On Tuesday last week, I joined 400 others in the basement of the Hotel Kabuki city for FailCon, the first conference I’ve known to examine past failures to look for secrets to success. While you might think the valley is all about learning from failure, people still struggle to openly celebrate or even discuss failure, presumably at odds with the cultural preference for “winners”.

I’m a big fan of the TED presentations (and would love to go to one of these events), and so I was pleased to be reminded of the TED commandments (pictured right) for talks which include “speak of thy failures as well as thy successes”.   Of course a few speakers couldn’t resist couching success in failure and Dave McClure was quick to shoot down panel members that followed the “my biggest failing is I work too hard” model. In Internet terms if you get more than a million users that’s usually a success story. I imagine Cassie Phillips had to dig a little to find speakers who would be a draw and talk honestly about past errors.

Lynne Johnson of the Advertising Research Foundation kicked things off with some advertising failure examples.  I particularly liked the example of Sir James Dyson of vacuum cleaner fame, most are familiar with the 5000+ prototypes before inventing the dyson vac that doesn’t lose suction as it fills up.  I didn’t know that he was a believer in consciously doing things the wrong way to learn a better way.  Very right brain and anther example of how specialization can trap the mind in familiar ways of thinking.

Seth Sternberg and Sandy Jen, co-founders of Meebo, the popular (42M!) unified instant messaging platform, brought some sage advice on team building.  Seth has learnt not to try and do everything himself and is a strong believer in putting together a team made up of people not like you.  This is an elegant simplification for hiring complementary skills and behavioral characteristics.  It doesn’t address the riddle of how to evaluate their skills (because, by definition, they’ll have skills you aren’t knowledgeable in) and whether the cultural fit will be there (as you’ll naturally be drawn to feel comfortable with people like you and like less those not like you).

I was lucky enough to attend Rotterdam School of Management in 1998.  We had 100 students from 50 countries with no dominant ethnic group as no more than 6 came from any one country.  This drove creativity but also incredible frustration because of varying cultural mores and communication capabilities.  For example, in general, the southern Europeans had a more relaxed perspective on rules and attribution than the Northern Europeans and Americans.   The coping method (and apparent route to greatest output) was typically that only 2-3 in any group of 4-6 would do 90% of the work.  Whether this just indicated that most of us failed as facilitators or moderators, or whether it’s an unreasonable expectation to effectively bridge all team differences on a fast-paced project is still unclear to me.  The answer, as if often the case, is probably in the gray middle, quickly assess the team makeup, recognize the likely team differences and identify any necessary coping mechanisms, start, and then isolate any disruptive influences not easily bridged.

Brandon Schauer, Experience Design Director at Adaptive Path made a beautifully clear and compelling presentation on how to improve use experiences.  I thought Brandon must have been reading Daniel Pink’s A Whole New Mind with all the talk of left brain, right brand and how to get empathy into your business.  There was a rather cool left-brain tool that tried to measure the customer value created by a new design which I’ll have to investigate further.

A fiery panel led by Larry Chiang followed, fuelled mainly by to and from between David Hornik; Partner, August Capital and Adeo Ressi; Founder, TheFunded.com (and previously of F&*ckedCompany.com from the .com days).  Adeo was trying to get David to admit that VC’s have companies in their portfolios that are effectively walking dead that they pay little attention to and have mentally written off.  Having been in two such companies, I had to side with Adeo on this one.  It was nice to hear that even management blunders don’t preclude future funding in new ventures, but major integrity failures probably would.  It wasn’t mentioned but burning bridges also tends to close off options in the VC communtity.

The final session before lunch (fortunately not after lunch) was led by Craig Jacoby,  Partner at Cooley Godward Kronish LLC, one of the best-known law firms for startups in the valley.  Unfortunately many entrepreneurs don’t know the basics when it comes to avoiding major legal SNAFUs.  Craig provided some of the necessary legal downers, such as: don’t create your new business on someone else’s gear (in other words get a personal laptop and phone, and do your side projects on your time, at your place, with your equipment.)  The other one, appropriate for the conflict-averse Bay Area crowd: have the difficult conversation about ownership sooner rather than later, so you don’t have different ideas about exactly how the percentages are defined, determined, and earned.

After lunch in the eerie, haunting and deserted world of Japan Town, Max Ventilla, co-founder of Aardvark suggested that entrepreneurs should actively seek to reduce risk.  Given the inherently risky nature of startups it makes tremendous sense to evaluate risks and develop mitigation strategies, just as one should for any project management. He also stressed the need to hire A-players.  Given all the current press on Ayn Rand driven by two new biographies, I’ve started thinking her philosophy might be the origin of the valley cliché about A’s move you forward, B’s hold you in place and C’s take you backwards.  It’s no doubt delightful to dream of creating a Galtian utopia, or that the valley has somehow created the same, but the harsh reality is most people are by definition B’s, so either you’re not going to have enough employees, or your fooling yourself that you’re surrounded by A’s.  I’m sure the answer is you have to hire the best you can find, but in the heat of the moment, when you’ve evaluated the candidates for an urgent position and none are ideal, does that really mean you should just not hire? Tough call.

Eric Marcoullier, co-founder of MyBlogLog told an authentic heart-wrenching story of realizing his business was wrong and having to fire 7 of 12 engineers.  The quotable quote: “Misery is nature’s way of telling you to do something else”.  You might be able to fool your investors and your colleagues but you can’t fool yourself.  If you keep waking up dreading going to work, you know its time to make a change.

An interview with Max Levchin, founder of PayPal and founder and CEO of Slide, revealed an amusing metric of success: the success of his employees: would the cash they generated by them a house (Google-style), a car, a bike or just lunch?

My personal favorite of the day was an authentic, off-the-cuff presentation by Mark Pincus, CEO of Zynga, a hugely successful social gaming company, full of quotes like “don’t try to build your resume: you screwed that up when you became an entrepreneur, so just go for it”.   An interesting tip from experience was always to negotiate for control, not valuation: he said he’d take 1/2 the valuation for more control. If it’s your ship you want to be able to steer it where you want to go, which may be different to what the investors want.  I saw this with Abilizer, when we were forced into the general portal market by the investors because they believed we should “follow the money”.  If we’d stayed in the less technically attractive HR market which we dominated, we may well have been much more successful than the also-ran we became competing with ~500 other dot coms in the general portal market.

Ali Moiz, of Peanut Labs presented start up screw up lessons including: #3: Funding. Too Frequent, Too Much. Makes you lazy. As I wrote in Year 2: Raise As Little As Possible, this is certainly my experience.

Miracles do happen. The standout stroke-of-luck story was related by Phil Libin, CEO of Evernote, the awesome online unified memory application with over two million users.  Apparently last October, on the eve of shutting down the business due to lack of cash, Phil received an email at 3:23 am from a Swede, who loved the application and wondered if he was still looking for investors.  $500,000 later, Phil’s lesson was never ignore emails from Sweden J  Perhaps what he meant to say was don’t ever give up, you never know where help will come from.

My lesson of Change or Die was oft repeated.  If you’re driving into a brick wall (a changed or non-responsive market) you’ve got to course correct.  Interestingly Scott Rafer, CEO and Co-Founder of The Lookery spoke from the heart about having to shut down his business, and how he would not pivot in the future.  The subtle distinction here is that a pivot is easily accomplished when you’re in the early stages shaping the business, but once you’re up and running and funded, and trying to scale, a pivot is nearly impossible.  I certainly saw this at Abilizer and Edge Dynamics.

The after-party at 111 Minna was well attended.  The San Francisco start up networking crowd always appears so hip compared to their staid colleagues in button-down shirts or polos and khakis on the peninsula.  I can’t quite work out whether its just the effect of the suburbs or the type of events held in each location, as many of these startups are actually based in Palo Alto, Mountain View and other areas of the valley.

In summary, a most enjoyable day with a few extras to add to my 10 Lessons.  As I mentioned in the preface to those lessons, everyone’s experience will vary with every new business, so this is no surprise.  At the very least, great to bond through shared experiences with others inflicted with a passion for startups and entrepreneurship.