“Yes, I Screwed Up”: How To Tell The Investor The Failures

Portfolio Manager FRÍA Sergei Villains in his column reviewed the experience with the founders of projects. Failures happen, and we, the investors, aware of this — because the business venture they occur much more frequently than in any other. There are common statistics.

“shoots” is only one investment out of ten. If to approximate, it means that the stories about errors we have to listen to nine times more often than the success stories. Moreover, behind every successful entrepreneur usually has a whole cemetery of feil and downs. And thats fine.

If the team you like, passed you as an investor a long way, but I was wrong, stopped and decided to start a new project, your shared experience, even if not successful, is a big plus. If the command failure is received from the investor correctly that it can maintain it when you start the next project. Because such investor already knows your strengths and weaknesses and understands what to expect from you. The most important element for many an unpleasant conversation — honesty.

A good founder should be easy to explain. We are faced with such a problem, solved it this way, here are the results, and based on the results I want to make a certain decision. The most ideal option when a startup comes in and says the magic words “I consider it inappropriate to continue to burn your money” and very thoroughly explains why and how he came to this conclusion.

In my practice, I heard this phrase only three times. With these commands we have kept good relationship and were willing to work on — though two of them decided to disperse, and the third launched the project, which did not require external investments. But usually, the entrepreneur tells the investor about the troubles in an entirely different way.

Worst of all — the breakup email. When the team sends an email summarizing the “we failed”. Its almost as bad as breaking up with a girl by SMS. Please do not do so. In my practice, met the team, who suddenly just disappeared and stopped answering calls.

Dont we all have friends to whom you have given 10 thousand rubles in debt five years ago and since then nothing about them was listening?. Other founders were saying, “look, I got a new job and decided to quit, startup”. Lied, that things are going fine, and then suddenly time – and bankrupt. This often occurs with companies which are credited by money partners and customers (see. As a well-known case of the notorious “Miterra”).

Such companies go bankrupt insane debts to partners, and the most unpleasant that may be in this case for the investor – if with these partners, the company introduced to you. But the top ranks in my rating of the ways to inform the investor about the problems is manipulation. “If you wont give me more money, then I will close” and “If you dont pay me, I wont do this business”. Im not kidding, this is true, sometimes we hear. Another common disease of startups — a habit to shift responsibility for his failure on the shoulders of others.

Partners, employees, contractors — anyone. Its a disgusting habit that never leads entrepreneur to success. What do his staff is fully his responsibility. It can not be anyone to delegate to. However, so do many.

“We were so stupid programmers that are unable to develop a product on time.”. “Our contractor marketing leaked the entire budget of nowhere and the customers didnt come.”. “Our financial advisors have built an impossible financial model.”. “Our product had to sell itself, but for some reason people do not buy it”.

“We somehow have not enough money.”. “Customers are idiots who do not understand that it is necessary to buy our product.”. “The Chinese factory, which promised to make the delivery, they brought not what I expected”. However, to take responsibility for the better.

At different times I hear from entrepreneurs such phrases. “I got sick and didnt do anything”, “I redid the site and I have dropped traffic”, “I had a fight with the leader of the market and he destroyed my reputation.”. And I cant say that the unwillingness to take responsibility — solely a Russian problem. Judging by our experience with foreign investors, it is a global problem, people in General are the same everywhere. On the market can sometimes be a hundred times more failures than success stories, but about them try not to talk.

This leads to the inability to accept the possibility of failure and tell about my mistakes investors. That is why when dealing with potential investees is very helpful to ask what problems he encountered in his previous projects and how they talked about them to employees and previous investors. Investors are always looking for strong founders who know how to take a punch and answer for their actions. How people survived the crisis and what was he doing at this time, it says, what its made. Medium-sized projects with a good team achieve better results than a weak team with great ideas.

Remember that.

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