Building It Up and Then Knocking It Down

Something about human nature loves promoting something beyond its natural limits and then relishing bringing it down hard. I saw this firsthand in the late 90s Internet bubble. Flatiron Partners and our portfolio were never as good as everyone made us out to be in 1999. And we were never as bad as everyone made us out to be after the bubble burst.

So I have to shake my head at the resurrection of the dead pool, which was made popular last time around by Fucked Company. Do we really need to celebrate when companies fail? It's hard enough for everyone involved to deal with the dashed hopes and dreams of a failed startup. But now we are counting them like notches on a sword handle.

The whole thing, starting with overhyping young companies that are nothing more than a few people working their butts off to make something happen, to throwing them in the "dead pool" when they fail is not healthy. Just ask Britney Spears.

Comments

[AlFromChicago]

Some quotes from Teddy Roosevelt:

"Far better is it to dare mighty things, to win glorius triumphs, even though checkered by failure... than to rank with those poor spirits who neither enjoy nor suffer much, because they live in a gray twilight that knows not victory nor defeat."

and this one:

"It behooves every man to remember that the work of the critic is of altogether secondary importance, and that, in the end, progress is accomplished by the man who does things."

[captain flummox]

I can see how one would take issue with the schadenfreude of it all, but the information itself is not to blame. It's important to know who's sinking, who's swimming, and why.

[eileen]

i never thought of the fc site or the dead pool list as notches on a sword handle, to me they have always been like the ghost of christmas future.

it just serves as a glaring reminder that every entrepreneur walks this tightrope over the abyss. i see stuff like this as a as a kind of signpost saying beware of hubris and analysis-paralysis and anything else that stops you from executing and succeeding.

[mark slater]

I've seen statistics on ratios of company successes to failures (something like 8 out of 10 will fail within the first year). My view point is simple.

I've been through several failures both as an employee and a principal. I am absolutely a better person (professionally) for it.

My long-term success and that which i have accomplished already is and will be defined not by whether i fail (because i will again) but by how i choose to deal with and react to that failure.

The problem comes when segments of our professional world just stop at reporting the failure. Thats just underbelly, gutter stuff.

Are people so insecure that their delusions of grandeur is defined by an 'i told you so' remark at someones failure? let me see how much you made and what you gained by achieving that most lofty of pedestals.

Its easy to tell entrepreneurs who have been through failures - because if they are still around it means they have embraced, and evolved - i'd place a bet on that character attribute before i would the person starting a sentence at a cocktail party with "dude - it was obvious".

[Mark]

I see no problem with deadpools. Fucked Company seemed to glorify this and build a full website around it often mocking the companies as they went down in flames.

Techcrunch's deadpool is merely a chronicle of what's happened in the industry.

[AP]

It's called journalism and if you want it to not be critical in general then perhaps Russia should be where you build companies. Good luck over there.

[Jeff Clavier]

Provided that TechCrunch tries to chronicle the reasons behind these failures - which are part of our day to day in the startup world, I think that this can actually be a valuable resource for other entrepreneurs.
And in this day and age, you can't live in public, and not die in public.

PS: Happy and Healthy New Year :-).

[chipster]

i think deadpools should be required reading for all entrepreneurs and employees who choose to join start-ups - everyone needs to have a healthy dose of the "reality" and not only the glamour of the few poster-kinder that make it big....remember there is alot of "bad management" in start-ups that are "learning" from their mistakes - and there are peoples lives/careers/families at stake...also lets make sure that the really poor management gets tossed in the dead-pool to never manage again...and the VC's that funded them end up there too....

[anon]

Fred, you certainly brag about your great deals (how many times have you mentioned you were an investor in that big home run called de.licio.us)? VC's overinvesting in Web2.0 is news, and what way to chronicle it but by listing shut downs as well? The winners (oops I mean the only two real winners to date, skype and youtube) get plenty of coverage. Reporting on failed deals is fair and balanced.

[Alan Kelley]

Having awareness of which companies fail can help create a more balanced perspective as other entrepreneurs and investors contemplate the future, but having sites that play up the death of companies is unnecessarily destructive to the people who have worked there.

[John]

SOMEONE needs to tell you geniuses that the emperor has no clothes.

[andre taliercio]

people who celebrate the fall of a start up have some resentment: They never dared to become entrepreneur or they are simply jealous because their company never secured VC funding.

[Max Bleyleben]

Aw c'mon Fred... don't you miss Fuckedcompany? VC failures are a critical component of the business, and tracking them is good fun and doesn't affect the outcome. It's also a useful reminder of the success probabilities in the industry, which often feel like they are being forgotten...

[ming666]

wow, this seems to have hit a nerve.
andre - you may be right. some of this is definitely schadenfreude, which is driven by envy and jealousy. that said i think the deadpool, f&*%ed Company, life support, etc. serve a purpose. decisions get made, money gets spent, careers get made or sidetracked. some people on this blog assume that all decisions are made for the right reasons both by the investor and the the entrpreneur. these sites, while snarky, do provide post-mortem information. i am a veteran of web 1.0. i actually raised multiple rounds, did 2 public offerings and actually saw more money than i ever thought i would - i am blessed. but in the downturn i saw an incredible amount of hubris and watched more companies ruined by scared vc(s) then i care to name. i am seeing a buildup of the same arrogance (on both sides) once again. the first indicator of this is the notion of someone putting boundries (beyond abuse and physical threat standards) on a discussion. i often find that when you examine pejorative comments you often link to a nugget of truth. that nugget almost always spurs wisdom. and that is always in short supply.

[Cecilia Pagkalinawan]

Reading the article in the NY Times and clicking through to this thread just gave me a cold chill. I was CEO of BoutiqueY3K which I had to shut down in March 2001`and lay off over 30 employees, including my older brother (who has three kids). I was so burned out that I had to take a year off. Even though I have since moved on to VP and Director level jobs in multi-national firms with mid-six-figure salaries, I still cannot shake that I was or still am a failure. When at age 27, you start a company, become CEO, and become worth $4 million on paper, raise $15 million in investment, have dreams of taking your company public... then crash and burn...it's hard to shake, even 6 years later.

[Squasher98]

As a young entrepreneur I couldn't agree more that deadpools are in poor taste.

What I think would be cool is for someone to create a stock exchange (maybe based on points) allowing people to invest in the 2.0 companies they feel have the best models. It would be cool to see who people hold in their "portfolios" and a good way to expose new companies. You can read my entry at: http://www.leveragingideas.com/?p=156

[Blake P.]

I am not for kicking people when they are down because that is the last thing I want done to me. Coverage is a good idea as long as it is respectful.

[Kid Croesus]

Good subject Fred.

Most of the comments here have hit on the points that immediately came to my mind following your post. I think that there were actually 3 different forces driving FC/deadpools.

1. The first was definitely schadenfreude, taking pleasure in others misfortune
(Note: I can no longer write the word schadenfreude without mentally picturing Martha Stewart: she is literally the Schadenfreude poster girl for me).
Schadenfreude is really just the flip side of envy -- we saw some 25-30 year olds getting rich quickly and seemingly unjustly (say Mark Cuban), so we enjoy it when we see a lot of other 25 year olds crash and burn. I think that was the impulse that started FC, and I guess we can all agree that Envy is bad, (except when it is the engine that drives capitalism.)

2. The second was occasionally empathy, and in many cases anger. What FC seemed to become an outlet for a bunch of employees who had been lied to and mistreated to gripe about their conditions and frequently, to commiserate. Arguably a healthy thing. I was actually surprised that the forum completely disappeared...maybe they would have caught Enron sooner if PUD hadn't locked away most of the interesting posts in order to make some money.

3. Finally, as many point out here in the comments, FC provides a cautionary tale about bubbles and the risks of entrepreneurship. Keeping track of all of the failures keeps everyone honest -- both to the entrepreneurs who try to push junk on the VC's and angels, and VC's and investment banks who try to push junk on the public markets. (theglobe.com).

[Kid Croesus]

One more thought...

I wonder if deadpools will naturally come around every 7 years due to the 5 year VC funding cycle...

1998 (yr 1): Some investments start to pay off.
1999 (yr 2): Really frothy bubble, Make some big money. Raise big fund.
2000 (yr 3) *pop* better sit on fund. DEADPOOL
2001 (yr 4) DEADPOOL (Sit on fund)
2002 (yr 5) DEADPOOL not fun anymore, but sit on fund.
2003 (yr 6) Better start spending that money or give it back.
2004 (yr 7) Spend that money!
2005 (yr 1) Some investments start to pay off.
2006 (yr 2): Really frothy bubble, Make some big money. Raise big fund.
2007 (yr 3) *pop* better sit on fund. DEADPOOL...