Invention and failure

As part of a recent job interview process I was asked to write a personal essay. The prompt, about invention and failure, forced me to reflect on my failed start-up venture several years after the fact. I had not thought deeply about the start-up in a couple of years, and the exercise was cathartic. I share the post and lessons in hindsight with you here.

In 2018 I tried—and failed—to start my own business. I have deep affinity for the space within which I was hoping to operate and it was difficult, emotionally, not to take the lack of traction personally. Intellectually, however, I was able to recognize that there were flaws in my model and approach.

I have a son with developmental disabilities and as both a mom and a product leader I saw a lot of opportunity for disruption and new solutions in that space. Diagnosis of Autism and similar developmental disorders has increased sharply over the last twenty years. Given the positive outcomes associated with early intervention, a lot of time, energy and funding has been directed into innovative therapies for school-aged students. However, the individuals who benefited greatly from these programs as children are now young adults in their 20s and 30s and are encountering what has come to be called “the disability cliff”. Greatly supported and presented with many options while in school, they face adulthood without similarly compelling prospects for employment or independent living. After evaluating a handful of business ideas to address this problem, I decided to focus on creating community housing. The goal was to leverage an existing co-living platform designed for mainstream Millennials that was gaining traction both with tenants and venture investors, and layer on programming, classes and coaching to fill the hours of the residents’ days.

I was confident that I could build and launch something great. I had led teams at two early-stage businesses. I have always been good at taking complex ideas and chunking them out into tactical parts and delivering to plan. I am by nature efficient; I use my time well. I was confident that I could make the most of the six months I’d set aside to get the business funded and off the ground. I knew the target consumer profile well—I was the consumer! I felt sure that investors, when faced with the problem (the sharp increase in prevalence of diagnosis, the acknowledged inability of state governments to meet the housing needs at scale, the deep need on the part of families to know that their children were housed safely for the long term) would intuitively grasp the potential for upside in the solution that I saw clearly. There was demonstrated consumer need and a complete lack of options in the market.

Which is not to say that I thought it would be easy. The problem I had chosen to address was extremely complicated. Individuals meeting the government definition of developmentally disabled receive subsidies specifically for housing. However, these subsidies do not go far in a city as expensive as New York City. In contrast, families, particularly those with the means to design bespoke purposeful and productive lives for their children, expected a fairly robust, well-appointed, independent and safe community for their young adults, which meant they would have to supplement the subsidies with private pay.?

The co-living model had much to recommend it. It was working well in the mainstream and offered opportunities for rich resident engagement. However, given the complicated history of congregate living in the United States and in particular in New York State (ref: Willowbrook), laws remain in place to limit the numbers of developmentally disabled residents in any one building. Developer tax credits, which could greatly reduce costs passed along to the end resident, are not yet available for housing for this population. Challenging these dense, complicated regulations would require working closely with state government. I recognized it might be difficult for an outsider like me to navigate the sector. These were acknowledged challenges.

?Beyond these complexities, there were several key flaws in my approach:

·? I was working alone. Building and running high performing teams is an area where I have always excelled. But here I was a coxswain without a crew, over-valuing the agility I had with my time and decision-making as a solo founder over the force multiplier gained from being in the boat together with others. I will never again underestimate the power of working together to solve problems.

·? I had spent many hours working to negotiate a partnership with a Millennial co-living platform to get to market quickly but, as my business was unproven, could not get to preferential terms. This meant that the pass-along costs to the resident were high even before I layered on fees to provide community programming, residential oversight and a little bit of a profit margin, both greatly narrowing my addressable market and also resulting in challenging unit economics. I had hoped that my social mission would give me some leverage, but ultimately, I did not have a strong negotiating position.?

·? The families who could afford the product were put off by the pilot residence’s subprime location (in a gentrifying neighborhood where the co-living company had not successfully been able to rent out the building themselves). I had spent months keeping constituent families apprised of my plans and recognized that they highly valued the hyperlocal community networks they had cultivated. I hoped, however, that a viable in-market option would offset concerns about location. I was wrong: when it came time to sign LOIs these same families balked at the unfamiliar pilot residence location and backed out. As a product leader I often coached my teams that what you hear from customers does not always align with their actions and yet I discounted the data inputs here, blinded by my personal conviction in the solution.

·? I had spent my time pitching venture investors, the community I knew, but in fact the business model was much more appealing to PE investors, where there was a precedent for investing in similar managed care or annuity businesses like rehab facilities and senior housing. However, while several PE firms were in fact interested in the business, they were not in the habit of making risky, early-stage bets. This was an intractable problem: I needed to prove the model to attract funding, but I needed funding to prove the model. A lighter weight, lower cost MVP may have led to clarity here sooner, perhaps leaving me time to pivot.

As a product and business leader for many years, I’d learned to recognize the signs of a failed experiment, a hypothesis disproved. Maybe I was ahead of the market. Maybe my offering didn’t address the fundamental needs of the community. Maybe I didn’t have the real estate expertise investors sought. Maybe the bureaucratic complexities were too significant for one individual to challenge. Maybe the terms I was aiming to negotiate for my launch partnership were simply unworkable. Likely, it was some combination of the above. So, though I had invested intense amounts of time and energy in the business and had deep, personal passion for the concept, I made the difficult decision not to call the capital I had managed to secure, to accept the sunk costs and to shelve the idea.

I unwound the venture. But I have not stopped trying to drive change in the space. One silver lining of the experience was that my network greatly expanded to include some brilliant, amazing people. Early-stage investors, committed social workers and innovative services providers, and real estate developers. I now leverage my knowledge and my network to scale my impact. I chair the Disabilities Committee at UJA Federation of New York and sit on the advisory board at the JCC Manhattan’s Center for Special Needs. I remain connected to the Autism startup community, heartened to be advising new businesses springing up to address the many unmet needs of that population. And I am part of a small, cross-functional group (a team!) developing single family homes for developmentally disabled adults in upstate New York where the economics make more sense.

?I have always set a high bar for myself, and it took many months for me to be able to look back at the endeavor in positive terms and not as a failure—a critical outlook for anyone working in the startup space.

I had been fearful of aligning my public self with the disability community but doing so has yielded dividends for my own child and family. Also, my personal and professional selves are in a greater state of flow than when I felt I had to hide my familial difficulties. I now lead my teams with even more authenticity and demonstrate a growth mindset.

Finally, as someone for whom many things in life have come easily, I learned the importance of persevering and pushing forth in the face of setbacks. This new strength enables me to take more risks than I might have otherwise, both as a businessperson and a human. I am a better leader, a better partner and a better parent for it.