Description: this is an open letter written by our Co-founder & CEO to his future children on how to draw insightful learning on business failures.
“We are all failures. At least, all the best of us are.” (Sir James Matthew Barrie)
My heart is laden as I write this to you. I’m burdened because I don’t know how to shed light on the subject of failure in a more positive tone.
However even at a young age, I believe you’re courageous to face the grim reality of life, and so I penned down my difficult memories for you.
In life, we face many challenges. So it’s likely that you’ll fail many times before you achieve success. And, I want you to know that it’s perfectly fine because everybody fails.
It’s important to know that failure is a way of life, and that it comes naturally before success.
Failures are painful. They hurt a lot. Which is why you almost never see people celebrate failure. No one loves failing.
We either see failures as bad luck and brush them off, or we can draw some of our greatest lessons from them. It’s our attitude towards facing failure after failure that defines who we truly are.
This is why I’m sharing one of my worst story of failures with you because I didn’t only fail myself, but also my former colleagues, former business partners and advisors, friends, and my family. It was one of my most tragic experiences because it impacted many others.
“Failure is the greatest opportunity I have to know who I really am.” (John Killinger)
I once entered into an industry which I had no experience in, and learned my most expensive lesson from it. I didn’t test the hypotheses of the new business, or validate the market because I was persuaded to trust in the abilities and personal influences of my former business partners.
All I did was a desk-based feasibility study that covered market analysis, SWOT analysis, financial and economic analysis, customer acquisition strategy, and marketing plan. My team and I didn’t engage in any customer validation to hear any substantive feedback of our targeted market, or to determine our unique value proposition or unique selling point.
After 19 months into the business, my partners struggled to deliver the operational support as they’d promised, and caused our product launch to be delayed by at least 8 months. As a result, we quickly ran short of cash and I struggled to raise money to sustain the business.
To make things worse, one of my partners kept reminding me for the “poor decisions” and “bad management”, while the other offered little help. In times of trouble, I was left alone to deal with all of the problems. I was helpless.
At this point, I was already caught in the sunk cost fallacy with glimpses of hope to turn things around after so much time, money, resources and efforts were invested into the business. I was desperate.
With one month of cash left, our team started to leave because I could no longer pay them. As you can imagine, their discontent quickly sprouted into a class-action arbitration claim against the company as I faced them alone at the arbitration hearing to settle the labour dispute. Even my own people turned against me. I felt hopeless.
In desperate times, your grandfather graciously sold his hard-earned properties to finance my bad business. To this day, this had left a deep scar in my soul. Forever I’m grateful for what he had done. Forever I’m still remorseful for what he had done.
In the end, I had to liquidate all company assets to pay off outstanding debts, and shut down the company with a seven-figure loss. This was my biggest loss and most painful memory among all of my business failures. I was penniless.
As your father who cares deeply and loves you more than anything else, apart from your lovely mother of course, I pray that you don’t ever need to go through a similar pain and loss in your life. Ever.
Now, I’m not saying that you’ll fail in your business ventures, should you get into business, but simply cautioning you about the consequences of not validating your business models, and advocating the importance of applying methodical and scientific approaches to build your businesses.
Starting a new business venture or a joint-venture partnership without prior data-driven research and experimentation such as testing your hypotheses, examining your business models, building your proof-of-concepts or prototypes, and validating your markets, your failure rate will be high.
In my earlier entrepreneurial years, I was ignorant of these strategic and methodical approaches used by industrial experts to research and validate our business ideas, project proposals, and product-market fit. Had I known, I might have avoided some of my costly mistakes.
“Tell yourself, ‘I’m not a failure. I failed at doing something’. There’s a big difference.” (Erma Louise Bombeck)
Each time I’d failed, I’d do a post-mortem analysis to draw insights from the shortcomings and try to avoid them as best as I can in the future.
I’d usually do this exercise each time I lost a basketball match, failed an exam, discontinued a broken relationship, lost a tendered project, rejected by a big corporation, made a bad decision, wound up a business, disappointed my family, and so on.
In ‘Failing Forward: Turning Mistakes into Stepping Stones for Success’, John C. Maxwell (2000) reminded us that although failure can be very painful, but we must also remember that our failures do not make us a failure.
Truth be told, I still find each rejection, mistake, and failure to be painful. I still go to bed worrying and fearing for my next failure. Therefore I understand your pain each time you fail.
However, after countless failures, I personally find it is easier to cope by following methodical approaches, such as the Observe-Orient-Decide-Act (OODA) loop or, Build, Measure, and Learn (BML) process to examine our failures and bounce back.
Moreover, I’ve also learned that while we’re still feeling rotten, we can distract both our minds and our hearts by focusing on doing something meaningful. At the end of it, I guarantee you that you’ll feel some sense of accomplishment or enlightenment.
Otherwise, we’ll be trapped in the endless fear-of-failure cycle (John C. Maxwell, 2000):
That said, at each failure, I’d feel depressed and worthless for a period of time even if I didn’t show it. In my own timing, I’d pick myself up and start over.
The sooner you realize that we spend our lives making mistakes, the easier you’ll learn to better manage failure.
“While one person hesitates because he feels inferior, the other is busy making mistakes and becoming superior.” (Henry C. Link)
In the business context, did you know that every year there are more than 75% of new and small companies around the world shut down?
To put it in perspective, imagine that each year around the world, there are 100 million new businesses (Moya K. Mason, 2012) created and only 30 million companies stand a chance to survive. That means 7 out of 10 companies are very likely to fail. This failure rate is staggeringly high and extremely concerning.
When I tried to understand why companies failed and looked at the most common reasons for shutdown, I noticed a pattern in the data.
Based on CB Insights’ analysis on 101 startups (top 20 reasons startups fail), the number 1 reason for shutdown is no market need (42%). From our own analysis on 150 startups (top 30 reasons for shutdown), the top 3 reasons for shutdown are poor business model (23%), strong competition (19%), and no product-market fit (17%).
Statistics show that most companies failed to identify their problem-market fit before they could effectively validate their businesses to achieve product-market fit. The problem-market fit (aka problem-solution fit) is achieved when you identified an existing real-world problem (critical pain points suffered by your targeted customers) that is solved by your solution offering through deliberate processes of experimentation and validation.
In the business and scientific contexts, the methodical approaches of analysis, experimentation and validation make sense because the issues are structured. However, in the context of life, I believe that we can analyze our failures through methodical approaches as well, by applying structure to our messy and unstructured issues.
Generally, I’d identify the reasons for failure, and list them in a structural order for future reference. Once you start this healthy exercise, it will get easier. I promise.
I therefore encourage you to pick up the habit of doing a post-mortem analysis each time you fail and draw insights from your mistakes.
“90% of all those who fail in life are not actually defeated. They just simply quit.” (Paul J. Meyer)
After I’d recovered from my last business failure in 2016, it was during my market research that I truly felt the extreme pain point on the lack of a centralized database that stores credible information and data on business failures.
Every time I prepared for a new business venture, I had to look through several search engines to compile my findings on market analysis, competitors analysis, and post-mortem analysis on failed businesses of the industries that I was exploring.
From the research findings, I’ll analyze the reports to identify the next business opportunities, and to also understand how my team and I can offer something different than our competitors. We would study the markets and search for our unique value proposition.
In 2014, I attended the DLD’14 (Digital Life Design) Conference in Munich, Germany, and heard Ijad Madisch (co-founder and CEO of ResearchGate) shared his European success story on how he co-founded ReseachGate by encouraging its worldwide members of scientists and researchers to share not just their successes, but also raw data and negative results from failed experiments.
According to Ijad, more than 90% of the data created in scientific experiments are negative results and these data rarely get published. As a researcher himself, he was frustrated that researchers were not sharing the negative results and raw data sets which led to research redundancy.
Ijad advocated that “if we know who is doing what, we can be much more efficient. Open source has been very successful in how you can combine competition plus being open. I always call it ‘open science’. We have to move to a world where this competition is still needed, but everyone needs to also understand that the more open I am, the more successful I will be.”
Although it was the first time I’ve heard of ResearchGate but I remember thinking to myself, “Wow, this guy is brilliant! A database of failed results (data) from scientific experiments for researchers to learn from. Amazing.”
Imagine if Thomas Edison had access to ResearchGate, he’d had invented the light bub technology much sooner with lesser failed experiments.
Something so simple yet it solved the pain points of many researchers from around the world to freely share their works.
“What if there are similar pain points shared by other entrepreneurs in the business domain? What if there is a centralized database comprised of business failure data from all over the world to learn from?”, I thought to myself.
However, at that time I was running a consulting company and so I didn’t entertain the thoughts any further. It wasn’t until several years after in 2017, as I continued to experience the pain points through a couple of failures, that I built our database of business failures.
I’ve also discovered that the pain points were also experienced by many founders I’d had met and spoken with from Beijing, Hong Kong, London, Milan, Kuala Lumpur, Singapore, Manila, Jakarta, Bangkok, and Brunei.
In our research and early customer validation (interviews with our potential users throughout our development stages), with our proof-of-concept and early prototypes, we’d learned that the problems truly exist among aspiring and budding entrepreneurs. Currently, we’re validating our problem-market fit on a wider audience with our latest MVP (Minimal Viable Product).
On a mission to help reduce the staggeringly high failure rate, my team and I built Flipidea (pronounced as ‘flee-pee-dia’) to enable you to discover analytical insights and learn from failed startups and business failures.
“Experience is not what happens to you. Experience is what you do with what happens to you.” (Aldous Huxley)
We begun compiling data on failed startups and business failures from around the world into a centralized database.
Essentially, our database is a collection of searchable and rich data of failed businesses which include post-mortem analysis, competitors and similar companies analysis, bankruptcy reports, interviews and more.
From our database, you’ll be able to draw insights from the companies’ reasons for shutdown collected from post-mortem analyses.
You can also analyze the data of the companies before they shut down, such as which industries they were in, who their investors were, how much investment they raised, who their competitors were, and so on.
We also built our idea checker to analyse your intuitive business idea and predict its estimated failure rate before you start the rigorous process of formulating and designing your business ideas, models and plans.
The idea checker can also check the uniqueness of your existing business by identifying the failed companies who share similar business ideas to yours, as well as helping you to decide if you should pivot into doing something different and creative.
As an entrepreneur, your father is not taking chances on seeing you hurt yourself, should you one day decide to become an entrepreneur.
So children, I created Flipidea for you to learn from the failures experienced by other fellow entrepreneurs, turning people’s hindsight on failures into insights, in order to reduce your failure rate.
“Learn from insights so you can change your behaviour, and then commit to the challenges of doing it differently the next time.” (Steve Blank)
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Our proprietary data retrieval systems scan the Internet to monitor, gather and clean relevant, aggregated, and public information from news articles, websites, press releases, regulatory filings, and so on. Flipidea’s idea checker, tools, simulations, intelligence and algorithmic systems are powered by artificial intelligence and advanced analytics using our own proprietary data and synergised public data. Flipidea does not warrant the completeness or accuracy of data provided, so you would need to independently verify the information. Nevertheless, we encourage you to check the accuracy of our information before its use. We also gently advise that you obtain sufficient knowledge, market understanding, professional advice and experience to make your own evaluation of the merits and risks of any actions with the information.
Last edited on 21 June 2021.