We give abundant advice to founders about how to make startups succeed yet we offer few models about dealing with failure. So here’s mine.

In my experience, living through failure has six stages:

• Stage 1: Shock and Surprise
• Stage 2: Denial
• Stage 3: Anger and Blame
• Stage 4: Depression
• Stage 5: Acceptance
• Stage 6: Insight and Change

While I had been part of a few failed startups, none of them had fallen squarely on my shoulders until Rocket Science Games where my business card said CEO. It was there that I lived through all six stages and came out the other side a changed man.

Failure

Stage 1: Shock and Surprise

We raised $35 million and after 18 months made the cover of Wired magazine.The press called Rocket Science one of the hottest companies in Silicon Valley and predicted that our games would be great because the storyboards and trailers were spectacular. 90 days later, I found out our games are terrible, no one is buying them, our best engineers started leaving. With 120 people and a huge burn rate, we’re running out of money and were about to crash. This can’t be happening to me.

Stage 2: Deny any of it was your fault

In my mind, I had done everything the investors asked me to do. I raised a ton of money and got a ton of press. We hired everyone according to our plan. It was everyone else who screwed up. I did everything right.

Stage 3: Get angry and blame everyone else

This was the fault of my cofounder since he was in charge of game development, it was the engineers who bailed on me, it was the sales and marketing people who didn’t tell me how bad the games were, it was the VC’s who refused to put any more money in the company, it was Sega’s fault for making a bad gaming platform…

State 4: Get depressed

When the inevitability and magnitude of the failure sunk in, I slept in a lot. There were days I’d get up late and go to bed again at 5 pm. I lost interest in anything associated with my past industry. (To this day I still can’t play a video game.)

Redemption

Step 5: Gradually accept your role in the failure

A few weeks after leaving, I began to think about what I should have done, could have done, and pondered why I didn’t do it. (I didn’t listen, I didn’t act, I didn’t own my role as CEO, I wasn’t prepared to do what was right or leave.) This was hard and didn’t happen overnight. My wife was a great partner here. I often reverted to Stages 2 and 3, but over time I took ownership of my primary role in the debacle.

Stage 6: Gain insight and change your behavior

This was the hardest part. While I stopped blaming others, understanding what I could change in my behavior took long months. It would have been much easier to just move on, but I was looking for the lessons that would make my next startup successful. I looked at the patterns of behavior, not just at my last company but also across my entire career. I learned how to dial back the hubris, get other smart people to work with me – rather than just for me, listen better, and act and do what was right – regardless of what others thought I should do.

Epilogue

For my next startup I stopped the behaviors that drove Rocket Science off the cliff. We established a team of founders who worked collaboratively. When my co-founders and I got the company scalable and repeatable, we hired an operating executive as the CEO and returned a billion dollars to each of our two lead investors.

Now when I listen to entrepreneurs who’ve cratered a company, I listen for their stories of failure and redemption.

Lessons Learned

• Six stages of failure and redemption
• Don’t get stuck in Stages 2, 3 or 4  - move forward
• Don’t skip acceptance of your role
• Gain some insight so you can change your behavior—then commit to the challenge of doing it differently the next time

This post initially appeared on Steve Blank’s blog. Blank is a retired serial entrepreneur now teaching entrepreneurship at UC Berkeley, Stanford, and Columbia.

Background: Shutterstock

This post was written by entrepreneur and startup coach Rahul Varshneya.

You know that you want to quit your job and that you want to start a startup. You’ve had this desire for quite sometime now and you really must begin.

But you don’t.

You don’t because you’ve got responsibilities. You don’t because you’ve not got the perfect time. You don’t because you don’t have enough cash. You don’t because you procrastinate.

The bottom line is, you don’t because you’re afraid. The rest are all excuses.

The problem is that there is a gap between knowing it and doing it. This gap is what differentiates the entrepreneurs from the rest, though. You can remain an aspiring entrepreneur forever, or you can take the plunge today.

Sometimes, the gap just remains and you never start. My intention here it to bridge this gap for you by making you dig to the bottom of the gap, identify the issue, and help you nip it. Nip it so that you can take the first step towards a long journey of entrepreneurship.

The only reason why people do not take the plunge into entrepreneurship is fear. That is at the root of all excuses. So how do you overcome fear? Here’s a plan.

#1 – Just Do It

There’s nothing like squashing or overcoming fear by staring straight into its face. Take the plunge for whatever be your reason not to. What’s the worst that will happen to you? You’d fail? But that’s going to happen anyway!

If you’re going to do a startup, you are going to fail. But the best part is that if you embrace failure, you will succeed.

I’ve learnt through my experiences that the best way to do something is to simply get started. Do not worry about the outcome for that is not in your hands. What you control is your karma, the result is something you have no control over, so why worry about something you can’t even control?

#2 – What’s Your Fear?

Identifying what you’re afraid of is a crucial step. You can’t just be afraid of failure; it’s got to be far deeper and intrinsic. Failure is an integral part of life and is deep rooted in everything we do.

The smaller things we don’t notice sometimes. So the task is to identify what is it really deep down that is bothering you from starting up. Write down factual things. Like the fear of not making any money after ‘x’ months/year. Fear of survival for the next ‘x’ months/years. You’ve got to be precise and write these down.

Also pen down what’s the worst that could happen if you come across these situations.

What you’ve just done is remove the clutter and fear from your mind onto real issues that you have down on paper.

#3 – Identify Resources

Once you’ve identified your fears, now begin to identify what you would do in case you come across these problems. Who you would/could go to for help? What resources can you dig into if you face these challenges?

You need to do an exercise in contingency planning, detailing everything that you will do in case you fail or face your worst fears.

Now you have a plan. A well-defined plan on what you will do when you fail. Instead of these issues cluttering your mind, now you’ve got an action plan. But failure can come in many ways and at the most unlikely instances. That is where you need to break your moves into smaller bits.

#4 – Get Started

Now that you’re prepared to get started, there are two things that you need to take care of. Make sure that whatever you’ve chalked out in your contingency plan, you’ve taken care of that. By taken care of I mean that you know you will have access to those resources when you go down that route.

Having laid down your fears at rest, you are now totally prepared to take your first steps. Don’t aim for a record-breaking long jump in the first step that you take. Break down your tasks that are required to get you started into smaller bits; smaller bits of achievable tasks that you can complete in 2-3 days.

If the first step to starting your venture is to put out a website, start identifying vendors. Start speaking to people who can introduce you to them. Most aspiring entrepreneurs don’t even get started with this because of the overriding fear of failure.

You may keep telling yourself all this while that getting website designed and developed is expensive, or how will you ever find the right partner who can understand your perspective and get things done. And then you just don’t get started.

The trick is simple. Just do it. Start finding out vendors. Start speaking to everyone you know about it. You will be surprised with the results. And this will boost your confidence to get on to the next step.

Once you successfully complete the first step, move on to the second. And so on and so forth.

#5 – By All Means, Please Fail

You really must fail. Even superman fails, learns a lesson, and then strikes back. The point I’m trying to make is that no one is immune to failure. And when you take smaller steps and strides, your fall will also be less hurtful.

But fall you must. Fail you must. Because only then will you discover the better path or journey. Only when you tread on the path with thorns will you realize the other better path and understand the value of what it means to be on it.

Failure is great because it teaches you many things. It’s an opportunity because only by failing will you come to understand your true potential. Because if you fail, you will relentlessly pursue till you get it right. Now, it is far easier to relentlessly pursue something when that task is much smaller at hand.

You get the point of breaking them down into smaller bits now?

The bridge between knowing and doing is very very small. All you need is a little bit of focus, a lot of passion, and Nike’s popular slogan imprinted in your head – Just do it. For when you’ve got focus, passion and true love, the universe truly conspires to make it happen for you.

If this article inspired you to get started, please write to me. I’d be happy to hear from you.

Rahul Varshneya has spent his entire career either working for startups or starting businesses. He now spends time between coaching aspiring entrepreneurs in launching their ventures, apps and websites, and building Arkenea Technologies, a service partner for entrepreneurs helping them develop their mobile applications and websites.

This is a guest post by Josh Tolan 

Entrepreneurs have the weirdest problems on their road to startup success. Even the biggest startup blunders, however, can be overcome with a little elbow grease, some ingenuity, and the advice of those who have gone before.

Here are some of the strangest startup blunders I’ve come across, and tips to avoid similar problems in your own company.

What’s in a Name?

For Mason Estep, founder of StandOffer.com, a disloyal collaborator ended up as an important lesson in the power of social media. While working on the early stages of his crowdfunding search engine, Estep meet up with another young entrepreneur who seemed interested in the idea behind his company. But this potential employee never turned in any work, and Estep and his board decided to pass on making him a permanent member of the company.

Instead of moving on this almost-employee formed a rival company. While this could have been bad news for Estep and StandOffer, the simple fact was this competitor never really understood the importance of social media. So Estep and his team jumped on Twitter, scooped up the competitor’s name, and filled the profile with links to his own company.

“Social media is the single most important thing for a startup in 2012 and neglecting its importance is a death wish,” Estep advised. “By thinking outside the box and utilizing innovative strategies, you can flood your target market with helpful information, original content, and most importantly, access to your site.”

The competitor eventually went under, while Estep’s company held onto the name throughout the company’s short life. This shows just how important a tool social media is in today’s modern economy. In fact, 47 percent of customers rate themselves as more likely to patronize businesses and companies they follow on social networks.

So forgetting to secure your brand name on major social channels is a huge mistake you don’t want your startup making. What’s in a name? For your startup, possibly success.

Gotta Get My Benz

For startup companies, cash is not exactly flowing like it does at a Fortune 500. Finding investment is part of the game, as is figuring out how to do more with less. But not always…

A CEO who was scheduled to sign an investment deal with a group of angel investors postponed the meeting by telling the key investor he just “had to go pick up his new Mercedes first.”

“It made the investors question how their funds were being spent,” said Paula Sorrell, Managing Director of Entrepreneurship and Innovation for the Michigan Economic Development Corporation.

With his company in an early pre-revenue stage, this was a bad time to make a big ticket luxury purchase. The angel funds never came in, leaving this CEO in the lurch with a nice car and no funding for his company.  When times are tough and money is tight, make sure you’re allocating your funds in a responsible manner. Or soon you might not have any funds to work with at all.

Watch Your Ws, Ts, and Fs

Startup environments are often less formal than large scale corporations. This can lead some startup founders to throw aside their hard learned lessons in professionalism.“A CEO learned by email that he was not going to receive the funding he hoped from an investor, and — using poor judgment — responded ‘WTF?’,”  said Sorrell. “That CEO went on to another company and presented his new investment opportunity — to the same investor.”

Obviously, this CEO didn’t receive the angel funding his early stage startup needed from this investor already unimpressed by his unprofessional conduct. In his second venture, hopefully this CEO has learned his salty language will only cost the company growth opportunities.

Whether you have five employees or 5,000, it’s important to keep things professional at all times. You never know if the next contact you make will mean the success or failure of your venture.

Hire Employees, Not Friends

When it comes to hiring, finding the right people can be make or break time for a fledging company. Many startups make the mistake of thinking they can find the perfect employees in the family tree. But family and friends often make better companions than workers.

“When starting a business stress levels can be high. Add in pressure to produce income to support your family obligations or kids that need to be driven everywhere and the commitment level becomes lopsided,” said Dwight Zahringer, CEO of Trademark Productions, Inc.

Zahringer points out firing family members or close friends can impact not just your business, but your personal relationships as well. Bumping into a fired family member at the holidays can be awkward, but letting bad employees stay around just because they’re family can be even worse for employee morale. In the interview, whether in person or through online video, look at the candidate’s credentials instead of their last name.

Starting a new company can be a strange, and sometimes even scary, experience. Take these lessons from those who have been there and avoid these blunders in order to make the sailing smoother for your company.

What are some of the strangest startup blunders you’ve seen? What are some blunders your startup has encountered? How did you fix them? Share in the comments!

Josh Tolan is the CEO of Spark Hire, a video powered hiring network that connects job seekers and employers through video resumes and online interviews. Connect with him and Spark Hire on Facebook and Twitter.

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[Update: We fixed some quotes; we regret the errors]. Gina Bianchini, the founder of startups Mighty Bell and Ning, went off script today to talk about failure. At the Failcon conference in San Francisco, she talked about how to learn from your bad breaks.

She has come face to face with failure. Bianchini’s last big startup, Ning, sold for $150 million in 2011 and had more than 100 million registered users. But it was considered a failure because it had once had a $750 million valuation and had raised more than $100 million. And it lost out to Facebook, which became worth billions of dollars.

One lesson is to roll with failure and not become a victim. She learned this in the third grade, when her mother took her to a tournament race (she was a competitive walker) and they arrived too late for her to compete.

“It was totally crushing,” Bianchini said. “I could have been a victim at that moment, feeling sorry for myself. That was not my M.O. My dad was killed when I was 11. Not winning the vice president race in my high school. It’s not about what happens to you. It’s what do you do next. How do you bounce back from failure? Try to stay focused on the things I can control and look at life as a series of small moments that I have some control over.”

You can trace failures back to small moments, she said.

She added later, “What did I learn this week? Did I do everything within my control to drive this? It’s so much more relaxing and so much more fun. It’s not like a big scary world crashing down on me. I feel I am in control of my own destiny, and failure and mistakes and fucking up is part of that process. It is a process. It’s so much more fun to succeed. The joy is in learning every single week.”

Bianchini said she writes down lessons that she learned in a week every Sunday and her goals for the coming week.

“[Carrying] failures on our back as we go into the new week is like climbing Mount Everest not with just your supplies but with 50 pounds of rocks on your back,” she said. “It’s exhausting.”

Asked what she learned at Ning, she said she learned a “ton of lessons.” But it was hard to pinpoint any one singular lesson of “five or six years of my life.”

Another speaker at Failcon, author Scott Berkun, said that one of the fallacies about failing is that there is a single point of failure.

“We believe simple lies over complex truths,” he said.

She did not say that Ning itself raised too much money. But she did say that people consider the ability to raise a lot of money to be like a status symbol in Silicon Valley.

“That was fucked up,” she said.

Raising a lot of money when you have growth is good. But having revenue to go with that growth is important, even though venture capitalists tend to value growth above all else, she said.

She also said she was humbled that many of her own “genius ideas” didn’t work. Sometimes the ideas that worked came accidentally or from someone else. She said it’s hard but you have to embrace those ideas, no matter where they come from.

Bianchini said that working in small groups and having lots of one-on-one conversations is the way she likes to work. In that environment, it’s a lot easier to make products and “be real” with people on your team. That is something within your control.

Bianchini said, “The power of intimate communities to change people’s lives is the most important lesson I’ve learned in the past decade.”

Teams have to be willing to iterate back and forth based on constructive feedback. They don’t do as well if, after they launch a beta version of software or a web site, if they get nothing but congratulatory feedback.

“We live in such an interconnected world, nobody wants to come out and say, ‘I don’t get what you are doing,’” she said. “….You see congratulations threads. Once you get through that cycle, you can understand what was real about what you built and what was not about what you built…. People love what you are doing….It’s crickets when the actual numbers come in.”

If you spend a lot of money on a big bang launch and it fails, then “you look like an asshole,” Bianchini said.

“I look myself in the mirror and ask, ‘Am I prepared to publicly fail? The answer is yes….I don’t believe you can build anything new if you are not willing to look in the mirror and put yourself out there.”

And the haters will come out. Bianchini was a big target in part because she got a cover story in Fast Company magazine — and she was a high-profile, attractive woman.

“I’ve seen people get a lot more shit than I got for that,” she said. “There were like two haters…. Don’t listen to them. The message in Silicon Valley was to keep your head down and keep delivering.”

Renowned author, creator of the term “Stipster,” and seasoned also-ran Adam Fletcher examines why the F-word is so taboo in the startup community…

Have you seen that M. Night Shyamalan film about the people who live in a clearing in the woods? The one where they live like it’s the 1890s? They don’t even have Twitter. It’s all terribly quaint. Anyway, the kicker is that they’re chased by these scary red creatures that come out from the woods. I think. I don’t remember it all that well. Only in the end, [SPOILER ALERT] it turns out there are no monsters, they are just chasing themselves, in red coats. There’s a powerful metaphor in there.

What I found interesting is that they don’t refer to the monsters by name, instead calling them “that which we do not speak of.” The startup world has its own “that which we do not speak of” – failure. This has improved in recent years, particularly in the US, but we humble Europeans still have a great problem in honestly sharing our failures. This is not a good thing.

We tend to live by a simple rule:

Succeed = tell everyone!

Fail = destroy all evidence

Failure – the ultimate buzzkill

But why shouldn’t we talk about failure? Well, it does tend to be quite the buzz-kill. Plus, why would anyone be interested? It didn’t work. Why is it detrimental to society when we don’t share our failures? Why is it wrong to have a media obsessed with reporting and analysing the every brainfart of the “successful”?

The reason is obvious – when we don’t share our mistakes, no-one else can learn from them. As a result, collectively, we waste a huge amount of time, money and our sanity making the same ones again and again. I’ve heard it suggested as low as five per cent of scientific research ever gets published. The successful five per cent. Who wants to publish unsuccessful research? Who would be interested in a failed experiment? Well, people also planning that experiment, you’ve just saved them a lot of time and money.

Nice one, you big loser. Just because it didn’t work for you, as you hoped, doesn’t mean that there isn’t a small piece of that failure directly relevant to someone else, the last piece of a particularly problematic puzzle that they needed, which solves something they’ve been working on, which will make their future research successful. On this note you may have heard of ResearchGate, who have an office in Berlin and are aiming to tackle this very problem, by connecting scientists together into a giant, nerdy, Facebook for atom-splitters. Already 1.9 million scientists have signed up for the service.

Everyone is making money online – not true

The other problem is that we create an information vacuum. In the spaces where our failures should be laid bare, where there should be cautionary tales, we stay silent. In this vacuum rushes the sharks and the shameless. The internets snakeoil salesman, who purport to earn $3000 an hour with some foolproof internet ponzi schemes, in which they are kind of enough to sell us all the secrets of their success from never-ending sale letter pages, for the low, low price of just $24.99. Today only.

So from a distance it seems like everyone is a success. Everyone is making money online. This, in turn, puts more and more pressure on us and only heightens the feelings of inadequacy and shame when we try something and it doesn’t work. Everyone else is successful, why not us?

Plus, I think we’re really bad at understanding success, here are some reasons:

1. Illusory Superiority

93 percent of US car drivers believe they rank in the top 50 percent of drivers. 25 percent of SATs exam-takers estimated themselves in the top 1 percent. This is often referred to as the Illusory Superiority effect – we have a tendency to think very highly of ourselves, higher often than our own meagre talents. This is why, when asked to reflect honestly on our business successes, we might exaggerate the role we played in achieving them in the rush to blow our own tuneful trumpets.

2. Retrospective Simplicity

The world has the regrettable habit of being rather complex. It’s like a giant puzzle with eight million pieces, for which we’ve misplaced the lid and all the corner bits. Humans have the regrettable habit of being, while well-intentioned, rather simple. Collectively, we’re smart enough to put men on the moon, individually, we’re so busy working, eating, sleeping, thinking and losing our socks, that a day in which we don’t forget to shower or lose any of our children in the supermarket is already considered a moderate success.

Because of our short attention spans and busy lives, we’re very bad at dealing with lots of complex data. The media knows this and that is why it’s so good at breaking everything down into binary opposites for us – Tories vs Labour, Democrats vs Republicans, Terrorists vs Freedom, Capitalists vs Communists. When there are just two options, we can handle that just fine. It’s like a football match, even if you don’t know who’s playing you can always just cheer for whoever’s winning.

Retrospective Simplicity works the same way, only it’s related to events of the past. It’s what happens when we look back and try to dissect something as big, complex and as multi-faceted as business success. It’s why we tend to attribute success to specific individuals and are so attracted to the idea of the solo genius. Apple is a runaway success because Steve Jobs was a visionary. That’s true. But it’s not why Apple is a success. It’s just easier than trying to break down and make sense of a massively complex web of interlinking factors and dependencies at play in a multinational company of some 47,000 people, in which Steve Jobs was a highly influential part.

3. Luck

In the same way we oversimplify success as being very personal, a direct result of our herculean efforts and intellects, we treat business failure as equally personal. It failed because of us. Because we didn’t work hard enough, didn’t come up with an idea good enough, just weren’t smart enough to make a success of it.

It didn’t. Once you’ve been around people who’ve started a business or two, you realise that’s all just nonsense. Starting a business is more art than science. More guesswork than knowledge. More optimism than rationalism. There is no blueprint. It’s a lot about hard work. It’s a lot about adaptability. It’s a lot about encouraging serendipity, more commonly known as being in the right place, at the right time. It’s a lot about luck. Luck is to business, what foreplay is to sex – while not strictly mandatory it sure makes the ride smoother.

So get over it. It’s not on you. It just didn’t work out that time. Don’t delete all evidence your project ever existed. Document everything, a leave it online as a digital tombstone. You’ll have learnt a lot, dust yourself down, collect up your bruised pride, take a couple of months off to recharge, go again. There’s nothing quite like the experience.

Help your loser brethren – document your fails

Of course analysing failure suffers some of the same problems as analysing success. You’re still trying to make sense and draw conclusions from complexity. But failure should be sobering. It should remove a lot of the ego from the analysis. We can’t rationally conclude something failed because we’re visionary geniuses. Rationally. And so in our analysis of failure there should be a greater chance we’ll reach meaningful, practical insights and lay out the likely booby traps awaiting the next guy.

Yet no-one has built a service where we can do that. There is no reason why if you’re thinking of starting a new business you cannot go online and read clear, tangible problems that others faced when starting a business in that niche. Not sob stories of co-founders falling out or the world being not being ready for their genius. I’m talking about specific, tangible problems previous businesses in the same area had, which you will need to solve. Something like – Admittingfailure.com but focused on tech and not NGOs.

Put down the self-help book…

Contrary to popular belief, business is not a zero-sum game, for you to win, someone else does not have to lose. Once we accept that, the idea of helping everyone, whether we succeeded or failed, becomes a no-brainer.

The specific cocktail of circumstances that allowed the successful to succeed has gone now. Often for the unsuccessful, the idea was great but other factors, be it societal or technological were not right. Maybe the time has come for someone to execute properly on that idea.

Sergey and Larry, Steve Jobs, Warren Buffett, Marc Zuckerberg, these are unlikely to be relevant business role models to you at this stage. Their secrets may offer solutions, probably not to your current problems. It is very unlikely to be relevant to your life what successful people do the first hour of every day. You’re probably building a small internet business (as I suggest in my last article). Your role models are people who’ve already tried to build a similar small business. The good news is, they’re everywhere.

Put down the self-help books, stop searching for hacks, secrets, blueprints, gurus, experts and guides. Find someone who’s built something similar to what you’re planning, whether it succeeded or failed and go meet them. In real life. Understand what specific problems they had at each stage, then plan for them, or if they’re common, create a service to help solve them. Then share your experiences back to your niche and know that if it doesn’t work out , know you’ve still just as much good advice to give, so give it freely.

For related articles, check out:

• 9 Signs you’ve become a startup hipster
• Don’t drink the startup Kool-Aid – just find a problem and try to solve it

Adam writes for several websites. If you want to know when follow him on Twitter.

This story originally appeared on VentureVillage, one of VentureBeat’s syndication partners.

Top photo credit: Hans Gerwitz/Flickr

In an NPR interview yesterday, Kickstarter co-founder Yancey Strickler seems to suggest that the question of refunds has never been broached, that failed projects which are unable to deliver promised goods are “a bridge that has not yet been crossed.”

That wasn’t a big deal, perhaps when projects were small: some thousands of dollars. But now Kickstarter has raised $289 million for almost 70,000 projects. And some of those projects, like the Ouya gaming console, have raised millions of dollars from tens of thousands of fans.

Unfortunately, not all Kickstarter projects have have been completely above-board.

Tech-Sync Power Systems took $27,000 in pledges before being canceled under odd circumstances. Vere Sandals seemed to be a case where an organization took on backers for one purpose — yes, sandals — and was accused of using the funds for another: starting a retail business. That turned out to be a simple delay. But others, such as the group behind MYTHIC, a nonexistent game from an imaginary team, continue to try to scam the crowdfunding scene.

The good thing?

The internet is very good at detecting and shutting down scams. MYTHIC was canned after raising just under $5,000 of an $80,000 goal. Another scam for a universal video game controller was shut down before getting fully funded. And, since no money is awarded unless a project is fully funded, and the Kickstarter community seems to be pretty good at weeding out bad actors, it’s not clear if a complete scam has ever fully succeeded on the site.

However, that doesn’t mean that all projects always deliver the goods, but most do — even if they’re late.

As Appsblogger’s recent infographic shows, only 25 percent of Kickstarter projects in the Design and Technology categories finish on time. After eight months of delay, at least 75 percent of projects have delivered the goods to their backers. In fact, the more funding they have, the later they deliver.

We’re still working to find out what happens to the remaining 25 percent that haven’t delivered after 8 months or more, but here’s one anecdotal point: Kickstarter told me about one project that delivered two years after completing funding.

So what about that quote? What about the apparent reference to failed projects being an “uncrossed bridge”?

A Kickstarter PR representative told me that “the quote is a mis-hearing.” The “new ground” Strickler is referring to is not failed projects, but whether Kickstarter would get involved in mediating a dispute between a project and its backers.

“Kickstarter would not step in as a mediator,” the Kickstarter representative, who declined to be named, told me. The relationship between a project and its backers is just that: a relationship between those two parties. Kickstarter, he said, simply facilitates the arrangement.

That’s consistent with the Kickstarter terms of service:

All dealings are solely between Users. Kickstarter is under no obligation to become involved in disputes between any Users, or between Users and any third party. This includes, but is not limited to, delivery of goods and services, and any other terms, conditions, warranties, or representations associated with campaigns on the Site. Kickstarter does not oversee the performance or punctuality of projects.

And …

Kickstarter does not offer refunds. A Project Creator is not required to grant a Backer’s request for a refund unless the Project Creator is unable or unwilling to fulfill the reward.

But it does leave a lot of grey area. For example, who would force a “Project Creator” to grant a request for refund, if not Kickstarter?

There’s some room for clarification here, and Kickstarter just published a blog post, attempting to provide it. But, the representative said, the company is still young.

“We’re three years old. In our first year, no one knew about us,” said.

Now that many millions of people have heard about Kickstarter, it will probably have to cross the refund bridge sooner rather than later.

photo credit: ktpupp via photo pin cc

Born in Korea, Huh came to the U.S. in the 1990s and earned a journalism degree at Northwestern University. His first company, focused on the decidedly unfunny vertical of web analytics, failed after 18 months. After working a succession of jobs, in 2007 he started blogging, found I Can Haz Cheezburger, and bought the site.

Source: Cheezburger

One of Memebase’s recent contributions

Today, Cheezburger runs FAIL Blog, Memebase, and The Daily What, in addition to numerous other sites.

I caught up with Huh at GROW conference in Vancouver and got some inside news on Cheezburger network plans and how Cheezburger is designed.

While we were chatting, I also took the time to ask Huh a few more personal questions:

VentureBeat: What was your inspiration for starting Cheezburger?

Ben Huh: I had a job that I hated and I wanted to get out of it … and I wanted to do it in B-to-C.

VentureBeat: You’ve done a lot for cats. What’s your favorite animal today?

Ben Huh: Right now it’s sea otters.

VentureBeat: What’s the reason you took VC money?

Ben Huh: I wanted to hit a grand slam and not hit a double.

VentureBeat: Funniest web meme ever?

Ben Huh: It’s not the funniest, but one of my favorites is a little meme called Brushy-Brushy … it’s actually a picture of a tiny little bat being brushed on the head by a toothbrush.

Source: Cheezburger

For the uninitiated … the original Brushy-Brushy

VentureBeat: Stupidest idea that Cheezburger ever did that worked.

Ben Huh: Start.

VentureBeat: What would you do today if you were just starting out?

Ben Huh: What would I do today if I was starting out? I would think really hard.

VentureBeat: Most surprising thing in your career?

Ben Huh: That people gave me money to run a business!

VentureBeat: Something no one knows about Cheezburger?

Ben Huh: There’s a lot of things that people don’t know about us. But I think this one thing goes against the grain: We’re really, really serious at work.

VentureBeat: Number one reason for your success?

Ben Huh: Our users.

VentureBeat: Favorite accomplishment?

Ben Huh: Not starving to death? No, actually, I think my favorite accomplishment is when I failed in my first company, but I got back up and did another one.

Image credits: Cheezburger Network

In Silicon Valley, people fail. And they fail often. But one of the elements of Silicon Valley that makes it such a petri dish for startups is its tolerance for failure. In Korea, however, failure is still a taboo.

“In Korea failure in startups is a kind of stigma, and I think that will cause a lot of difficulties,” said Hankyung journalist Won Ki Lim at the beLAUNCH conference in Seoul, Korea today. “Most of the ventures will fail, but on the flip side, with that failure… this stigma attached to failure will go away gradually.”

Failure is a key part of learning, according to many in Silicon Valley. A number of entrepreneurs look to their failures as part of the reason they succeeded. Indeed, companies like Instagram, which was recently sold to Facebook for $1 billion, began out of a failed mobile app called Burbn. It seems, however, that Korea still looks cautiously at failure, and many venture capitalists look toward proven successes to award funding — the financial lifeblood Silicon Valley startups depend on.

Indeed, angel investing is on the smaller side with about 30 percent of Korea’s venture capital deals going toward early stage companies. There is an emphasis on proving your company’s worth before money is awarded, which Go Venture Forum’s Youngha Go sees as a block in the growth of the Korean startup community.

“The balance is not made between the angel capitalists and the middle-sized funders,” Go said, referencing the low percentage of seed investing, versus the 70 percent that makes up middle and late stage investments. “It shows we are still lagging behind in angel investment. We need to increase the size of angel investors.”

Go suggested that the Korean government should get involved and award funding to startups, as opposed to awarding welfare to jobless youngsters.

“Given that we have a serious jobless problem among our youth, rather than just giving the welfare to the young generation, supporting startups would be very good for younger generations,” he said. “Startup funds given by the government would make more jobs. The thing is, when the government fails to identify the right startup, the money can be wasted.”

Disclaimer: The beLAUNCH conference covered the costs for my airfare and hotel stay during the event. This does not, however, affect my coverage which remains objective.

It’s conventional wisdom (and true) that an entrepreneur who has failed is often better for the experience. But failing badly can hurt your reputation and, in the worst case, saddle you with personal liabilities. We’ll address two major sources of trouble: Unpaid payroll taxes and fiduciary duties.

Pay the Payroll Taxes!
Fortunately, officers and directors of a failing company usually are not liable for the company’s debts. There are some exceptions, and it is crucial to be aware of them. The major exception is payroll and withholding taxes. The responsible officers of a company are personally liable for these. You must pay the payroll taxes and you must pay any amounts withheld from employees’ wages. The government will pursue this liability aggressively. Another exception is employee claims for wages, severance, sick pay, vacation pay, and holiday pay. In some circumstances, corporate principals can be liable for failure to pay employees. Paying your employees their final paychecks (and paying the government the related taxes) will avoid these liabilities.

Notice Conflicts of Interest and Deal with them
You’ve probably heard of fiduciary duties. Directors and officers of a company owe them to the company and, in certain circumstances, its shareholders or creditors. In a growing company, fiduciary duties are usually (and rightly) far down the list of concerns for the officers and directors. That changes when you’re shutting down or selling at a price that won’t make everyone happy. First, when people are unhappy (and especially when some people are more unhappy than others), they tend to point fingers and find fault. Second, a struggling business often makes desperate deals to keep going. These deals can involve difficult conflicts of interest.

Fiduciary duty is a simple concept: When you agree to act in someone else’s interest rather than your own, you have a duty to do just that. The problems mostly concern conflicts of interest rather than outright dishonesty. The law recognizes that people’s decisions are strongly but unconsciously influenced by self-interest. So if you make a corporate decision in which you have a personal interest, the law usually assumes that you decided in your favor and against the corporation’s interests, even if you don’t think you did. The trick is to notice conflicts and find a way to take yourself out of the decision or get someone disinterested to help with it in advance.

So as you wind down, keep a look out for conflicts: the “circling the drain” convertible debt round from a few principle investors, the sale of the company’s IP to one of the founders who’s willing to put up some cash for it and then have another try at commercialization, the sale of the company that will get some money to the preferred stock but none to the common.

We’ll spare you the hellish legal detail. Get good legal advice if you’re facing a conflicted decision. But two simple rules can save you a lot of legal bills:

Get Consensus
First, try to get consensus, after complete disclosure. If everyone knows what’s happening and agrees, it’s hard for them to complain later. There are two major problems with this approach. First, it’s hard to get consensus. Try. Don’t assume that people want to fight. There’s usually not much at stake, and most of the people involved are repeat players — this isn’t their last rodeo and they care about their reputations. If you can’t get everyone, it can help to get nearly everyone, if you get the most likely troublemakers.

The second problem with getting everybody on board is figuring out who “everybody” is. In a faltering startup, “everyone” usually means all shareholders (preferred and common) and all lenders (e.g. convertible note holders). You might want to reach out to other known creditors, such as landlords. Think expansively. You’re trying to cover yourself. So the old adage that it’s better to ask forgiveness than permission doesn’t apply.
If you’re going for consensus, get a lawyer. The point is to make sure people can’t complain later, so it’s important to get the wording and procedure right.

Stay Independent
The old adage “He who pays the piper calls the tune” doesn’t apply to corporate fiduciaries. Directors and officers talk about answering to the shareholders, but the law is clear: They make their own decisions in the interests of the corporation. Corporate directors don’t take orders from anyone. Corporate officers answer only to the board and superior officers.
In normal times, this point is theoretical. If directors and officers don’t listen to major shareholders, they’re replaced. When the going gets tough and the participants’ interests diverge, however, deciding independently can be crucial. A majority shareholder who wants to buy the corporate assets for nothing may scream at you that you have to do what she says because she controls the corporation. So remember that the very worst that shareholder can do to you is remove you from office. If you think about it, that’s usually a reward, not a punishment, in the context of a failing business. With a good employment contract, you might even snag a payday as you leave. By contrast, giving in could get you sued. It will feel uncomfortable, but stiffen your spine and act the way the law expects: Decide independently.

This gets us to the final question of shutting down a business. How do you wind everything down?

Four Ways Out
There are four ways to close up shop. We’ll give a general idea of how things work, but this is not a safe DIY project. Get a lawyer to help you.

1. Walk Away. One way to deal with a failed company is to walk away. If the company has minimal assets and minimal creditors, this approach can work. But if there are assets or creditors, it can leave the directors with liability (for failing to do their jobs), so it is not desirable.

That brings us to the other three ways:

2. Bankruptcy. Bankruptcy is a court proceeding. In a “chapter 7” bankruptcy, a trustee takes over and liquidates. In a “chapter 11” bankruptcy, management remains in control under court supervision. The benefit of bankruptcy is that it stops all lawsuits and creditor collection. It also allows the company to sell assets free of liens and creditors’ claims, which can increase the sales price. Bankruptcy also allows the company, with court approval, to assign certain contracts without the other contracting party’s consent. Finally, shareholder approval is not required to file bankruptcy or to sell assets in the bankruptcy. The downside of bankruptcy is that it can be a long, expensive, and bureaucratic process.

3. Assignment for the Benefit of Creditors. Assignments for the benefit of creditors (“ABC’s”) are similar to bankruptcy. In California, an ABC is a private proceeding, so no court is involved. In an ABC, the company transfers its assets to a neutral third-party in trust for creditors. The assignee sells the assets and pays the proceeds to creditors. ABC’s offer speed and flexibility. The ABC and the assignee’s asset sale are often simultaneous, avoiding any interruption in an ongoing business and preserving the going concern value. An ABC also usually costs much less than a bankruptcy. Finally, there is much less publicity. On the downside, an ABC requires shareholder approval, which can be cumbersome, and the assignee can’t sell the assets free of claims. So an ABC is best if there’s a buyer willing to proceed without a 363 sale.

ABC’s are often used to sell the company’s assets to insiders. Insider purchases raise red flags because they involve divided loyalties. The officers or directors of the seller have a duty to maximize the sales price. But if the same people are also buying, they have an incentive to underpay.

Accusations of a breach of fiduciary duty are a definite risk. An insider buyer can sometimes inherit some of the failed company’s liabilities as a “successor” to its business, if the buyer is a “mere continuation” (i.e. basically the same people using the same assets to operate the same business), or if the transaction is for the fraudulent purpose of escaping the seller’s debts.

Finally, a buyer of assets from a failed company can be exposed to claims to claw back the assets as a fraudulent conveyance. Under fraudulent conveyance law, the failed company’s creditors or its bankruptcy trustee can claw back assets transferred for less than reasonably equivalent value when it was insolvent or lacked adequate capital. The reach back period is two years under bankruptcy law and can be as much as six years under state law. Value is arguable, so fraudulent conveyance law enables the company’s creditors to surface with claims years later.

An ABC with an independent assignee can help address these concerns because the assignee can independently evaluate the fairness of the insider transaction. The assignee can market the assets to other bidders or get an appraisal to validate the price offered by the insiders. Finally, the ABC insulates the buyer against fraudulent conveyance claw backs. An ABC does not offer as high a degree of protection as a 363 sale in bankruptcy but often will be good enough, especially where the sales price is not high enough to justify the expense of bankruptcy.

4. Dissolution. Dissolution means the corporation distributes its assets and ceases to exist. Dissolution (without a prior bankruptcy or ABC) is best when there are enough assets to address known liabilities. We’ll discuss dissolution under Delaware law (which governs most venture-backed startups), but remember that state laws and company documents vary.

There are two basic ways to dissolve a corporation: The board can dissolve by itself, or it can get court approval. Either way, the goal is to pay all known claims, provide for disputed and uncertain claims, give notice to anyone known to have a potential claim, and wait some time for claimants to appear. You always have to wait at least three years before you’re done, but the actual work is usually quicker.

Most liquidating corporations, especially failing startups, don’t go the court route because it’s expensive and slow. The advantage is that court approval can insulate the directors and shareholders from claims they improperly distributed the corporation’s assets and can force resolution of potential claims. But a contested dissolution can be as slow and expensive as a bankruptcy, and bankruptcy provides better protection.

The Confidence to Move On
No one enjoys failing. But doing it right can avoid future problems and enable you to move on. As you start your next venture, you want the freedom to keep your eyes on the road ahead and the horizon beyond, not the rearview mirror.

Ethan Stone is a transactional lawyer, focused on early-stage entrepreneurial companies. He represents clients in company formation and financing (company and investor-side), mergers and acquisitions, technology transactions, executive employment agreements and other transactions. He writes the Stone Business Law Blog.

Bennett Young is a partner at Jeffer, Mangels, Butler & Mitchell focused on insolvency matters. He represents financially distressed companies, their investors and creditors in workouts, restructurings, bankruptcy and related litigation. He also represents buyers of distressed companies.

[Top image credit: mypokcik/Shutterstock]

Thirty seconds into my pitch for a system that lets users control the ads they see, I can tell that my audience gets it. The problem is clearly understood, the solution is simple, the use cases are well-defined, the market size is compelling. There’s only one hitch: History says this effort won’t succeed.

Over many years, there have been many smart entrepreneurs who have made the same pitch, and all of them have failed. So I must answer the question — the capital-Q Question — “Why will you succeed where the others before you have failed?”

It’s a good question, and it has more wrong answers than right answers. But this question is sometimes the wrong one — especially when it suggests that an idea isn’t worth pursuing just because there’s been a history of failure.

Before you’re ready to address the Question, you have to consider its corollary: “Why do people keep trying this idea?”

Possible answers here involve irredeemable stupidity, unforgivable ignorance, and incurable obstinacy. But assuming that everyone involved in the conversation is rational and well-informed, there’s only one correct answer: the idea is intrinsically compelling and obviously worthwhile. People keep trying because the expected rewards of success overcome the low odds of success.

In fact, it’s possible that the more compelling the idea, the longer the history of failure — because the most compelling ideas have been with us for a long time, regardless of whether or not they are possible to achieve in any given time.

Take for example the idea of human flight.

It’s a truly ancient desire, seriously considered by some of history’s greatest geniuses, but it was always impossible — until the day it wasn’t.

More than a hundred years passed while the idea evolved from a science experiment to a practical project to a massive industry. But the core idea is so elemental that despite those centuries of “failure,” today we can hardly imagine a history where this dream would have failed to become a reality.

This example illustrates the folly of some common wrong answers to the Question. Some people believe they will succeed where others have failed, because of superior intelligence, or harder work, or even better luck.

But the Wright brothers didn’t win because they smarter, more diligent or luckier than Leonardo da Vinci. All of those those factors pale in comparison to the fact that their efforts occurred four centuries later.

The only right answer to the question of why you could succeed where others have failed is:

Timing.

You must believe that times have changed, such that what was once impossible is now achievable.

Of course, mere belief isn’t enough, unless you prefer the path of stupidity, ignorance and obstinacy. The detailed task for anyone pursuing the formerly impossible is to precisely identify what necessary conditions for success currently exist, which did not exist during previous attempts.

Tablet computing failed for years and years, and now Apple, with the iPad, seems to have established a substantial market.

It didn’t happen just because Steve Jobs is a hard-working genius, succeeding where his own company had failed before (mostly without him).

Instead, his genius was in waiting for the required advances in multitouch screens and related user interfaces, low-power processors, and wireless broadband – and then striking as soon as those elements were available at a reasonable cost.

My personal example is less epic than Icarus and less timely than the iPad, but it has all of the elements for asking and answering the Question. My company, Bynamite, is one of a long line of efforts to give consumers control of their online advertising experience — not to block ads, but to see better ads.

Several people have pointed out that this isn’t a new idea. We recognize that we’re no smarter, more diligent, or luckier than anyone else who’s tried to do something in this space before.

But we do know that certain matters have crossed a threshold as compared to, say, three to five years ago:

1. Industry size: online behavioral advertising is now a billion dollar industry. As recently as five years ago, the idea that someone was using your Web history to target ads to you was a largely theoretical concern; it may have been happening, but not often enough that you’d notice it. Now behavioral targeting is a big growth area for the industry, so consumers are seeing the effect more and more, and the media and the government are taking note in a big way.
2. Consumer habits: one of the tough problems in trying to get consumers to participate in the value of their own data is that the data isn’t worth much per consumer. But one of the lessons of the multibillion dollar markets in Facebook games, virtual goods and the gamification of online life is that relatively small amounts of value can drive huge volumes of consumer behavior, if the presentation and packaging of the experience is right.
3. Data markets: In prior times, startups had to both build a consumer experience with data and build a market exchange for that data. The ad data ecosystem is rapidly evolving, and has matured to the point where several different kinds of next-generation data exchanges exist. That cuts the problem in half for any startup attempting to allow consumers to monetize their own data.

Only time will tell if these factors are really necessary or sufficient. But history has already demonstrated that the idea I’m working on has failed over and over again – and contrary to some implications, that is the surest sign that it’s worth trying.

If you are pursuing an idea with a history of failure, take heart!

And then get to work on identifying the precise developments that give you confidence that now is the time for the idea to take flight.

The lifelong “company man” has become a relic of the past. New businesses are being launched in record numbers as the Internet lowers the barriers to entry and levels the playing field.

But most startups fail. In the next 12 months, 600,000 new small businesses will be created in the U.S. alone. By the end of the year, half will have shut their doors forever.

It’s chaos running a startup. And chaos turns entrepreneurial dreams into a nightmare that can bury startup owners who can’t keep up with customers and prospects.

The symptoms of chaos are often little things that are overlooked: Missed little league games and disappointed loved ones. All nighters and cold dinners. Slowly, the business consumes the entrepreneur’s life and too often, destroys everything.

I have spoken to thousands of small business owners over the last decade and they have all experienced chaos at some point. My partners, and I experienced it as well while growing Infusionsoft.

But it doesn’t have to be inevitable. In our new book Conquer the Chaos: How to Grow a Successful Business Without Going Crazy, we detail a six-step process to help entrepreneurs grow their businesses quickly and more effectively. Here’s a quick summary of the method:

Build your emotional capital. Emotional capital is the currency you use to wake up every day and fight the battle. It’s the passion, enthusiasm and positive outlook that propel you through your day, keeping you driven to achieve your goals. It’s the balancing of work, family, and emotional and physical health.

Assert your entrepreneurial independence. You decide the fate of your company. Conviction is essential to making things happen.  As you navigate difficult decisions you will be tempted to question just about everything you do. Self-doubt leads to seeking approval and advice. Entrepreneurial independence requires you to strike the balance between ignorance and arrogance — learning what you need to know and what you need to ignore. By the way, one of the reasons business owners seek additional input is because their objectives are not clear. If you haven’t decided the objectives of your company, figure it out. And figure it out fast.

Practice disciplined optimism. If you are going to survive chaos – and survive it well – you must be prepared to handle all the pain and unpleasantness that comes with running a small business. It starts with an undying belief that your startup will achieve the success you have envisioned, while at the same time confronting and attacking the brutal facts of your current reality

Centralize and organize your stuff. Entrepreneurs face especially complicated situations. Corporations have hundreds, even thousands, of people to do the same job you’re trying to accomplish on your own with a small staff. Unless you’re supernaturally organized, you’ve got information, reports, records and financial statements everywhere. What if you decide to take a vacation or you’re sick? To build a solid business foundation – and get one step further out of the chaos –  you’ve got to centralize your operations no matter what size your startup is. If you don’t get organized, it’s a safe bet you’ll go crazy soon.

Tap into the magical power of follow-up. The moment we realized how important follow-up was to our company, Infusionsoft, we quickly transformed our small business into a multimillion-dollar company. Now, several years later, we’ve seen thousands of businesses grow fast by fixing their follow-up. When you fail to follow up, you’re losing out on incredible opportunities and causing yourself more pain and frustration. You’re stunting your growth and prolonging your partnership with chaos.

Burn the to-do list and move from manual to automated. Automation is the key factor to saving you time, money and manual labor. But automation also tends to be the one principle that is missing from most small businesses. Automation is intentional and purposeful and it will propel the entrepreneur out of chaos into liberation. Big businesses have learned to automate everything possible. But most small businesses are havens for manual, grunt labor that wastes time, costs money and enslaves the business owner to the business.

We’ve found that once these strategies are in place, you can focus on and actually see results in growing the business like never before. Chaos will try to creep in, so it’s up to you to pay extra attention to it and squash it when it appears. The first step is recognizing the symptoms. Once you do that, you can conquer it. And that elusive “freedom” of being your own boss becomes a reality.

http://ecorner.stanford.edu/swf/player-ec.swf