Our Failures

(and what we’ve learned from them)

We believe deeply in the work that we do. And we’re proud of what we’ve been able to achieve! However, we’ve experienced a number of failures and false starts over the past few years. To keep us humble, and make sure we’re always striving to learn and improve, we describe some of those lessons here.

What is most precious to us is our values. We use them to hire, fire, evaluate internal performance, select our entrepreneurs and select our mentors. The first days of our long programs are always devoted to sharing our values with our entrepreneurs.

Our biggest failures, from where we stand, come from when we fail to live our values. We have had moments when we were scared to be truthful, when we forgot to celebrate someone on our team, and when we didn’t support each other. We’ve learned that values are about posture, not position. We’ve learned that we will invariably fail to live our values, but that so long as we are willing to learn from those mistakes and endeavor as best we can to improve, we have to forgive ourselves. This is, in our opinion, our greatest challenge.

There’s an old saying that the cobbler’s son has no shoes. While our first value at the Unreasonable Institute is to treat everyone we meet like they are the Messiah in the room, we have often failed to treat our own team with the same intentionality and respect. We love our team and spend our free time hanging out with each other. But in the past, for example, we didn’t make sure that members of our team had health insurance, adequate time-off policies, important benefits when starting families, clear on-boarding, and sometimes even the basic resources they needed to do their jobs well. We’ve been slow to create clear justifications for salaries and raises, and there was a time when promised raises went undelivered due to a turbulent financial situation. We’ve also been less-than-clear about job responsibilities and expectations, leading to confusion amongst members of our team. We’ve fired people in ways that we’re not proud of, we’ve made unilateral decisions when we should have consulted more people, and we’ve made team-wide consensus decisions when we should have given specific people clear authority to make decisions. Basically, we are a work in a progress. But perhaps best of all, our team has always offered honest feedback on what’s working, what’s not working, and what they need to be successful. With such honest communication channels, we can learn quickly and make changes, and today we are far more mature, far more “professional” (whatever that means), and far more conscientious in our leadership and management of our team.
Boy oh boy do we have some stories for you! Next time you’re in town we can sip some whiskey in leather chairs and tell the whole story, but basically over the years we have selected entrepreneurs and scale teams that ended up not being who we thought they were. Selection is THE most important thing we do, and it is also one of the hardest things we do. In selection there is information asymmetry: there is no way for us to know everything we need to know about an entrepreneur or a scale team before we have to select them. We’ve learned a lot about how to optimize the process to get to the information that actually matters when making a selection decision, but selection is more art than science, more investigation than evaluation. And there are people and teams that slipped through the cracks. From extreme un-coachability to intentional dishonesty to woeful under-preparedness, we’ve seen it all, and at times our failures of selection (especially of our scale teams) have embarrassed us in front of funders and key partners.
With so many great mentor minds contributing to how our ventures can improve their business, the feedback can often vary creating a condition that’s been termed “Mentor Whiplash.” Our entrepreneurs have reported struggling with mentor whiplash since year one of the Institute and we’re only just developing frameworks (blog post on the subject) to help them better process this feedback and interpret the right signals.

We recognize that Mentor Whiplash will always exist and that some of it is good for an entrepreneur to be reminded that “there are no maps” (as Unreasonable Mentor Pascal Finette says). But we believe there are a few things that we can do to mitigate its effect.

(1) We have developed a better process for entrepreneurs and mentors to “date” before committing to working together. We work to understand our entrepreneurs’ needs before the Institute and then scan our existing network of mentors for those who might have the expertise our entrepreneurs need. We check in with both the entrepreneur and the mentor to ask if they would be interested in connecting. If they say yes, we connect them so they can have an introductory call. We then follow up with both to get feedback on how it went. If both the entrepreneur and the mentor, enjoyed connecting, we take steps to help them deepen the relationship. By the time entrepreneurs get to the Institute, they have flagged a few mentors who they already have a bit of a relationship with, which they can explore in greater depth. This stretches out the amount of time that entrepreneurs have to get to know mentors, which allows them to “test out” their advice.

(2) We are helping our entrepreneurs build “Mentor Teams.” Getting different mentors together in the same room or on the same phone call to hash out differences of opinion can help a lot with Mentor Whiplash. It also helps mentors to be part of a team – they take the commitment of mentorship more seriously, they can focus on what they are best at (meaning if their expertise is in marketing, they don’t also have to feel pressured to advise the entrepreneur on their financials if there’s another mentor on the team who can do that), and they crave relationships with other Unreasonable Mentors as well. Everybody wins!

(3) We are training our entrepreneurs on how to better engage with Mentors. When we first started the Institute, we assumed that you could just put a Mentor and an entrepreneur together and magic would happen. Not so, we’ve learned. Entrepreneurs need to show up prepared for conversations with mentors, follow up, and keep them engaged. We’ve detailed our approach in this blog post.

(4) We plan to train Mentors on how to better engage with entrepreneurs. Unreasonable Mentor Cheryl Heller wrote this post wondering out loud about the need to better train mentors. We agree this is something we need to do.

In our first five years of operation, our efforts to find a sustainable business model were mostly unsuccessful. We tried many experiments including tuition, philanthropy, and revenue sharing with our entrepreneurs, but it’s only been recently that we have been aggressive about ensuring we have a model that is repeatable by us and all of our teams across the world. Recently, we’ve been more successful with 90% of our 2016 budget coming from earned revenue (not philanthropy). But while we’ve been able to become more financially sustainable than previous years, we have a long way to go. We need to ensure that our business model is repeatable year after year, and we need to ensure that our business model can scale to other Unreasonable Institute programs around the world. Right now, many of our programs in countries around the world still rely primarily on philanthropy.
Of the hundreds of organizations that have come through the Unreasonable Institute so far, close to 20 have failed. The reasons these ventures have failed are varied, but are mostly due to co-founder struggles or failing to find a profitable business model.

While we don’t consider the entrepreneurs who have moved on from their ventures failures by any means at all (in fact, some of them have gone on to greater heights), we want to recognize that some of the ventures that come through the Unreasonable Institute don’t survive. We spend most of our time and most of our marketing talking about all the our active ventures have raised, for example. But at the same time we know that this isn’t everyone’s story. We honor our entrepreneurs who had the courage to move on from their ventures.

In every situation we know of, we stand by them and support their decision, believing they did the right thing. We’ll continue to support them as they move forward into other adventures because we believe in them. We know the work they do will be a manifestation of them and their beliefs.

We also will begin highlighting some of their stories on our Impact page under “Stories of Impact”.

A big part of the Unreasonable Institute is giving our entrepreneurs access to funding. In our first two years, we thought that meant training our entrepreneurs to pitch incredibly well and then putting them in front of a room of investors.

We were wrong. In the first two years of the Unreasonable Institute, we took all of our entrepreneurs to San Francisco, the densest concentration of impact investors in the world, for a pitch day. Some notable funders showed up, but zero dollars were invested in our entrepreneurs as a consequence of these two days.

Why? We’ve learned since that pitching is a very small part of raising capital. The pitch is what you do to get an investor interested to meet with you. But that’s where they really want to get to know you as an entrepreneur and to get to know your business. We spent so much time preparing our entrepreneurs to pitch in our first two years, and very little time helping to build real businesses and to make the most from the one-on-one conversations with investors that might eventually lead to capital. We also didn’t properly “pre-dispose” the investors in the room. In other words, they came in relatively cold without knowing what the entrepreneurs were doing already. They didn’t know which entrepreneurs they should really pay attention to and which ones weren’t as relevant to them. And we didn’t set the investors up for success by giving them the chance to “syndicate” with other investors.

So in 2014, we hired Sara Rodriguez to lead the Venture Funding Department. Sara’s only job is to help our ventures get funding. In the last two years, Sara has helped entrepreneurs to figure out the amount and type of capital they want to raise, put together a list of ideal prospects, get their financials in tip-top shape, assemble term sheets, understand how to build relationships with the right funders, build syndicates of funders, and ultimately secure the capital they need.

At our Investor Days events our entrepreneurs only pitch for 2 minutes each, specifically mentioning the challenges they are facing and what they need help with. Then they host a “breakout session” with investors where everyone can dive deeper and get their hard questions answered.

As a team, we ask investors to parachute into the role of “board members” for the entrepreneurs they are meeting with for the duration of the breakout session. In the sessions the entrepreneur explains the business, fields some questions, and articulates the key challenges they are facing, whether those are related to getting funding (including how to structure term sheets, how to spend the money, etc.) or operations (including how to scale, who to hire, etc.). The openness of the entrepreneurs and the invitation to solve challenges together brings entrepreneurs and investors to the same side of the table as teammates.

And the results were extraordinary. In our first year running this new format of Investor Days (2011) 21 of 22 entrepreneurs left Investor Days with an average of 8 investors following up with them. In the month that followed, 11 ventures already secured firm commitments.

Still, we realize that we need to do even more. While a lot of our ventures have raised funding (see Impact page), most of our ventures continue to seek funding.

So in 2014, we hired a Venture Funding teammate whose only job is to help our ventures get funding. The job of this team is to help entrepreneurs figure out the amount and type of capital they want to raise, put together a list of ideal prospects, get their financials in tip-top shape, assemble term sheets, understand how to build relationships with the right funders, build syndicates of funders, and ultimately secure the capital they need.

From Nigeria to New Zealand, Boston to Brazil, Japan to San Diego, entrepreneurs who attend Unreasonable Institute programs come together and feel like a family by the end of the program. And while the strong relationships that entrepreneurs form with each other, with mentors and funders, and the Unreasonable team, sustain organically through the years, some of our alumni have told us they are disappointed we haven’t done more to support them after leaving Unreasonable Institute or to keep the sense of community as strong as it once was. In truth, in our early years, we had been relatively unintentional about supporting our entrepreneurs into the long-term, even though one of the most frequent questions we get is “What happens after your entrepreneurs leave the Institute?”

We’re in the business of long-term, game-changing support for entrepreneurs, so addressing the ongoing support blind-spot has been a priority for us in the last few years. We’ve made a few big changes: 1) we are taking the accelerator to the entrepreneur (instead of taking the entrepreneur to one Global accelerator) by launching dozens of local accelerators (Labs and Institutes) in dozens of countries. Embedded in the markets where our entrepreneurs operate, these local programs are better positioned to provide day-in-day-out support to entrepreneurs throughout the life-cycle of their venture. And 2) we are breaking up our continuous 5-week Institute into segments spaced out over time to better meet the evolving, long-term needs of our entrepreneurs. Think of it like numerous well-spaced-out, proportional meals instead of just one big massive buffet.

By bringing the accelerator into the entrepreneur’s backyard and by intentionally designing our program to meet long-term needs, we’re getting closer to supporting entrepreneurs for the long-run. But we still have a ways to go. In the future, we are planning to further invest in our global network that will connect all of our programs together and provide support at the local, regional, and global level for every entrepreneur.

We must fail together in order to succeed together.

Join us. Let’s change the world, one mistake at a time.

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