Failure is Great for the Entrepreneur's Resume

Last Updated Mar 10, 2011 12:28 PM EST

You failed in your last business start-up. Excellent -- play it up when you go out looking for funding in your next endeavor.

Shikhar Ghosh, an expert on entrepreneurship at Harvard Business School, points out that most new businesses fail--there is nothing unique about it, nothing to be ashamed of. You're in good company, in fact: Steve Jobs screwed up NeXT. Also, say hello to once-fired failures Henry Ford, Walt Disney and Oprah Winfrey.

In fact, it can be an advantage, he tells HBS Working Knowledge. For one thing, running a doomed company provides the entrepreneur who is willing to learn some hard-earned lessons about what it takes to succeed the next time. A failed business also yields networking opportunities with VCs and relationships with other entrepreneurs whose companies are succeeding.

That's why, says Ghosh, boards of successful companies often seek out the founders and CEOs of failed companies because they value experience over a clean slate.

The article also delves deeply into just why companies fail. Sure, underfunding can be a reason. But too much money is also a problem, Ghosh says.

"The predominant cause of big failures versus small failures is too much funding," Ghosh says. "What funding does is cover up all the problems that a company has. It covers up all the mistakes, it enables the company and management to focus on things that aren't important to the company's success and ignore the things that are important. This lets management rationalize away the proverbial problem of the dogs not eating the dog food. When you don't have money you reformulate the dog food so that the dogs will eat it. When you have a lot of money you can afford to argue that the dogs should like the dog food because it is nutritious."

What has failure taught you?

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  • Sean Silverthorne

    Sean Silverthorne is the editor of HBS Working Knowledge, which provides a first look at the research and ideas of Harvard Business School faculty. Working Knowledge, which won a Webby award in 2007, currently records 4 million unique visitors a year. He has been with HBS since 2001.

    Silverthorne has 28 years experience in print and online journalism. Before arriving at HBS, he was a senior editor at CNET and executive editor of ZDNET News. While at At Ziff-Davis, Silverthorne also worked on the daily technology TV show The Site, and was a senior editor at PC Week Inside, which chronicled the business of the technology industry. He has held several reporting and editing roles on a variety of newspapers, and was Investor Business Daily's first journalist based in Silicon Valley.