Most business start-ups fail. But countless failed entrepreneurs go on to establish further enterprises. In his PhD research, Dr Keith Cotterill, a businessman with more than 25 years of experience, examined attitudes to failure in Cambridge, Munich and Silicon Valley.

My interviews provided a unique opportunity to discuss failed ventures and most interviewees were remarkably candid.

Dr Keith Cotterill

Biographies of Apple co-founder and many-times-over millionaire Steve Jobs are best-sellers. The narrative of his life with its drama of highs and lows, friendships and fallings-out, makes compelling reading for anyone interested in what drives a human being to risk all in pursuing a dream. Stories are how we make sense of what’s happening around us: consider these more modest snapshots of success and failure.

British entrepreneur Henry left academia to set up a venture based on his expertise in the physical sciences. His enterprise failed, as did his second, and he remains bitter about what happened. American Priya also experienced business failures. She travelled around India to give herself thinking time and back in the USA she set up a social network for entrepreneurs. Hans is a German physicist whose venture collapsed when business partners embezzled its funds. With his wife, he purchased the assets of the bankrupt firm and started a ‘phoenix’ company, turning the enterprise around.

Starting a business is risky. It is estimated that between 50 and 90 per cent of the new companies that emerge each year collapse.  Many more fall by the wayside while still at the business planning stage, having failed to attract start-up capital. Others make it much further down the line but never attain viability and become the ‘living dead’. When entrepreneurs fail, the consequences can be drastic, entailing not just crippling financial implications but also loss of self-esteem and, sometimes, traumatic implications for personal life – including alcoholism, depression and family break-up. 

Yet many entrepreneurs who fail go on to start further businesses, only some of which succeed. How do they cope with failure, and what motivates them to pick themselves up and start afresh?  Given that start-up companies are widely regarded as the engine of economic growth, and that each year a small number of new enterprises prove spectacularly successful, these are important questions.

When Dr Keith Cotterill embarked on a study of the attitudes of habitual technology entrepreneurs who had experienced at least one business failure, he opted for an in-depth approach that would add to our knowledge of how people make sense of, and respond to, the roller-coaster narratives of their careers. His research draws on data he obtained from extensive interviews with business people based in three contrasting regions – Silicon Valley in the USA, Munich in Germany, and Cambridge in the UK.

“My own years of experience in technology start-ups – successful and otherwise – made me uncertain about my own attitudes to failure, and having worked in many countries, I was drawn to an international context, comparing how different cultures and regions might impact such attitudes. Silicon Valley appears to enjoy a pioneering but forgiving culture where failure is celebrated as valuable experience. Germany seems the opposite, with strong cultural aversion to risk and personal exposure leading to the fear and stigma of failure. Cambridge, with its high reputation for entrepreneurship in the UK, seemed an obvious third region to explore” said Cotterill.

His first challenge was to find people willing to talk to him in depth about episodes of failure. To build rounded profiles of interviewees, he needed to find individuals open to sharing not just information about their careers but also their personality traits and emotional responses to negative events. 

“Entrepreneurs tend to create stories as part of a survival strategy: they may know funding is running out and customers aren’t signing deals, but they need to remain optimistic and persuasive about a positive outcome, and this often requires maintaining parallel versions of events to balance conflicting demands. Obtaining a dispassionate, truthful account of their experiences can therefore be challenging. However, my interviews provided a unique opportunity to discuss their failed ventures and most interviewees were remarkably candid,” said Cotterill.

By listening to the unfiltered narrative accounts of the entrepreneurs, he was able to gain insights into their experience, and lessons they had learned. “Although entrepreneurs are typically highly skilled at presenting their version of events, the interviewees relaxed sufficiently to share traumatic and difficult aspects of their experience and recounted personal consequences with commendable frankness. Without exception, they appreciated the chance to discuss their failures with a neutral observer, revealing various attitudes including blaming others for their downfall, feeling the practical stigma of being shunned by investors and future employers, while also celebrating their experience by recounting what they had learned and how they had developed as a result.”

The interviewees whom Cotterill recruited ranged in age from mid-40s to mid-50s. Four of the six US interviewees came from minority ethnic backgrounds – a fact that several saw as contributing to a high level of motivation. All but one of the 18 respondents were men, a fact that Cotterill recognises as a potential source of bias, but reflective of start-up demographics in general. 

To capture and tabulate the attitudes of his interviewees, Cotterill used a qualitative psychology technique called Interpretative Phenomenological Analysis (IPA) to gather data, summarise the cases and create a thematic analysis. The themes covered different aspects of business context, language and narrative, environmental factors, personality characteristics and entrepreneurial response.  This approach is particularly appropriate where there is little primary data on such experiences: failed entrepreneurs are hard to find, and not all want to talk about their ventures. Furthermore, many of their stories are traumatic and filled with nuance that is hard to capture through more structured approaches.

Across the individuals studied, there were more similarities than differences – though some of the differences were striking. Most notable were the personality-centred differences between individuals such as self-belief, ability to handle conflict and anger, and relationships with work colleagues and families.  One US interviewee professed to be so furious with an investor that ‘I would not piss on him if his back was on fire’; another said ‘I don’t feel any animosity towards any of my investors, nor do I feel very negative about any of us’. 

What surprised Cotterill most about his analysis of the interviews was how the high degree of self-efficacy of entrepreneurs was evident regardless of the region in which they operated: although German and British entrepreneurs recognised their countries were not the best at coping with failure, they did not did not allow this to deter them. It was as if they were sufficiently confident and capable that ‘rules for others’ did not apply. German interviewees talked about how bad stigma could be but most did not feel directly affected by it; British entrepreneurs discussed how funding was hard to obtain but not for them. Another issue was tenacity: more tenacious entrepreneurs sometimes concealed a difficulty in letting go – when the consequences of failure were so bad, they were more likely to sustain their venture at all costs.

Cotterill’s own background put him in a strong position to tackle some of the trickier issues. A graduate of Oxford University (PPE), he trained in London as a chartered accountant before entering the technology industry. Over the past 25 years, he has created and built multiple software companies, working extensively in the USA and elsewhere. Many of his ventures proved successful – including the IPO of Commerce One, and Webify Solutions which sold to IBM in 2006 – but he has also had first-hand experience of failure when multiple companies did not take off. Some failed for obvious reasons – business timing, lack of funding, lack of customer deals – but sometimes as a result of what he describes as inexplicable bad fortune.

He said: “I became increasingly fascinated by the human factors that cause people to start new ventures when the rate of failure is so high, and applied to Cambridge University to take a PhD allowing me to frame an investigation into entrepreneurial failure. What I learnt helped me understand my own experience and may help me support others through mentoring and coaching. Perhaps failed entrepreneurs would benefit from explicitly evaluating their experience of failure in order to speed their recovery. In my thesis I developed a framework, based on primary research to support a holistic evaluation of a failed venture, enabling an entrepreneur to systematically examine all aspects of the experience before concluding what they might wish to do next.”

Cotterill took his PhD at the Institute for Manufacturing (Department of Engineering) under the supervision of Dr Tim Minshall. He graduates tomorrow (27 April). He is already working in London as CTO for a high-growth start-up in financial technology, while advising multiple new ventures in the UK and California. He is also teaching graduate students in Cambridge and continuing to refine his research in collaboration with the Institute for Manufacturing.

For more information on this story contact Alex Buxton, Communications Office, University of Cambridge, 01223 761673



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