The Entrepreneur Insiders network is an online community where the most thoughtful and influential people in America’s startup scene contribute answers to timely questions about entrepreneurship and careers. Today’s answer to the question “What must every entrepreneur know about startup success?” is written by Sharat Sharan, co-founder and CEO of ON24.
Whenever I’m asked about my journey as an entrepreneur and what advice I’d share with other entrepreneurs, it always comes back to a single lesson I learned. And I learned it very quickly.
But first, let me take a step back. In 1998, I helped found a company called ON24 in Silicon Valley, which was meant to be an “always on” news service, hence the name. It was a time of incredible growth in the technology sector, and so many investments were being thrown around left and right.
What we didn’t know was that we were on the cusp of the epic dot-com bust. As a lot of companies and entrepreneurs learned during that time, failure is never far away. It’s a constant shadow, one that every entrepreneur will inevitably face. It is as much a part of Silicon Valley as logoed hoodies and headphones, which brings me to the lesson I share with fellow entrepreneurs: You’re going to fail. The key is to recognize the difference between failure and mere adversity. But in those instances when failure is inevitable, you have to fail fast.
As I said, I had originally set out to create a 24-hour news service. That failed. The key to failing fast is to first admit it—the longer you persist or lead a company in the wrong direction, the more irrevocable the damage becomes. I recognized that we needed to quickly pivot, and find a better application of our technology while providing tangible value to our customers. Whenever the economy goes south, entrepreneurs need to be sure they’re providing a service vital to that customer’s bottom line, not one that is on the chopping block.
In 2008, ON24 was exploring options to expand our reach in virtual marketing conferences, which were all the rage among marketers at the time, so we decided to acquire a company to fill the blank spaces in our offerings. But over the course of the year, markets shifted considerably. The acquisition we thought would propel us into the lead of a new, innovative segment didn’t pan out.
Instead of waiting to turn our recently acquired company around, I made the decision to cut our losses. Rather than delaying the inevitable, we acted quickly. In the end, we actually sold the company back to its original founders. We lost money on the deal, of course. Acquiring the company in the first place may not have been a savvy business decision, but it was savvy to admit defeat and move on quickly. We got out of the commitment before more damage was done.
We had failed, but we did so quickly and, perhaps just as importantly, we learned from our shortcoming. It was an important lesson to learn and one that has stuck with me throughout my journey at ON24.
That said, you cannot simply avoid risks in hopes of steering clear of failure. Success in entrepreneurship means taking risks. Taking on far-reaching, complex challenges are what startups do; it’s how they survive and compete in established markets. You must act in opposition to the legacy companies that deal in risk mitigation.
Before an entrepreneur sets out on an endeavor, they must understand that failure will come along at some point—it’s how you deal with it that determines whether you’ll be successful.