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Marketplace Morning Report

Your start-up failed. Congratulations!

Krissy Clark Jan 8, 2014
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Danielle Morrill is a 28 year-old web entrepreneur who lives in San Francisco. A few years ago she started a company, Refer.ly, that paid people to write reviews about products they loved.  It was her first try at building a business, and her first major fail. 

“Apparently that’s going to help me in Silicon Valley,” she joked. And in a way, she’s right. According to a popular saying in Silicon Valley, having a failed company on your resume is a badge of honor, meaning Morrill just earned her first badge. “So I guess I should celebrate,” she said.

In fact, she already has been celebrating, and the rest of Silicon Valley along with her. When Morrill officially called it quits for Refer.ly last spring, she shared the news of her failure in a blog post and scored it with Handel’s “Zadok the Priest.”  Rejoice!  The chorus sang out — Rejoice! —  as Morrill announced that, after raising more than $1 million in seed money, Refer.ly had had failed. 

“My greatest feat as a start up founder isn’t to fail,” she wrote in the post. “It’s to become a zombie start up.”

By zombie, Morrill meant, a company that’s still technically operating, but has so little traction, it should be dead. Silicon Valley is full of these companies, she wrote, and she didn’t want hers to be one.

Morrill’s announcement was received with what amounted to a social media standing ovation: thousands of comments and tweets saying she was courageous, insightful, inspiring.

“It was the highest traffic post I ever wrote,” Morrill said recently. 

And that is bad news for Josh Felser, a Silicon Valley investor and entrepreneur who has founded a couple very successful start-ups of his own.

“In every other industry you’re actually worried about your next job, but in our industry people are glamorizing failure,” Felser bemoans. Sure, he says, there are times you need to let go of a venture that’s going nowhere. But  as a venture capitalist, it’s his money on the line. And he wants to invest in people who are terrified of failing. 

“It should be like  going to war,” Felser says. “You want it to be bad enough and painful enough that you’re only going to fail if it’s the only option you have.”

Of course, you could argue, the cavalier attitude toward failure in Silicon Valley that drives a venture capitalist like Felser mad is actually fueled by the venture capital game. When the aim is to win big, anything less than spectacular success can be tempting to bail on. 

In Danielle Morrill’s case, that company she pronounced a failure was actually doing O.K. by the standards of many small businesses:  a growing customer base, starting to make a little money.  But, Morrill cautions, “it was never really going to take off. And I certainly believe that the implied promise when we raised money was that we  would build a highly scaling, high growth, venture backed start up.”

Morrill still has some investor money left. She’s using it to fund a new start up. And, to pay rent on the home-office she and her two co-founders share, in a penthouse apartment in one of San Francisco’s newest skyscrapers. 

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