At some point, every startup will experience a failure. If the startup is lucky, that failure will be minor, and the company will survive. But if it’s unlucky, that failure can mean the end of the company — an experience that Seattle entrepreneurs Kelsye Nelson and Dean Graziano discussed with GeekWire’s John Cook at GeekWire Startup Day 2016.
Nelson is the founder of Avasta Press and the co-founder and CEO of the former company, Writer.ly. Graziano is the founder and CEO of MissionX and was previously the founder and CEO of Lively. The two entrepreneurs sat down to talk about their experiences with failed startups, telling the audience exactly what went wrong and and how they were able to bounce back.
Nelson’s startup, Writer.ly, was an online marketplace of publishing services, connecting authors to freelance editors, designers, and publishers.
Initially, Writer.ly had success in its fundraising from the Seattle Angel Conference and Founder Showcase in San Francisco, and even scored an advisor in Guy Kawasaki.
“Out of the gate we had 1200 users and revenue our very first month,” Nelson said. “Then we got another angel, and another angel…Then we had 5000 users, and another angel investor and another.”
But then, Nelson said, the company’s successes petered off. Revenue stopped and Writer.ly discovered that its customers needed more guidance than their DIY publishing site could provide. Finally, the tech partners to whom Writer.ly had given most of its investors’ money didn’t deliver.
“Then we had no more angel investors and we ran out of money,” Nelson said.
At three years in, Nelson realized that Writer.ly wouldn’t succeed without leaving behind the very customers it had promised to serve — indie publishers and authors. But even with this realization, it took time to talk herself out of Writer.ly, and Nelson stayed almost a year and a half longer than she should have, she said.
As an entrepreneur, she explained, you have to be the biggest believer in your own startup, so it takes time to lose that conviction and to tell yourself the opposite of what you’ve been saying for so long: that your company really isn’t going to make it.
Reflecting on her experiences at Writer.ly, Nelson said that she wished that the startup had grown more slowly and sustainably rather than doing big rounds of fundraising because Writer.ly would have had more time to experiment and work out some of the issues that led to the company’s downfall.
“When we made our choices for how to spend our money, there was nothing for us to fall back on if that didn’t go well,” she said. “I wish that we had spent more time building up our revenue and building up our community and doing more experiments because those experiments became harder and harder with the bigger money we were betting with.”
After Writer.ly failed, Nelson felt disappointed, as well as marked by covert stigma, surrounded by a world that rewards only successes and that discounts hard work if it doesn’t result in profits.
She took time to herself to recover — reading, going on long runs, eating heathy food, and getting lots of sleep to rejuvenate her entrepreneurial fire.
“Be around people who are supportive, find small wins, reconnect with your purpose,” she recommended. “Take a huge break, go travel, forget about startups, don’t talk to any startup people for months. And then come back.”
Since leaving Writer.ly, Nelson has founded another company, Avasta Press, which brings digital and social marketing practices to indie publishing. Nelson said that the process of starting another company was aided by the failure of Writer.ly.
“I’m more honest about what would make me happy and what my weaknesses are,” she said. “It made it so much easier to go onto next place.”
Like Nelson, Graziano has had his share of failure in his 15 years as an entrepreneur, but also his share of successes. Most notably, Graziano founded Visible Technologies, a social media software company, which he sold in 2014 to Cision for a profit. However, his former company, Lively, did not fare so well.
Lively was a mobile app that provided fans with fast access to high-quality audio and video recordings of live performances, meaning that fans would no longer have to tape shows themselves or buy bootlegged copies.
At first, the company was successful raising $2.63 million in two rounds of funding, but then problems with record labels regarding recording and distribution rights began to plague the company.
“I feel really comfortable saying this, that I feel from a macro-level, we did everything right,” Graziano said. “But there’s always those light problems…It’s a game of inches.”
Graziano said that working with record labels was more difficult than he had anticipated and that as he was waiting for agreements to come through, Lively was running out of money. Eventually, the company ran dry.
Graziano said that while the startup had not succeeded from an investor or shareholder point of view, he mostly had done everything right, and that he actually viewed Lively as a success in the sense that any customer, employee, or investor in the company would work with him again.
“It’s okay as long as you can look at yourself in the mirror and say, you know, sometimes things don’t work,” he said. “Maybe I would have done something here a little bit different, but for the most part, I worked my butt off and we saw out our vision.”
After Lively’s demise, Graziano went through the five stages of grief as he mourned his startup. But he pushed himself to get back out there to figure out where he wanted to go next.
“I believe in failing fast,” he said. “Sometimes coming around really quickly and doing another [business venture] very quickly is actually a good thing because you’re still in that momentum and you’re really hungry for it right at that point [of failure].”
From Lively, Graziano jumped into his new company, MissionX, a promotional marketing platform for online retailers. His business decisions at MissionX have been affected by his time at Lively, Nelson said. He is now more self-aware about what he wants and doesn’t want in terms of responsibility.
“Now I know what I’m really good at and what I’m not,” he said. “I love building things, but I don’t need to be the CEO of every company I build. And I have no problem with that.”