The falling price of failure
Josh Kopelman has written an excellent post on why it's cheaper and faster to fail in today's market and the positive effects this can have on innovation.
"Companies used to waste millions of dollars of VC money – and entrepreneurs used to waste years of their lives – working on a failed hypothesis. Now, the cycle is much shorter."Like Josh, I remember the cost of doing business in the 90s when it really did cost a lot of money to build a web business: Sun (or even worse, Digital) hardware, Oracle software and sky-high marketing costs were all significant drain on the bottom-line.
There are some key concepts to grasp.
- It's ok to fail - we are terrible at appreciating this in Europe where people are often so afraid of failure they end up not even trying
- The cheaper it is to fail, the more ideas we can test
- There's a big difference between an idea and a business
Starting small doesn't mean that you're not going to need funding to hire and scale up if you have a real business to pursue, but what it does mean is that you can find out very quickly and cheaply if your idea has traction. There is a big difference between an idea (which is easy to discard) and a business that has taken on people, costs and commitments (which is very hard to discard both rationally and emotionally).I really hope we can adopt these lessons and leverage the really exciting new funding cycle that Josh highlights in this very cool and excellent chart from Peter Fenton.
We have a great opportunity today to test more ideas, which we can do very quickly and cheaply, and start businesses which have a better chance of succeeding.
Let me know what you think.