How Failure Is Viewed in the Innovation Community: Seattle Startups and VCs Weigh In

1/16/09Follow @gthuang

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specific to the Seattle area. Nathan Kaiser, founder of the startup-resource site nPost, says, “Seattle does have an aversion to failure, even though failure may at times be the key to success. Any number of successful entrepreneurs had failed at previous startups,” he says. “We need to be more open to failure in this town.”

Tony Wright, co-founder of RescueTime, generally agrees with Kaiser and Hulett. “In general, I think that VCs have patterns that they look for, and probably base their investment criteria on what they’ve experienced,” he says. “If you look at the pedigree of most VCs up here, I think you see a lot of them come from senior management at big companies. As a result, I think they fund people who look great ‘on paper’—MBA guys who have methodically moved their way up the corporate ladder, or senior technologists from Amazon or Microsoft—people who have no failure on their resume, partially because they’ve never taken any risks where they could fail.”

Wright continues, “I think VCs in the Valley probably get a ton more exposure to people who succeeded without paying their dues at a big company. They’ve learned that non-traditional stories can be a good foundation for startup success.”

Local angel investors disagree that entrepreneurs need to have only successes on their resumes to get support. Rebecca Lovell, program director at the Alliance of Angels, says, “There is no question our group has a proclivity to support serial entrepreneurs who have had some startup success under their belt, and in many cases, gotten the band back together to do it again,” she says. “Some are certainly battle-tested by a combination of success and failures, but as far as the latter is concerned, there is really only one thing we won’t tolerate: dishonesty…Much better to be truthful about setbacks and show what you’ve learned from your mistakes, than overstate the success of your last venture.”

Investor Geoff Entress, who not long ago gave a popular talk on why startups fail, said he doesn’t get the sense that failure is seen as a black mark in Seattle. In tough times, he says, “the best entrepreneurs will change and make it work. But even they will fail sometimes.” Entress points to the experience of his own startup, UrbanEarth, which went belly-up in 2000. “Nobody held it against us,” he says.

Maybe the whole thing is best summed up by Seattle-area entrepreneur and investor Martin Tobias of Kashless and Ignition Partners. “I think that any investors that are less tolerant of failure are silly and stupid,” he says.

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com or call him at 617-252-7323. Follow @gthuang

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