Close encounters with friends' startup failures teaches ...

Updated: Jun 30

I have known quite a number of people whose startup companies failed. Let me state first that I was a professor of engineering at University of Illinois and then Northwestern University and knew a large number of high caliber smart individuals. Let me recount some of the failures and success stories.

A friend of mine, Prof. CM, was a great scientist and a member of the national academy of engineering. He was a pioneer in nanotechnology. He turned his research work (bionano cancer marker detection) into a Chicago startup company, Nanosphere. Nanosphere promises to detect cancer antibodies in blood and provide advanced learning of cancer occurrence in man.

The company was able to go public on Nasdaq. However, for over 10 years the company was losing money and never can turn positive cash flow. It was delisted from the stock market.

Failures happen to everyone. Especially the cleverest.

A graduate school friend of mine, RM, discovered a new device to detect bioagents. He was able to make a on-chip biodetection system for portable bio analysis. The system provide high sensitivity and can be done with low cost. RM quit his job to pursue the company. After the device was made, he found that he had two competitions. One provide really high sensitivity instrument that is more sensitive than his. The other one has low sensitivity, but is really cheap and can be used for a particular industrial application. RM's device can not penetrate both the high end and the low end market, even if his device looks better on paper. Eventually, the company failed and RM is jobless.

Two Stanford professor friends of mine, RH and TK, both are very promising scientists. Being near Stanford, they got a really good chance to startup companies with venture money. One developed a silicon clock, and another a chip cooling device (Coolidge). However, both companies failed, and were eventually sold at a loss.

Only failure is the true mother of success. - Chinese Proverb.

A professor friend of mine pioneered the concept of smart dust. His name is KP and a professor at Berkeley. He started a company called Dust Networks to make wireless sensor networks and interconnected IoT devices, in 2005! One can argue that he is a really early pioneer. However, the company was not able to make any positive profit and had to be sold at a loss after operating for 5 years.

Once in a while, there are stories with happy endings. A professor friend of mine, MW, was able to commercialize his micro optics work to make a cell manipulation tool for pharmaceutical companies doing drug-discovery cell sorting work. The company did reasonably well and is one of the exceptions of professor operated companies. But again, this is Ming Wu's third start up - in the first two he burned all the investor's money.

On the other hand...

I have also been associated with several full time entrepreneurs who are not academic people. Let me give a few examples.

A friend of mine quit a high profile national laboratory's job to pursue a company full time. His company develops networked sensor devices that monitors temperature and vibration of machinery and relay the information over wifi or cellphone signals for remote access and monitoring. It is a very promising device with potentials to enhance factory safety and reduce energy cost. However, he was never able to make a sale of the device to any factories after 15 years.

He went to Indiana steel factory owners and said, look, my device is helping you save half a million dollars of money. Pay me and I will install it. The owner does not care.

Eventually he developed a sensor for monitoring temperature and humidity and used it monitor the inside condition of a water tower during internal paint job. Water towers need to be protected from rust - it is vital to keep the internal pressure of a water tower high to make it dry during the once-every-two-years paint change. This is the livelihood for his small startup, and he is lucky and tenacious to have found that.

If you are highly educated, and you believe that "you can think of something and then convince someone to accept it", it is a very very long shot.

You need to develop a quality offering, have pricing position, have value to justify profitable pricing, wait for long enough for your products to be adapted,and prevent competitors from entering your turf.

Your idea needs ROOM TO GROW. Technological readiness, business room to grow, pricing room, etc etc. If you just want to do good things, startup is THE BUSINESS OF DOING GOOD THINGS.

A friend of mine makes VR equipment in China. His company develops virtual reality gear and audio-video equipment. One time he was about to get an order from an insurance company for ordering a photo-taking device for frontline receptionists. However, the ordering process was very long. The company representative in charge of the order asked for many extra benefits for himself (i.e., bribing), and eventually give the order to another company with closer ties to him. My friend's company hire the best programmers and VR engineers in southern China - they can make anything, they just cann't sell any.

If you don't even fail, how do you know you are trying hard enough?

The company has to maintain staff, office rental and pay employee benefits over the entire time the contracts were negotiated - which took 1.5 years to eventually fail.

When you startup, you fail everyday. This is what is called "daily learning" and maturing.

Even after you SUCCEED, people startup to fail at their companies. One friend of mine worked with his partner for ten years on a LED light bulb company in Guangdong, China. The company "succeed" rather quickly and start to have large revenue with export sales. After ten years, the company was trying to get a bank loan to survive the lean times. But the bank loan did not come on time for the company to file for bankruptcy - then a mystery buyer showed it, it was the bank manager's relative.

A friend of mine started a book store / coffee shop business and quickly grow. However, he was always interested in "growing" it. So he invested all the money he made into an electric motor company. And he lost everything and drives taxi today.

These are all real stories. I can never make up something so crazy.

I also have a list of patent precautions.

The following is a case where a revolutionary concept can not be commercialized.

The following is another example that a solution for a problem eventually lost out to another solution.

Other links to articles about startup failures and how to "embrace" them.

Real cases of startup failures

Top reasons beginners fail

For startup, the first failure is mandatory and it is the success!

Why companies start for 3-4 years before they fail?

Top 10 Indian startups that closed in 2019


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