Learning from Failure

1. Learning from FailureAn Insider’s View of What NOT to do orHow to Create a Successful Start-up Roger Ehrenberg IA Venture Strategies NYU Stern School of Business April 7th, 2010

2. History of Success/Failure

3. I hope this isn’t my destiny…

4. Is it possible to “fail successfully?” YES But How?

5. Case Study Monitor110

6. Why Did We Fail? Leadership Lack of a “buck stops here” leader Product Development Development running Product organization Case Study: Monitor110 PR Too much, too early Money Too much Feedback Too far from the customer Speed Too slow to adapt to market reality

7. Leadership Lack of a “buck stops here” leader No single vision Inability to efficiently manage through crisis Difficult to avoid factions behind each leader Source of conflict with Board Case Study: Monitor110

8. Product Development Development running the Product organization Results in a backwards product development process Creates conflict and ill-will with sales and account management Expands the distance between customer requirements and what is built Enables a “science project” to be perpetuated Case Study: Monitor110

9. PR Too much, too early Creates unrealistic market expectations Creates unrealistic internal expectations Raises anxiety around customer interaction Facilitates raising too much money Case Study: Monitor110

10. Money Too much Defers the need to generate revenues Delays the need to face into severe product problems Provides the resources to pursue non-customer driven science projects Works against creating a scrappy, hard-edged, “us against the world” culture Case Study: Monitor110

11. Feedback Too far from the customer Results in a product not geared towards customer requirements Enables product management to stay off course Results in a team not accustomed to interacting with and servicing customers Creates an isolated, insular, tech-focused culture Case Study: Monitor110

12. Speed Too slow to adapt to market reality Wastes money and development cycles Creates fractures between technology and business organizations Seeds conflicts between Management and the Board Often results in key departures Case Study: Monitor110

13. Other mistakes As if that wasn’t enough… Built huge, costly infrastructure prior to generating revenues Engineered every part of the business – harvesting, data cleansing, semantic analysis, display and reporting Didn’t have a single core competency – IP was dispersed throughout the Firm Case Study: Monitor110

14. Attributes of failing successfully Paraphrased from blogger Dave Friedman, commenting on Information Arbitrage

15. One man’s view of the successful entrepreneur “It's not that they're brilliant or well-educated…They work all the time. They don't let failure demoralize or destroy them. They pick themselves up and keep going and eventually, every once in a while, one of your ideas actually breaks through and works, and it makes all that stuff seem worthwhile.” Dean Kamen, Founder of Segway, as told to Thom Patterson of CNN

16. Being a first-time entrepreneur is hard True entrepreneurs – those who believe “You can’t fail – you can only stop trying” – are few and far between A related study* has shown that: The timing of a start-up may be more important than the quality of the idea Entrepreneurs who are successful the first time are more likely to succeed in subsequent ventures because of available resources * Performance Persistence in Entrepreneurship, Gompers, Kovner, Lerner and Scharfstein, Harvard Business School, published December 3rd, 2008

17. Some other deep thoughts “We all have a philosophy that ideas and vision are important. But execution is the thing that distinguishes companies.” Mike Maples Man has an infinite capacity for self-rationalization.” Sigmund Freud Don’t be so humble … You’re not that great.” Golda Meir

18. Case StudyStocktwits

19. The Good Stuff Correcting Monitor110’s mistakes Single leader – Howard Lindzon Separation between Development and Product – Chris Corriveau and Soren Macbeth PR only after functioning product in market Initially built for less than $50k, has raised $4.8 million in three rounds as product/revenue milestones were achieved (Monitor110 raised $20 million before $1 of revenue) The product is aggressively used by and shaped by our customers Product/market fit has been insured Case Study: Stocktwits

20. The Good Stuff Creating barriers Focused on building core IP – leveraging open source software, APIs for data and the cloud for storage and processing Ruthlessly focused on our customers – working to segment our audience and to provide the stuff they value Paranoid about data quality – built reputation algorithms and community self-policing mechanisms to kill spam before it spreads Case Study: Stocktwits

21. Pretty successful seed stage investor with significant deal flow Viewed as value-added because of deep experience in both investment and operations Co-founded/incubated two businesses and doing more through my fund Stocktwits, Kinetic Trading, stealth IDS company, stealth database company (hopefully…) Have a grip on my core competencies and focusing ruthlessly on the intersection of those skills and market megatrends IA Ventures, a seed-stage venture fund Where am I today?Learning from failure

22. Big Data is pervasive Advertising, Finance, Commerce, … Extracting value is hard Large Unstructured Real-time The best organizations use Big Data effectively … The rest fall behind Big Data revolution is underway driven by Pervasiveness of actionable data Powerful commodity hardware Cloud computing Advanced algorithms, analytics, and visualizations IA VenturesThe Big Data opportunity

23. IA Ventures invests in early-stage companies developing tools and technologies for managing and extracting value from Big Data

24. Starting a companySome Things I Want To See Product visionary / Domain Expert Technically strong founding team Cash disciplined Milestone based execution

25. “Illegitimi non carborundum” Translation: Don’t let the bastards grind you down Failure isn’t life-threatening; it’s part of life Understand your core IP; keep costs down and leverage open source wherever possible Bond with the early-stage ecosystem; thousands have gone through what you are going through – leverage this collective wisdom Winning is hard, but victory is very, very sweet It you don’t think the pain is worth it, don’t be an entrepreneur Key Take-aways