How Failure Is Viewed in the Innovation Community: Seattle Startups and VCs Weigh In

Last week, I reported that Voyager Capital managing director Erik Benson said failure is seen as a “black mark” in the Seattle innovation community—more so than in places like the San Francisco Bay Area or New England. I’ve been asking around at local startups and investment firms to see what people’s reactions are, and (if it’s true) to hear what can be done about it.

The issue has definitely touched a nerve. For the most part, the entrepreneurs I hit up tended to agree with Benson’s assertion, while investors generally disagreed. I’m not sure what that means yet—maybe it’s all a matter of perspective—but there is definitely something to this discussion. And definitely a divide.

Local entrepreneur Matt Hulett, the CEO of Mpire (which runs the ad network Widgetbucks) and a fourth-generation Seattleite, says he strongly agrees with Benson. “The culture in the Northwest is very conservative. It’s one of the reasons why entrepreneurs based in the Northwest look first to Silicon Valley to fund big ideas. If you are building a truly disruptive company, then you are bound to fail,” he said in an e-mail. “In the Northwest, the demeanor is usually around ‘prove first.’ The proof is most likely around a proven management team as well as some traction on the business model.”

And why is that? “It could be that we’re more enterprise software and telecom/wireless focused in this state, or maybe we’re just built that way,” says Hulett. “Truth is, in the Northwest, having done something in a big company (Amazon, Microsoft, etc.) will be more highly valued than having tried a number of startups.”

Interesting take, but Bill Bryant, a Seattle-based venture partner with Draper Fisher Jurvetson (and an investor in Mpire), disagrees. “I think it’s more a function of ‘survivor bias,'” Bryant says. “There are all too few startups to begin with, so the successes, and the failures, tend to stand out more than in the Valley. In a small sample size, when ‘failed previously funded entrepreneurs’ do not get support for their next project, it’s simply more visible. Statistically and culturally, I do not believe that investors shy away from failed entrepreneurs any more so than investors in, say, the Bay Area—and they do so for the same reasons—that they didn’t demonstrate quality strategic leadership, were not good at execution, failed to attract a quality team, and generally squandered their initial capital backing.” That litany, Bryant adds, will not allow you to raise capital in any community.

But entrepreneurs and startup observers—not all, but most I talked to—see some problems … Next Page »

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4 responses to “How Failure Is Viewed in the Innovation Community: Seattle Startups and VCs Weigh In”

  1. One thing is for certain: failure is not only tolerated, but richly rewarded among the Seattle-area VCs:

  2. km4 says:

    Most VC’s should take a hard look at their investment portfolio then look in the mirror for some deep self introspection.

    What will they see – it begins with an F !