The Silicon Valley has a history of spectacular failures paving the way for cutting edge innovation; in India the trail is yet to be embarked upon
Last week, I met with someone who had been a part of the core start-up team of Asera,Inc. Asera, if anybody remembers, was identified by Forbes.com as the top Business-to-Business Company in 2001. The company was awarded the distinction of being a key technology enabler alongside Oracle, SAP and IBM. It was among the Top 10 companies to watch for in the same year, as per Network World. Asera was the brainchild of Vinod Khosla who is a highly respected thought leader in the technology space with Sun, Cerent, and Juniper to back his credentials. It raised $175 million and put together a stellar team of who-is-who in the web services/database space to build an e-business operating system. David Murphy who headed the Tivoli business for IBM was brought in as CEO. Virtually no stone was left unturned, as Vinod Khosla attempted to take on the biggies of the enterprise software world and create a new disruptive technology success with Asera.
Five years and millions of dollars later, Asera quietly wound down, selling its assets to SEEC which in turn was acquired by Polaris in 2008. But Asera is neither the only flame out from Silicon Valley nor is it the only big failure from Vinod Khosla’s stable. There was Ethnic Grocer, Centrata, Corio, Dynabook, 3DO, to name just a few; all large bets in different technology spaces backed by serious amount of capital, the very best talent and a great board of advisors. If any of them had succeeded, they would have gone on to upset the status quo in their space, like Juniper did in the networking world for the same Vinod Khosla. To quote Khosla “this ability to fail, this freedom to fail, is what has, in my view, given me the ability to succeed…it's given me the ability to explore ideas”.
Silicon Valley is replete with such spectacular failures in all cutting edge innovation spaces, including those like green energy, biotech, e-commerce, social networking, etc., where we still have miles to go before we get to a maturity point. Today’s wildly successful iPad had a precursor in GO Corp., which built a tablet computer running the Pen OS in 1987. GO Corp eventually folded up in 1994, but it left behind a stellar alumni cast of Bill Campbell, Chairman of Intuit, Omid Kordestani who became VP(Global Business) at Google, and Stratton Sclavos who took Verisign public as its CEO.
Then there was the highly famed chip company Transmeta that introduced the word “stealth” to the start-up world. It was conceived to take on Intel with its low-power, high-performance processor “Crusoe”, but failed to live up to its projections winding down in 2008. Transmeta raised $600M in its quest and had David Ditzel, the CTO of the sparc technology business at Sun, as one of its founders. Again, a huge bet with the best brains and serious capital, where success could have meant taking over the mantle from Intel! No half measures would work! Perhaps that is the reason they chose to fold up rather than continue as an “also ran”. It demonstrates the ability to walk away, to accept failure when it’s clear that the writing is on the wall. Max Levchin, founder of Slide, and ex co-founder of Paypal, puts it beautifully when he says, “Lots of companies that I don’t want to insult are fricking dead. Their user base is fluctuating. The employee base is fluctuating. They have adapted, but they have not gone from walking to flying.” The most successful entrepreneurs also have more failures than the less successful ones, for they know when to “fail”!
What do these failed entrepreneurs and executives do later? Do they wind up and go back to the safety of corporate jobs? Do they become gun shy, and stop taking these large bets? On the contrary, most go on to build successful companies eventually, leveraging their learnings from what did not work in the first instance. Bill Coleman, who founded BEA Systems, was a part of two failures - VisiCorp and Dest Systems - earlier on. He makes a point in one of his interviews that Silicon Valley's secret is "failure, massive amounts of failure". Says Mr. Coleman, "At BEA Systems, when I was putting together my senior staff I wanted people that were in at least one company that had failed. You learn not just about failure and how to make things work, you learn the psychology of failure and how you react to it".
The successful ones, too, are not afraid to take the risky path and perhaps end up in the failed heap. Elon Musk, who co-founded Paypal, is now running Tesla, the world’s first zero emission car manufacturer, and Space X, a space exploration technology company. Far removed from the world of Internet payments, neither of them can remotely be called anything but super high-risk ventures. They are the true moon shots – high risk, high potential reward.
This got me thinking – where are the Webvans, the Aseras, the Cuils, the Pay-by-Touchs, and the GO Corps of India? Where are our Vinod Khoslas and our Elon Musks? I couldn’t come up with any name, and neither could any of my close friends, so I decided to try crowd sourcing. Surely others would know a few? My query, tweeted a week back, got me just a single response — Capt Gopinath of Air Deccan! So I must conclude that our entrepreneurs have not failed big enough to become folklores like the ones in the valley. Why? Are we not taking those big “do-or-die” bets? Are our best people not stepping forward to put their weight behind new ideas that can be category killers? Do we have enough VCs who believe that they can build the next Cisco or Amazon from Bangalore? Are we ready to fail in full public glare and move on because we want to fly, not just walk? So far atleast we see a different pattern in India – A Raman Roy does one successful BPO and then starts yet another; Ashok Soota does Wipro, then MindTree and now Happiest Minds! Our VCs are not helping either. There was a time when most VCs would only fund IT services or BPO companies. Now the flavor is domestic e-commerce, or K-12 education! They want to back "successful" entrepreneurs. And, barring a few, most VCs want to see several million dollars in revenues before they are ready to dip their fingers! Perhaps the focus here is still on execution risks rather than on innovation risks.
The Silicon Valley mantra has been that it takes several moonshots before you can get one to land. The best and the brightest get together as different startups to solve big, challenging, problems. They know, right at the start, that only one will crack it but that it cannot happen without the many others trying different solutions. Google was preceded by Inktomi, Altavista, Overture, Lycos, all great companies in their own right. Each of them tried solving the problem of search, and monetizing it, in their own way. Eventually Google figured the right approach, and soon enough the others folded up, freeing the talent and knowledge that they had amassed to propel Google to bigger heights. The same scenario is unfolding in the social networking space. Facebook was built on the rubbles of MySpace, Friendster, Six Degrees, Hi5 and many more. Facebook’s valuation of $82b+ has happened because of the hundreds of millions of dollars that have been invested and written off in the other companies. Each new disruptive innovation, when it succeeds, invariably leaves behind a trail of spectacular failures. Here in India, we have not even started building this trail, to hope for future successes.
Paul Saffo a celebrated futurologist and Stanford Professor, who has been watching and participating in the Valley for decades now, says: "The absolute secret to Silicon Valley success is failure. This place reinvents itself because we know how to fail in the right way. Silicon Valley was not built on the spires of earlier successes but on the rubble of earlier failures…the companies that grew large and then collapsed in a spectacular way and then a bunch of little start-ups colonised their old offices. You see this again and again and again in the Valley. This place works because we know how to fail."
I rest my case.