Wrong first time around? Failures before success

Before success often comes failure. Christopher Adams asks some well-known entrepreneurs about the time they got things wrong, and what they learned from the experience

Josef Roberts. Photo / Richard Robinson.
Josef Roberts. Photo / Richard Robinson.

Does a company by the name of Traf-o-Data ring any bells?

Probably not.

And you probably wouldn't have heard of Bill Gates, either, if the Microsoft co-founder had let the lack of success of his first start-up - which built a computerised machine for processing traffic data - deter him from moving on to establish what became the world's biggest software company.

Failure. It's a loaded word that no one really wants to be associated with.

But there is a school of thought, particularly in the United States, which believes failure is an important - even crucial - experience in the metamorphosis of the entrepreneur.

John Holt, managing director and co-founder of San Francisco's Kiwi Landing Pad, a base for up-and-coming New Zealand businesses in the city, says Kiwis are generally more afraid of failing in business than their American counterparts.

And he says failure is considered more of a dirty word in this country than in other parts of the world, particularly California's Silicon Valley.

"I think we just tend to be more conservative, even compared with the Aussies, in terms of giving stuff a crack," Holt says.

Some of the world's highest-profile businesspeople have experienced failure.

Donald Trump started an airline that was a flop.

Walt Disney's first animation company collapsed, leaving him so poor he reportedly had to survive on dog food.

Closer to home, many of New Zealand's best-known entrepreneurs have had to cope with failure. Here are some of their stories.

Get your mistakes in while you're young

Josef Roberts
Energy drink pioneer and Burger Fuel chief executive

Josef Roberts may have successfully introduced Red Bull to Australasia and led fast food operator BurgerFuel into profitability and global expansion, but all that came only after he got caught up in a failed New Zealand property venture.

He was 28 and part of a group of investors who borrowed heavily to buy a building.
Then came the 1990 property crash and the banks reined in their lending.

"If you weren't in a position to reduce debt you were basically stuffed," Roberts says.
Worse still, he was a guarantor of the deal. "I was just young and signed a piece of paper I shouldn't have, a guarantee."

But Roberts says he wouldn't have made it to where he is today without learning from that "major mistake" early on.

"My lesson out of all of that was debt - I'm not a fan of debt. Debt's okay if you've got strong cashflow that can't be attacked, but if you're relying on sales in bad times then you can get in trouble. In those days I saw many great companies disappear overnight and they weren't so great, really, when it came down to it because they were highly leveraged."

That attitude towards debt is evident in the company he leads today. BurgerFuel - which is rapidly expanding in the Middle East and reported a 55 per cent lift in profit in its latest full-year result - doesn't carry any debt whatsoever.

Roberts says failure isn't something entrepreneurs should be afraid of.

"It comes with the territory," he says. "If you're going to push the boundaries then you're probably going to have a fall at some stage and my advice is do it early on in life, not late."

Cash shortage, plus no visa was overseas venture's formula for failure

Lance Wiggs
Technology entrepreneur and investor

"Don't start a business in a country where you don't have the right to work."

That's the advice of Lance Wiggs, who found out the hard way why it's never a good idea to establish a business while you're in another country on a tourist visa.

Panic Music, a short-lived Canadian music label, was set up by Wiggs and a business partner in the early 1990s, and its first release was a Christmas CD produced to raise money for the homeless.

It was launched with a 12-hour concert in Montreal. But by the time the label got around to organising the event it didn't have the cash required to promote it properly.

"We didn't manage to sell enough of the CDs - we couldn't do a marketing push," says Wiggs, who has since gone on to greater things, including acting as an adviser to Trade Me founder Sam Morgan during the auction website's sale to Fairfax Media in 2006.

"Don't launch a product without having the money to market or promote it. We did some clever stuff but basically we had no money."

If the label's lack of ready money wasn't bad enough, Canadian immigration was also on his case.

"Doing business in a foreign language is fine, but make sure you've got the right to be in the country," says Wiggs. "I got kicked out of the country and they wouldn't renew my visa."

That was the final nail in Panic Music's coffin.

"It all blew up when I had to leave the country and we didn't shift enough of the CDs in the first place."

He lost around $10,000 to the failed venture.

"It's hard ... it feels very brutal, but all of the players involved were able to move on to other stuff so that was okay."

Today, Wiggs can look back on the saga as a learning experience.

"There's no substitute for just giving it a go, and learning by doing is an incredibly fast way to accumulate knowledge and experience," he says.

"It was kind of like an MBA in a way and I subsequently went off and did an MBA at Yale a couple of years later."

Wiggs is a director of the Punakaiki Fund, which is aiming to raise up to $50 million from the New Zealand public to invest in Kiwi ventures such as internet, technology and design companies which have the potential for rapid growth.

Minority holding, major loss

Sir Peter Maire
Co-Founder, navigation device maker Navman

He may be one of the high priests of New Zealand entrepreneurship, but decades of business experience didn't stop Sir Peter Maire from getting snared in the disastrous ProvencoCadmus affair.

The two Eftpos providers - Provenco and Cadmus - merged in 2008 with the aim of creating "a New Zealand technology company with a global focus".

But the electronic payments company instructed its bank to call in receivers in August 2009 after running out of funds.

Maire was a director of ProvencoCadmus, in which his Tahia Investments vehicle held a 6 per cent stake. Other high-profile businesspeople were also shareholders, including The Warehouse founder Sir Stephen Tindall, the late Allan Hubbard and Wellington's Todd family.

"It was a huge blow for everyone involved," Maire says today. "It was a sharemarket disaster, that thing."

For Maire, the collapse highlighted how frustrating it can be to hold a minority shareholding in a poorly managed, failing business.

"All you can do is suggest and recommend and you're sitting around a board table with half a dozen other directors and everyone's got their own view on how to fix the problem," he says. "The worst experiences I've had are being a minority investor in companies."

While Maire "lost a bundle" through the collapse, he managed to make some good of the situation.

Born out of the ashes of ProvencoCadmus was Maire's Fusion Transactive, which acquired the petroleum assets of the failed company in 2010 and produces technology for petrol stations, controlling everything from payments at the till to the monitoring of fuel stocks.

"[Fusion Transactive] has been hugely successful."

Maire says the company has just won a major tender - worth "many tens of millions" - in Europe to supply outdoor payment terminals to petroleum giant Shell.

Early lesson on the power of cashflow

Shane Bradley
Founder, daily deal website GrabOne and online retail operator Shop HQ

On September 14, 2001, Shane Bradley's first business empire collapsed.

The Rotorua-based aluminium window supplier that he founded in his late teens was finished, in liquidation. The company was a victim, Bradley says today, of bad debts owed by the builders it supplied.

"I had about $700,000 worth of bad debt," he says. "It was horrible and for a long time I didn't like to talk about it."

Telling his 45 staff that they no longer had any jobs was one of the hardest parts of the experience.

"I was obviously bloody nervous when I was driving to work that morning."

But he says the staff accepted the news better than some others, who vilified him for the company's failure.

"You really find out who your friends are," Bradley says. "One day you're a 23-year-old employing a lot of people and the next day you're getting texts saying 'ha ha good job'. It's pretty hard to take."

He says he made a list of the 10 most important things he learned from that unhappy experience, which he had laminated and has kept as a reminder to this day.

One of the biggest lessons was that "cash is king".

"If you ain't got your cashflow sorted you can have the best business in the world, but poor cashflow can pull down the most successful businesses."

Bradley says Kiwis have a difficult relationship with both success and failure.

"I don't like calling it tall poppy syndrome," he says, "but New Zealand certainly does have a little bit of that - people love building you up and as soon as something goes wrong they'll try and tear you down again.

"It's different to the States where they view going broke or having a start-up failure as almost a badge of honour."


Branding boo-boo real 'profit-killer'

Erica Crawford
Co-founder, Kim Crawford Wines

Entrepreneurs are driven by a hefty dose of passion for their products, but Erica Crawford says that enthusiasm can sometimes be a real "profit killer".

She counts the 2006 refresh of the Kim Crawford Wines brand as one of her biggest business stuff-ups.

It happened just after the brand, which she founded with husband Kim in 1996, had been acquired by United States liquor firm Constellation Brands.

"We brand mapped and went through the process with Wasabi [a branding agency] and produced what I thought was a stunning campaign," Crawford says. "We proudly presented the work to Constellation ... and were met by disbelief and dismissal."
The US company had very different ideas about what the brand stood for.

Still, Kim Crawford Wines forged ahead with the market testing.

Crawford says the campaign was well received in New Zealand and Australia, but didn't go down so well with wine enthusiasts in the US, who preferred a more conservative approach to branding.

"And here I was [in the marketing] presenting a cellar worker with red wine splashes all over his white T-shirt, tattoo on arm and no head."

The branding mistake lost a company a "substantial" amount of cash.

"Naturally, I'm now a different, more measured beast when I make brands for that market [the US]," says Crawford.

Erica and Kim Crawford launched a new brand, Loveblock Wines, this year.

- NZ Herald

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