A Forum on Failure Stirs One-Liners and Personal Anguish Among CEOs
It was billed as “an evening of candor and compassion,” but with onetime M*A*S*H screenwriter Neil Senturia serving as impresario, a San Diego forum on business failure became an extended tragic-comic riff, abounding with one-liners.
Entrepreneurs are rarely willing to publicly discuss their failures after they shut a company down, perhaps with the exception of Christopher Herot, who talked with Xconomy’s Wade Roush about last year’s shutdown of Zingdom. Yet much can be learned in the post-mortem of a startup.
Senturia, an irreverent and restless serial entrepreneur, says he proposed the topic to San Diego’s MIT Enterprise Forum to share such insights—and because it felt like the right time considering the current economic downturn for a panel discussion among local CEOs who have confronted failure.
“Failure in itself can be a transformative event,” Senturia said in warm-up remarks that set a poignant-but-funny tone. “Remember Nietzsche said that whatever does not kill me makes me stronger. But Nietzsche never had to interact with venture capitalists.”
Ken Kalb, who left the company he founded, Continuous Computing, after winning an Ernst & Young Entrepreneur of the Year award in 2005, told the audience Senturia had invited him to talk “emotionally and candidly about what it feels like when things go into the crapper.”
There is usually no single explanation for why startups fail, Kalb and the other panelists agreed. But if there is a single reason why startups implode. Kalb says the “quintessential” factor is hubris, which he defined as “Someone’s ego or inability to look at themselves or the situation around them.”
Senturia, who moderated the discussion, urged the CEOs to talk about the toll that failure has taken on them personally.
“If I look back and ask myself what were the things that really cut me deep, it’s the relationships,” said Joe Markee, a venture investor and co-founder of San Diego’s Copper Mountain Networks and Primary Access. “I had gone to friends at Qualcomm and convinced them to come work with me. I’ve had to shut a company down and tell people that we can’t go on.”
Kalb responded, “I started a company called Analog Analytics, and I had to fire a guy that I had worked with for 16 years. We had started five companies together and made a ton of money. And he was devastated.”
Kalb in particular was open about his personal anguish in business failures, saying it’s very hard for him as CEO to keep the business side from spilling over into his personal and emotional life.
“Relationships fail. Marriages fail,” Kalb said. “I never managed to figure out the difference between who I was and what I did.”
Peter Shaw, who’s started several technology companies, declared, “People ask me how I’ve managed to stay married for 37 years. And I tell them, ‘I’ve been an entrepreneur. And I travel a lot.’”
The audience roared.
Seizing on the opportunity to discuss the toll on relationships, Senturia turned to Tina Nova, founder and CEO of specialized laboratory service provider Genoptix, and said: “Tina, you’ve been through five or six marriages. Why don’t you talk about what that’s like?”
As another wave of laughter erupted, Nova said, “It’s very hard. It’s very hard to find someone who understands what it takes.”
Markee said Copper Mountain Networks was founded in 1996 to develop Digital Subscriber Line equipment for high-speed internet connections. The company initially targeted the regional Bell operating companies as its customers, but later switched to focus on CLECs, competitive local exhange carriers. After its initial public offering in 1999, the company’s market valuation was close to $1 billion, but Copper Mountain’s customer base evaporated in the telecom networking “tech wreck” of 2001.
In retrospect, Markee said, “The way the market was going and the CLECs were building, you knew there was going to be a reckoning, but you couldn’t tell where it was.” Copper Mountain later moved to Palo Alto, CA, and eventually was acquired in 2005 for $10 million by Oregon’s Tut Systems.
“In hindsight, you see it all,” Shaw says. “But you don’t see it in real time. And as an entrepreneur you tend to believe that you can still pull the rabbit out of that hat.”
When Senturia asked, “How do you handle greed versus rational behavior at the board level?” Kalb lamented, “it was beyond my earthly understanding” when the board of Continuous Computing rejected a $250 million buyout offer for the company.
“Selling companies is like hors d’oevres,” Senturia quipped. “When it comes around, take it.”
Nova related that she was a researcher in the early 1980s at Hybritech, which became a progenitor for San Diego’s biotech industry after the company was sold for roughly $500 million to Eli Lilly.
“It was a fast company,” Nova says. “We were a young company. We didn’t know anything… And when the company was purchased by Eli Lilly, it was like ‘Animal House’ meets ‘The Waltons.’ ”
Nova later joined another San Diego startup, Ligand Pharmaceuticals, and realized soon afterward that the biotech’s basic technology was a dead end. She said she had the unenviable job of telling Brook Byers, a partner at Kleiner Perkins Caufield & Byers, that the firm’s venture investment in Ligand was a mistake.
“I told Brook Byers, who is like a god, that this technology didn’t work,” Nova said. “He had just purchased oceanside property in Arizona.”
Instead of shutting the company down, however, Nova said she worked with other founders to start over with different technology, which they acquired from Ron Evans’ laboratory at the Salk Institute.
Summarizing her philosophy, Nova says she hates failure and hates to lose. “There is failure. There is personal failure. There is company failure. And then there is change.”
Ligand may have been founded on faulty technology, Nova says, but it wasn’t a failure. “To me it was change. It was about taking something that didn’t work and turning it into something that did.”