Entrepreneurial risk vs. bad business practices

I had an interesting talk today with someone about this issue of celebrating failure.  I have said in the past, and many others as well, that we need to be a society that encourages entrepreneurial risk – particularly in the technology-based fields.  The old adage “nothing ventured, nothing gained” comes to mind.  However, there is a huge difference between celebrating entrepreneurial risk taking and celebrating bad business practices.  

I am a self-professed fan of entrepreneurship and I promote on this blog business success and the incredible importance of that to the province’s economic development but that doesn’t mean that there are not ‘bad’ businesses or companies that have bad business models or bad management practices.

When a business goes bad, technology-based or IT business as well, we shouldn’t automatically celebrate – particularly if there was taxpayer money involved.

Entrepreneurial risk is about finding a new way to do something or to exploit some interesting market niche in a new and innovative way.   If the business fails because of lack of market acceptance or some other reason related to normal business risk – fine.   I think we need to see more of that and we need to have access to more of that risk capital here. 

But if the business fails because the entrepreneur didn’t understand how to manage cash flow or blew through the angel financing without alignment to revenue potential or was an outright bad boss and couldn’t rally the troops, we shouldn’t celebrate.

In fact, we need to be more deliberate with young entrepreneurs that success is more than having ideas and more than having ideas and being able to convince VCs or angels or governments to invest in you.    That’s when the real work begins.  At that point it’s about good business practices.

That should be the role of incubators, mentors, etc.  I think that these small technology startups should have a small, active advisory board of folks from the same and other industries that can help the entrepreneur through the grit of running a business (as opposed to visioncasting). 

But let’s not automatically applaud business failure – that’s not the point.

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2 Responses to Entrepreneurial risk vs. bad business practices

  1. Anonymous says:

    Thank you for this post. The concept of celebrating failure could only be promoted by someone who has failed.

    Perhaps it is appropriate to celebrate risk taking but even that needs qualification. In days of old, risk takers borrowed from friends, mortgaged their house and basically put all they had on the line because they were absolutely committed to their idea. These days, such risk taking is rare; the majority of the risk is the burden of ACOA, BNB, suppliers and employees. In fact, a lot of weak business ideas have a prolonged life because of the funding and support focused on new business development.

    We do need to encourage risk taking and entrepreneurship, however, celebrating entrepreneurial failure is attempting to glorify a situation that normally causes a lot of pain to others.

  2. Anonymous says:

    Whatever! Still not a week passes that I don’t swear to never buy in NB again. A marketing joke. Now that I have signed up to my American ship to location.

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