SIIA Previews Presentation 2009

1. Learning from Failure How to “Fail Successfully” and Lay the Foundation for Real Success
 Roger Ehrenberg IA Capital Partners, LLC SIIA Previews January 26, 2009…
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  • 1. Learning from Failure How to “Fail Successfully” and Lay the Foundation for Real Success
 Roger Ehrenberg IA Capital Partners, LLC SIIA Previews January 26, 2009
  • 2. Background 1 <ul><li>18-year Wall Street veteran - M&A, derivatives, trading at Citibank, Deutsche Bank </li></ul><ul><li>4-year early-stage investor -, Wallstrip, Clickable, Buddy Media, Stocktwits and 23 others </li></ul><ul><li>Investor, Co-founder, President and Chairman - Monitor110 </li></ul><ul><li>Current projects - Stocktwits, Kinetic Trading </li></ul>
  • 3. History of success/failure 2 <ul><li>Wall Street executive - successful </li></ul><ul><li>Early-stage investor - looking good </li></ul><ul><li>(early returns are encouraging) </li></ul><ul><li>Entrepreneur - failed on first try </li></ul><ul><li>Smarter, better investor and entrepreneur - trying again after taking some lumps </li></ul>
  • 4. I hope this isn’t my destiny … 3
  • 5. Is it possible to “fail successfully”? <ul><ul><ul><li>+++++ YES +++++ </li></ul></ul></ul><ul><ul><ul><li>BUT HOW? </li></ul></ul></ul>4
  • 6. Case study: Monitor110 5 <ul><li>Why did we fail? </li></ul><ul><li>Lack of a “buck stops here ” leader </li></ul><ul><li>Too internally focused </li></ul><ul><li>Too much PR, too early </li></ul><ul><li>Too much money </li></ul>
  • 7. Case study: Monitor110 6 <ul><li>Why did we fail? </li></ul><ul><li>Lack of a “buck stops here ” leader </li></ul><ul><li>No single vision </li></ul><ul><li>Inability to efficiently manage through crisis </li></ul><ul><li>Difficult to avoid factions behind each leader </li></ul><ul><li>Source of conflict with Board </li></ul>
  • 8. Case study: Monitor110 7 <ul><li>Why did we fail? </li></ul><ul><li>Too internally focused </li></ul><ul><li>Created an offering not geared to customer requirements </li></ul><ul><li>Managed a team not accustomed to interacting with and servicing customers </li></ul><ul><li>Fostered an isolated, insular, tech-focused culture </li></ul><ul><li>Facilitated an over-engineered, proprietary and </li></ul><ul><li>costly architecture </li></ul>
  • 9. Case study: Monitor110 8 <ul><li>Why did we fail? </li></ul><ul><li>Too much PR, too early </li></ul><ul><li>Created unrealistic market expectations </li></ul><ul><li>Created unrealistic internal expectations </li></ul><ul><li>Raised anxiety around customer interaction </li></ul><ul><li>Facilitated raising too much money, too easily </li></ul>
  • 10. Case study: Monitor110 9 <ul><li>Why did we fail? </li></ul><ul><li>Too much money </li></ul><ul><li>Deferred the need to generate revenues </li></ul><ul><li>Delayed the need to face into severe product problems </li></ul><ul><li>Provided the resources to pursue non-customer driven “science projects” </li></ul><ul><li>Worked against creating a scrappy, hard-edged, “us against the world ” culture </li></ul>
  • 11. Attributes of failing successfully 10 <ul><li>Humility - possessing the ability to acknowledge and learn from failure </li></ul><ul><li>Insight - having the perspective to extract the lessons learned from failure </li></ul><ul><li>Persistence - embodying the toughness to take lessons learned and move forward </li></ul><ul><li>Paraphrased from blogger Dave Friedman, commenting on Information Arbitrage </li></ul>
  • 12. 11 “ It's not that they're brilliant or well-educated… They work all the time. They don't let failure demoralize or destroy them. They pick themselves up and keep going and eventually, every once in a while, one of your ideas actually breaks through and works, and it makes all that stuff seem worthwhile.” Dean Kamen, Founder of Segway, as told to Thom Patterson of CNN Persistence and the entrepreneur
  • 13. Being a first-time entrepreneur is hard 12 <ul><li>True entrepreneurs - those who believe “You can’t fail - you can only stop trying” - are few and far between </li></ul><ul><li>A recent study* has shown that: </li></ul><ul><li>- The timing of a start-up may be more important than the quality of the idea </li></ul><ul><li>- Entrepreneurs who are successful the first time are more likely to succeed in subsequent ventures because of available resources </li></ul><ul><li>* Performance Persistence in Entrepreneurship , Gompers, Kovner, Lerner and Scharfstein, Harvard Business School, published December 3 rd , 2008 </li></ul>
  • 14. Some other deep thoughts <ul><li>“ We all have a philosophy that ideas and vision are important. But execution is the thing that distinguishes companies.” </li></ul><ul><li>- Mike Maples </li></ul><ul><li>“ Man has an infinite capacity for self-rationalization.” </li></ul><ul><li>- Sigmund Freud </li></ul><ul><li>“ Don’t be so humble. You are not that great.” </li></ul><ul><li>- Golda Meir </li></ul>13
  • 15. Case study: Stocktwits <ul><li>What we’re doing right </li></ul><ul><li>Single leader - Soren Macbeth </li></ul><ul><li>Separation between Development and Product - Soren and Phil Pearlman </li></ul><ul><li>PR only after functioning product in market </li></ul><ul><li>Initially built for less than $50k, just raised $820k from a group of users and strategic investors (Monitor110 raised $20 million) </li></ul><ul><li>The product is used by and shaped by our customers </li></ul><ul><li>Our customers are the market - we live it and breathe it every day </li></ul>14
  • 16. Case study: Stocktwits <ul><li>What else we’re doing right
 </li></ul><ul><li>Focused on building core IP - leveraging open source software, APIs for data and the cloud for storage and processing </li></ul><ul><li>Ruthlessly focused on our customers - working to segment our audience and to provide the stuff they value </li></ul><ul><li>Paranoid about data quality - built reputation algorithms and community self-policing mechanisms to kill spam before it spreads </li></ul>15
  • 17. Key take-aways <ul><li>“ Illegitimi non carborundum ” </li></ul><ul><li>- Translation: Don’t let the bastards grind you down </li></ul><ul><li>Focus on core IP, leverage the IP of others to preserve focus and minimize costs </li></ul><ul><li>Feel the stress of getting to revenues ASAP </li></ul><ul><li>Raise 2 years ’ worth of capital, but ensure the plan gets you to cash-flow breakeven if you can’t raise more money at that time </li></ul><ul><li>Failure + Learning + Persistence = Success </li></ul>16
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