Startup Failure: Seattle’s Stigma, Boston’s Chip on Its Shoulder, and Silicon Valley’s Badge of Honor

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one of two ways. It either causes them to lose confidence and be hesitant, which investors smell, react to, whatever, it becomes part of the calculus; or it creates a positive feedback loop. It could be it emboldens them, it could be it puts a chip on their shoulder, it could be it gives the person something that they need to prove.”

“Let’s take the positive of those two,” Feld said. “Say I’ve had a success, I made some money, and now I failed. I lost the investor money, I lost my money, I spent three, four, five years of my time. If you get a chip on your shoulder from that, and you’re like, ‘Goddamn it, the next time I’m gonna win’—I want to talk to you. And I think most investors want to talk to entrepreneurs like that. If you fail and fail and fail, and continue to repeat the patterns each time, that’s a bad signal. But I don’t think the general shtick of failure is good, it’s just a character-building phenomenon.”

Feld then made a provocative claim, especially to my native Bostonian ears. “One of the reasons I think Boston has resurged as such an entrepreneurial community, in a good way, in the last couple of years, is it had a massive chip on its shoulder,” he said. “Because it had failed. Boston was a great entrepreneurial community for software and Internet in the ‘80s and early ‘90s. It was ahead of the Valley. In ‘95-98, there were probably more Internet startups happening at the beginning of that phase in Cambridge than there were in the Valley. Something happened—probably all the MIT and Harvard business school students flooded the system with a bunch of crap, and the VCs retreated, those guys stopped—whatever. And then the Valley built critical mass that far outstripped Boston.”

“Boston had a chip on its shoulder, and even in 2004-2006, it was, ‘Woe is me, there are no startups here, there’s no capital here,’” Feld said. “And then it changed very quickly based on the entrepreneurs. It wasn’t guys like me, it was the entrepreneurs saying, ‘There’s good stuff here, let’s go do things.’ So it’s very interesting how that dynamic tends to drive behavior one of two ways, and I always encourage it to fire you up rather than tear you down.” (I’m very interested to hear what Boston’s entrepreneurs and VCs have to say about Feld’s assessment.)

Lastly, Feld translated all of this into an investing tip. “The best companies I’ve ever invested in were, when I think about the entrepreneurs, somebody who had a success and made enough money where they knew what success tasted like and they bought a fancy car, bought a bigger house, and increased their standard of living—and then they, very visibly, blew it. Those are the best. Because that third thing, or fourth thing, man they are going for it. And it’s not OK to make another 5 million bucks, because they already did that.”

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Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and Editor of Xconomy Boston. E-mail him at gthuang [at] Follow @gthuang

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