SIIA Previews Presentation 2009

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

Background 1
18-year Wall Street veteran - M&A, derivatives, trading at Citibank, Deutsche Bank
4-year early-stage investor - TheLadders.com, Wallstrip, Clickable, Buddy Media, Stocktwits and 23 others
Investor, Co-founder, President and Chairman - Monitor110
Current projects - Stocktwits, Kinetic Trading

History of success/failure 2
Wall Street executive - successful
Early-stage investor - looking good
(early returns are encouraging)
Entrepreneur - failed on first try
Smarter, better investor and entrepreneur - trying again after taking some lumps

I hope this isn’t my destiny … 3

Is it possible to “fail successfully”?
+++++ YES +++++
BUT HOW?
4

Case study: Monitor110 5
Why did we fail?
Lack of a “buck stops here ” leader
Too internally focused
Too much PR, too early
Too much money

Why did we fail?
Lack of a “buck stops here ” leader
No single vision
Inability to efficiently manage through crisis
Difficult to avoid factions behind each leader
Source of conflict with Board

Why did we fail?
Too internally focused
Created an offering not geared to customer requirements
Managed a team not accustomed to interacting with and servicing customers
Fostered an isolated, insular, tech-focused culture
Facilitated an over-engineered, proprietary and
costly architecture

Why did we fail?
Too much PR, too early
Created unrealistic market expectations
Created unrealistic internal expectations
Raised anxiety around customer interaction
Facilitated raising too much money, too easily

Why did we fail?
Too much money
Deferred the need to generate revenues
Delayed the need to face into severe product problems
Provided the resources to pursue non-customer driven “science projects”
Worked against creating a scrappy, hard-edged, “us against the world ” culture

Attributes of failing successfully 10
Humility - possessing the ability to acknowledge and learn from failure
Insight - having the perspective to extract the lessons learned from failure
Persistence - embodying the toughness to take lessons learned and move forward
Paraphrased from blogger Dave Friedman, commenting on Information Arbitrage

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

Being a first-time entrepreneur is hard 12
True entrepreneurs - those who believe “You can’t fail - you can only stop trying” - are few and far between
A recent study* has shown that:
- The timing of a start-up may be more important than the quality of the idea
- Entrepreneurs who are successful the first time are more likely to succeed in subsequent ventures because of available resources
* Performance Persistence in Entrepreneurship , Gompers, Kovner, Lerner and Scharfstein, Harvard Business School, published December 3 rd , 2008

Some other deep thoughts
“ We all have a philosophy that ideas and vision are important. But execution is the thing that distinguishes companies.”
- Mike Maples
“ Man has an infinite capacity for self-rationalization.”
- Sigmund Freud
“ Don’t be so humble. You are not that great.”
- Golda Meir
13

Case study: Stocktwits
What we’re doing right
Single leader - Soren Macbeth
Separation between Development and Product - Soren and Phil Pearlman
PR only after functioning product in market
Initially built for less than $50k, just raised $820k from a group of users and strategic investors (Monitor110 raised $20 million)
The product is used by and shaped by our customers
Our customers are the market - we live it and breathe it every day
14

Case study: Stocktwits
What else we’re doing right 
Focused on building core IP - leveraging open source software, APIs for data and the cloud for storage and processing
Ruthlessly focused on our customers - working to segment our audience and to provide the stuff they value
Paranoid about data quality - built reputation algorithms and community self-policing mechanisms to kill spam before it spreads
15

Key take-aways
“ Illegitimi non carborundum ”
- Translation: Don’t let the bastards grind you down
Focus on core IP, leverage the IP of others to preserve focus and minimize costs
Feel the stress of getting to revenues ASAP
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
Failure + Learning + Persistence = Success
16

http://www.informationarbitrage.com	762
http://manualofideas.com	196
http://www.altgate.com	99
http://informationarbitrage.com	47
http://www.simoleonsense.com	34
http://adrianskehill.com	31
http://sean.keener.org	25
http://www.manualofideas.com	12
http://altgate.com	12
http://static.slideshare.net	7
http://informationarbitrage.typepad.com	4
http://wildfire.gigya.com	4
http://altgate.typepad.com	3
http://www.informationarbitrage.typepad.com	3
http://pegobry.tumblr.com	2
http://www.slideshare.net	1
http://feeds.feedburner.com	1
http://members.webmaster-business-guide.com	1
http://74.125.43.102	1
http://boutofcontext.com	1

SIIA Previews Presentation 2009

by Roger Ehrenberg on Jan 26, 2009

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