8 Most Embarrassing (And Expensive) Startup Failures That Made Me a Better Entrepreneur

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8 Most Embarrassing (And Expensive) Startup Failures That Made Me a Better Entrepreneur

The first one cost me millions; the rest cost me hundreds of thousands, wasted years, and dignity, but taught me loads more.

8 Most Embarrassing (And Expensive) Startup Failures That Made Me a Better Entrepreneur
Photo by Memento Media on Unsplash

For years, I tried to conceal my startup failures, assuming they’d discredit my competence and expertise. Back then, I believed I was one of the unfortunate few who didn’t launch to immediate success, cash out 8-figures+, and repeat the process seamlessly. Seeing trust fund babies have their rent (or mortgage) paid by their mega-millionaire parents and their startups funded through familial connections didn’t help either. It truly felt as if I was one of the rare few who’d stumbled, fallen, or failed, like I was business incompetent.

Over a decade later, and my perception of failure has taken a 180-degree turn, and that’s not only thanks to the successes I’ve amassed along the way. Today, I look back on my failures as some of the most valuable building blocks to success. That’s not to say you need to fail firsthand to soak up the lessons those mistakes incurred, but it is to say that sometimes you can learn and grow even more from failure than you can from success.

Here are 8 of the most embarrassing and expensive entrepreneurial failures that have helped me master the skills to build successful ventures that positively impact the world, profit without outside investment, and allow me the time, location, and opportunity freedom I desired.

Sometimes the fine line between the founders who make millions and those who fold with next to nothing is simply a matter of timing, tenacity, or the faith to stick it out. Back in business school, I worked with a peer-turned-friend co-founding a fledgling tech startup. Revenue was minimal, profit nonexistent, and user adoption at the time fairly slow. Over the next year and a half, my role grew from creating the pitch deck that helped them secure necessary funding to managing a team of interns and employees to VP of Marketing. Unfortunately, the co-founders and I were all graduating and had to make a tough decision: to stay the course or take a “real job”.

They both stayed, one neglecting a job search altogether, the other reneging on a full-time consulting offer he’d signed. I had a 6-figure Wall Street offer for a top firm’s M&A group in hand, one of the most coveted jobs in finance, especially for someone in their early 20s; I took it. Flash forward a year later, and my co-founder friend was texting me regretfully, telling me he’d sell the whole thing for $5k just to get out. He was desperate for a steady salary, benefits, and a career he could count on. Two years later, he was negotiating the multi-million-dollar exit we’d both doubted would ever come.

The difference? He stuck it out and reaped the rewards. I took the safe bet, left, and left any and all equity and upside on the table. Moral of the story? There is no certainty in those first few months or years, and those who don’t have the risk appetite to stick it out may be shortchanging themselves some serious upside; I know I did.

My first solo-founded startup was a capital-intensive tech company that dabbled in user generated content, sweepstakes, and creator monetization. I had no experience in any of those fields, no tech background, and limited funds that were my life savings, so off to a great start, right? Nonetheless, I spent 18 months paying teams to build a product I ultimately shut down before we publicly launched or made one penny of revenue.

Why? I closed up shop because I knew that in order to succeed, I needed a number of things I lacked: deeper pockets and a bigger, better team. In case you’re wondering why I didn’t go raise the funding, hire the team, and seek out the help I needed, the answer is simple — and therein lies the problem: I didn’t believe in the business enough. While I’d been willing to risk my own time and money, the thought of risking someone else’s, and the idea that this could be my one shot to make a first impression on those investors, advisors, and team members was sickening. I wasn’t sold enough on my own idea to push others to join in, and that should have been the #1 clue to reevaluate.

The lesson? Be honest with yourself about all the resources you need, and don’t be afraid to ask for help if you need it. If you’re afraid to ask for help or seek out those resources, that may be an indicator you’re not quite confident in or sold on the long-term potential of your own venture. If you know you’re facing a money pit with a dwindling value proposition that may become obsolete in the next few years, there’s such a thing as strategically pulling the plug. My only regret is that I didn’t act sooner.

One of the intangibles when it comes to business and marketing is the little-spoken fact that if it makes you cringe, it will probably make your customers cringe too. Sadly, I failed to realize this when I poured over $30k into marketing of which I was unequivocally embarrassed, simply because it seemed to work for all my peers and competitors. Since that type, channel, and style of marketing worked so well for them (generating tens of millions for subpar products to mine, sold by less-qualified parties), I figured that must be the way — no matter how inauthentic it felt to me and my brand.

In retrospect, I can see that marketing worked for those peers because it was authentic to them and resonated with their audiences. As I was selling a more robust product to a more discriminating market, the same tactics didn’t attract the right crowd. If your marketing makes you cringe and your audience is anything like you, it might make them cringe, too. Furthermore, imitating another company’s marketing is no guarantee your audience will react the same, even if you’re in the same industry, peddling a very similar product.

It might sound like common sense that you probably shouldn’t hire someone you’re legitimately afraid of, but sometimes fear comes in the form of intimidation, and it can be a factor of perceived expertise. In my case, I hired a self-proclaimed expert to manage a costly marketing task on a monthly retainer. Since she and her team were “experts”, I deferred to them regarding budget, time frame to see results, and most every other concern that came up.

Fast forward four months, and I was spending close to $6k per month for their services, without a dime of profit to cover their costs. The logical move when something isn’t working is to tweak, change, or stop it. However, when I confronted this employee about the expense her services were incurring, I ran into an issue I’ve experienced multiple times when tiptoeing around the “firing” conversation with outsourced teams: She convinced me that ceasing her activities would instantly erase all the progress (i.e. investment) I’d made into her services and put my business back to square one, or worse.

So…I let her intimidate me into paying her bills for a full year before I apologetically “broke up” with her. To be honest, I didn’t even fire her team; instead, I told them I needed to put a temporary pause on the account that we’d resume in three months; that was years ago, and we haven’t spoken since. After dropping their services, something miraculous happened: My sales from other marketing channels kept plugging along, and my profit margins skyrocketed, along with my company’s bank account, since I didn’t have low-performing teams draining our funds!

Moral of the story? Don’t allow your own fear, weakness, kindness, or insecurity about your company’s success or your comparative lack of knowledge in contrast to a niche expert you hire put you in a vulnerable position to be bullied. Once you let the fate or success of your company lie in somebody else’s hands, you give them the upper hand. At that point, you’re no longer the real CEO or boss, but rather their puppet, bending and bowing to the requests of the incognito puppeteer.

Over the years, I’ve prided myself on running a very high-efficiency, high-output, high-ROI, lean team. In fact, I individually drive over 90% of sales for some of my companies with digital marketing and copy I create and execute myself. That said, I’m not opposed to branching out and expanding into new marketing channels and employee compensation models if they show promise.

One of my most recent failures surrounded a mass hiring effort to bring on a national sales team with an attractive commission model. Though I was skeptical of this sales team’s ability to perform, two experienced advisors pushed me to take the plunge, so I tried it. I spent two weeks preparing and upgrading our tech to handle the new commission model, two weeks recruiting, and another two weeks onboarding new recruits. The timing seemed ideal, based on the company’s historical seasonality, so I was truly setting up this sales team for ultimate success.

In the following weeks, my ears were ringing with the chirps of crickets. I was shocked to find that so many people lulled by the opportunity for “easy money” or big commission fall flat when it comes to delivery. The disruption was perhaps the worst of all. The added time and expense spent managing these people detracted from what could have been higher-ROI marketing activities or other pursuits.

The lesson? Just because a marketing tactic or sales model works well for other big companies doesn’t mean it will work for yours. Furthermore, choosing to manage a large volume of people can be a time-intensive and capital-intensive task; I wouldn’t suggest doing it unless you’re ready to go all-in. Lastly, a sales team — even an experienced or qualified one — isn’t a guarantee of an outcome or a silver bullet to success. Salespeople underperform, miss quotas, and get fired all the time, those just aren’t the stories they lead with in their job application (for good reason).

Back before I employed automation and owned companies that send tens of millions of emails, I started with an excel spreadsheet of addresses, crafting manual emails to prospective partners for one of my earlier startups. I didn’t even use an email scraper for the addresses; instead, I spent weeks — maybe months — painstakingly gathering the target list. Once I had a few hundred prospects, I began firing away:

I sent over 300 manual emails to these high-caliber prospective partners (or their agents, managers, handlers, etc.). Out of those 300+, I got about 300 rejections, only to land 5 yes’s that made their way to a signed contract. Of the 5 committed partners, one flaked out, but thankfully returned his 5-figure bonus. Another took the money and ran, quite literally; he fled the country as a fugitive, taking many more companies’ money than mine without producing a thing. He did eventually end up in jail and banned from every social platform, but no, I didn’t get a dollar back of the thousands we’d fronted him.

While there are many morals to this story, the 300+ rejections taught me tenacity and how to overcome objections and rejection. The one who scammed me ignited my resilience, as I chose to cut my losses and move forward with the other partners, rather than mope or let a lengthy legal battle derail me as I tried to claw back the money he stole. The 5 yes’s, which dwindled down to 3, taught me that conversions may be a lot lower than you’d expect and you may need to cast a broader net than initially expected.

While some people may believe there’s no such thing as bad publicity, there’s definitely a bad way to use your publicity, and that’s anything that incurs the threat of a lawsuit. One of my companies was fortunate to receive an array of favorable media, ranging from small local news channels to dedicated articles in the most well-regarded business publications read by hundreds of millions. The downside to being featured in publications read by hundreds of millions is that those major media players also have some big legal guns on their side, and they’re not afraid to use them.

I assumed I could use our earned publicity for free, only to get hit with logo trademark lawsuit warnings and forced to pay thousands simply to showcase our own earned media in our marketing. This unexpected and very expensive legal run-in required me to purchase a multi-thousand-dollar license, simply to leverage the positive publicity we’d been bestowed. The bright side is that this experience also made me hyper-aware and cautious when it comes to the use of earned media, logos, and PR. Beware, free publicity isn’t always free.

In my earliest years as an entrepreneur, I did something many fellow founders do: I lost money. I spent years spending before the pendulum swung the other way and revenue and profits actually entered my company’s bank account. In fact, some of those earliest entities of mine were shut down before they got a chance to make a dime, acting as one big multi-year loss. Therefore, I assumed that certainly I didn’t have to file any type of taxes at the time, since I was losing money…right?

Not exactly. Due to the types of entities I created, there were filing requirements — regardless of the revenue or lack thereof — that came with monthly penalties. It wasn’t until years later when I was hit with 5-figures of late filing penalties, many for entities that had never been operational, dating back to years when all I’d incurred were losses! Imagine wiping your hands clean of an old failed startup, only to receive a bill from the you-know-who for $10k in late penalties, simply because you failed to submit a form stating “nope, I’m not making a cent of profit”.

The lessons here are many, but I’ll hone in on a few:

  1. Keep every receipt or digital record of your inflows and outflows. Those records saved me years later when I was able to write off those losses and lower my remaining taxable burden for the subsequent profitable ventures.
  2. When it comes to filing, don’t mess around, and don’t delay. Either look it up online, employ a low-cost entity that can do it for you, or seek out an expert to have your tax and legal obligations covered. It will be far more complex and expensive the longer you wait.
  3. Don’t go starting new official entities willy nilly, day in and day out. If you want to add another revenue stream, consider whether it could be a subsidiary or “DBA” (doing business as) under your primary venture in order to reduce the need for duplicate filing. These days, my primary company acts more like a holding company for multiple of my relevant ventures, consolidating my legal obligations and saving me big-time.

Go to Publisher:

Entrepreneur's Handbook – Medium


Author: Rachel Greenberg