When startups stumble: Failing is part of it

Start up, fail, start up again: In the world of startups, failures are often not the end of a success story, but its beginning. In this sector, a flop is no longer stigmatized, if you learn from it. The IAA MOBILITY Visionary Club, on the art of failure – and the long road to success.

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It is considered one of the mantras of the startup world: Fail hard, fail fast, fail early. And it’s a fact that the sector is dynamic, and that startups tend to be founded rapidly and wound down just as speedily. Some estimates even suggest that nine in ten startups are not able to make it through[1], while in Germany it is reportedly around 75 percent that fail[2] to establish successfully. Even if the precise figures vary from study to study, a trend is clearly identifiable.

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Mistakes as a source of learning

Failure is part of the world of startups – as Matthias Schanze also confirms, in the IAA MOBILITY Visionary Club at the VDA Future Tech Day. As a founding partner of Rethink Mobility Venture Capital, Schanze invests in mobility startups, and ideally when they are just starting out. He knows startups are all about trying out something new, and that also includes the risk that an idea doesn’t work. So the rule here is: “Failure is the source of learning.” Tripping up, getting back up again, learning, doing better – that’s how success comes about.?

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Trial and error instead of a linear path through life

Even in Germany, the ‘culture of failure’ has now arrived. Unlike the USA, for a long time entrepreneurial failure was regarded here as a stigma. “That has gotten better,” says Schanze. And there are clear signs of that, he says. For instance, German startups are more prepared today to expose their technologies to initial customer tests earlier, and hence at a less mature stage – moving away from perfection and towards a more agile approach that allows for openly handling mistakes. Even unsuccessful company startups can now be mentioned in a resumé. Something that was still unthinkable for many people a few years ago is now a sign of an entrepreneurial spirit and experience. That said, a study conducted in 2015 already revealed that one-third of German company founders had closed down a startup they had previously established.[3]

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Ten years to success

So what do startups stumble over? “The reasons often lie in the team”, says Schanze. If the team isn’t working and there are weaknesses in culture and line-up and no common vision, it’s tough. Finance, too, is a sensitive issue. It needs to be clarified early on, and not at the point where money is urgently needed. “Startups need to know what they truly need and expect from a partner at the respective point in their corporate development, including in areas beyond the money.” For established companies looking to cooperate with a startup, conversely, having a clear objective is vital. “Often, companies invest because everyone is doing it.?But the question needs to be what you are looking to get out of it.” In addition, the willingness to enter into a long-term commitment is required. “It takes time – roughly ten years – before you can see success.” You need to be aware of that fact. And the best advice for successful failure, says Schanze: “Don’t repeat the same mistakes as everyone else, but learn from them.”

[1] https://www.failory.com/blog/startup-failure-rate

[2] https://www.demandsage.com/startup-statistics/

[3] https://deutscherstartupmonitor.de/wp-content/uploads/2020/09/dsm_2015.pdf