Start-ups hiding six feet under

Here’s my 4th contribution to EPFL‘s “start-up of the month

03.06.12 – The fear of failure probably explains the absence of a “European Google”. Whereas, on the other side of the Atlantic, start-ups are born and die in full view of everyone, their counterparts in Europe hang on for dear life, sometimes even when it doesn’t make sense to do so.

The fourth start-up of the month doesn’t exist! At least not at EPFL, nor in Switzerland or in Europe. I mean those start-ups that fail. European start-ups are a real paradox. We often complain about not being able to create successes like Google, Apple or Facebook, but on the other hand we don’t have any big failures either! In his doctoral work published in 2011, Sven de Cleyn – a researcher specialized in technology transfer – demonstrates that less than 10% of European academic start-ups close down [1]. In a survey dating from 2008, ETHZ produced similar metrics, with an activity rate of 88% [2]. EPFL is therefore no exception to the rule.

In fact, this strange phenomenon can easily be explained. European start-ups focus on survival, to the point that Sven de Cleyn had to use this parameter to define success. Failure is so culturally stigmatized that it must be avoided, almost at all cost. This is one of the fundamental reasons behind the difficulties we experience. In the excellent film Something Ventured, the Californians, followers of a Manichean way – success or death – call start-ups the “living-dead”!

Yet, failure is far from being a bad thing – it is actually necessary. Who didn’t fall several times while learning to ski, roller-skate or simply ride a bike? How could we manage not to fail in the far more complex task which involves bringing a technology or innovative product on to the market? Schumpeter, the famous innovation economist, had created the concept of “creative destruction”, explaining that the new replaces the old, and that this is in fact a good thing. He used a striking image to illustrate this: “It’s not an owner of stage-coach lines who is going to build railways!”

In his famous speech at Stanford in 2005, Steve Jobs echoes this sentiment: “Remembering that I will soon be dead is the best tactic I have ever used to help me make the important choices in my life. Because almost everything – expectations, pride, fear of embarrassment or failure, all these things – evaporates in the presence of death, leaving only what really matters. Remembering that you are going to die is the best way I know of avoiding the trap of thinking that we have something to lose.”

So, you may say that that’s easier to say than to do! It’s certainly very difficult to bring up past failures or to cite examples, as entrepreneurs are reticent to confess such things. I could mention a few myself, but without having the consent of the people concerned. I could almost have called this article “Desperately Seeking Start-up Failures”!

It seems that start-ups, like the mythical thorn birds, look to hide away in a thorn bush and impale themselves. We never organize proper funerals for those who fail, but now FailCon has done away with this taboo. This one-day conference is aimed at technology entrepreneurs, investors, developers and designers. It’s dedicated to the study of their own and others’ failures, as a preparation for success. During the first event held in San Francisco in 2011, Vinod Khosla, the famous venture capitalist, admitted having more often failed than succeeded. Failure in not desirable, it’s just part of the system, and it’s high time we integrated it accordingly. When will there be a FailCon in Switzerland?

[1] Sven H. De Cleyn, The early development of academic spin-offs: holistic study on the survival of 185 European product-oriented ventures using a resource-based perspective.University of Antwerp, 2011
[2] Oskarsson I., Schläpfer A., The performance of Spin-off companies at the Swiss Federal Institute of Technology Zurich. ETH transfer 2008.

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