Most entrepreneurs always admire those who have succeeded and rarely pay attention to those who’ve failed. Well, the show Silicon Valley offers some valuable lessons on startup failure that could help your business succeed. Read on to learn more.
Tech, startup investments, and humour - these are the three elements combined to make up the Emmy-nominated hit series Silicon Valley. The show, created by former Silicon Valley engineer Mike Judge, follows the introverted Richard Hendrix and his team as they go through the motions of getting their tech startup (Pied Piper) off the ground.
Any entrepreneur will tell you how much blood, sweat, and tears it takes to start a business, get it up and running, and ensure it grows to become self-sustainable. Sometimes, they are successful in their endeavours, while other times, you have to realize when to call it quits. Startups fail all the time for various reasons, like being unprepared, not doing enough research, and ignoring the small stuff. That is why if you don’t approach entrepreneurship with the utmost caution and preparedness, it can throw you a curveball you never expected.
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Silicon Valley demonstrates many things that can cause startup failure, regardless of whether you’re in the beauty or tech industry. Let’s explore some lessons on startup failure that we picked up from the hilarious series.
Lesson 1: Put everything in writing and pay attention to the details
This goes without saying. You can’t afford to rely on verbal deals or promises when you're in business. Ensure any relevant information and business agreement terms are in writing, even if the deal was made between friends. Because one day, someone could just wake up and decide to make a major decision that could affect your startup simply because you didn’t have anything in writing.
And as you’re drafting your paperwork, pay attention to the terms included in the contracts. Sometimes seemingly minute details can come back to bite you. Something as small as not asking users for parental permission (cc: Piper Chat) can pose a huge hurdle for your business, and you may face the law. So make sure you cross all your “t’s” and dot your “i’s” in all aspects of the business. This brings me to the next point.
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Lesson 2: Understand the law
Understanding the law is a primary theme throughout the show and an essential aspect of building any business to avoid startup failure. For example, in earlier Silicon Valley seasons, the team faced legal action based on the question, “Who owns the intellectual property based on the Pied Piper algorithm?” Considering the entire business model was practically centred around this algorithm, you can imagine how stressful it must have been for them.
So before you launch your business, consider any potential scenarios that could get you in trouble with the law. This also applies to patents. Unfortunately, the “Who owns what?” concept is a lesson that some entrepreneurs learn when it’s too late. So check on intellectual property rights regarding your business idea and any other “brainchildren” it may have produced, just to be safe.
In the same vein, NDAs are your best friend. They may not save you from every legal loophole, but they can serve as a general framework to ensure people don’t plagiarize your ideas. If you have a good business idea, best believe someone out there will be out to get a piece, so protect your IP by all means necessary.
Lesson 3: Don’t grow too fast
With the success of Pied Piper came the need for Richard and his team to grow their business, hire new employees, and move to bigger offices. I’m sure this is the natural trajectory every entrepreneur wants their startup to take.
However, sometimes growing too fast might not be in your business’s best interest. Every time it seemed the guys had figured out the company financing, something happened that would require them to grow the Pied Piper team. Even though hiring new employees for your startup can make sense, it could also lead to bad financial problems if you’re growing for the wrong reasons.
So what’s the right way to grow your business to avoid startup failure? If you want to grow properly, only hire people when there is a specific role with a particular business need to fulfil. Hiring a huge team of salespeople and marketing staff might seem smart until you notice your burn rate is higher than expected and you don’t have enough money to keep operations up and running.
There’s a reason many startups don’t get to the 3rd stage of enterprise maturity, where they are entirely self-sustaining. Speedy growth for your business can give the illusion of success that could simultaneously highlight errors in the weakest areas of your company. This is why it is important to establish a scalable plan whereby you consider all your current resources and prepare to strategize once your business starts growing again. This allows you to work slowly and steadily towards self-sustained growth and away from startup failure.
Lesson 4: Choose the right investors
A capital infusion can help any business grow faster in some cases, but this could also mean giving up equity if you take money from investors. Whenever you give up a board seat or equity, you lose a bit of control in your company. We see Pied Piper CEO Richard dealing with this problem constantly throughout the show.
So if you’re bringing investors on board, ensure you understand exactly what it means and how contracts are written (refer to point one). Whoever controls the majority of the company stock will have the most influence in case of a dispute and even control the company’s future. If you lose control, you might find yourself fired as CEO.
That said, choosing the right investor is crucial if you want your company to succeed. They need to understand your vision and respect your ideas so they don’t come in beating their chests and making unreasonable demands just because they have a stake in your business.
If you’re new to the industry, you may want to get someone who can show you the ropes, advise you, or be a silent investor who doesn’t interfere in decision-making. It’s up to you. This is why you must lay out your terms before getting anyone on board, lest you have disagreements or arguments over trivial issues. The wrong investor could sink your business by controlling how things run or wanting to hijack your idea and make it their own. Align yourself with investors who can support you and give you the stability you need to grow and go to market.
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Lesson 5: Don’t burn bridges
Even if there’s a chance that your business idea might eventually make you a visionary in your field, this does not give you the right to step on people as you climb to the top. This is one fatal mistake the Pied Piper crew makes when pitching their company to different venture capitalists in the show. They decide that the best way to get a nice chunk of investment capital is to “neg” each firm by acting like they don’t need their money. This terrible move costs them later when they end up with fewer and less desirable options.
So keep the peace for your business’s sake. You never know how your actions could affect the success of your startup down the line, and when you’re trying to get started in a particular line of business, you need all the connections you can get. This doesn’t just apply to entrepreneurship; it’s a principle we can all apply in every aspect of life.
In conclusion,
Setting up a business is already hard enough. You can’t just look to the entrepreneurs who have been successful for advice; there are lessons to be learned in startup failure as well. After all, what are mistakes if not hidden life lessons? So whether you’re trying to open a food service business or launch a revolutionary new app, the business principles to apply are still the same.
Silicon Valley is not just an entertaining tale of a bunch of techies trying to make their software seem like the best in an already full pot of ideas. You can also learn a lot from the show about what not to do regarding your startup. So grab some popcorn, sit back, watch a couple of episodes, and tell us what you learned from the show.
