with those of Daniel Borel, Mark Bürki and Paolo Buzzi.


Facebook Finally Files For $5B

Facebook data today



Equity split in start-ups

Eelcee and composites

Two million Swiss francs for an allergy-detecting device

Swiss register of corporations