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Startup Story: My Failure Was the Path to Success

By Matthew Goldman — September 29, 2015
You hear it often that to succeed at startups you should fail fast, fail early, and fail often. There is no doubt that failure is a part of startups, but it’s still hard and still something we all want to avoid. Startups are what I do, with a few brief exceptions. I started my first business as a freshman in high school, building websites, managing office networks, and building and administering servers. Many of my clients were startups themselves. Sometimes I’d land a client and they’d be out of business or sold to another company before I could get any work started. My best failure was in college, when two friends and I started a website for nightlife in Los Angeles (with global expansion plans, of course). LAClubbin.com hosted a Citysearch-style directory of nightclubs in Los Angeles and had a companion membership card for sale. This card garnered discounts and benefits at 10-15 of the top destinations in Hollywood and around the city. We thought we were on to something: traffic was growing steadily through the beginning months. We survived a complete rewrite of the site, for which I was responsible (although, for some reason, I could never make pagination work). We even had a business model! We won the Henry Kravis Business Plan competition, earning us $3,000 to pursue our dreams. But, that was the end of the good news. Our business model around the card just didn’t work. Our rock-solid contracts with club owners and marketing managers didn’t mean anything to a bartender or bouncer at 11pm on a Saturday night. Our customer service line (a cell phone shared amongst the three of us) rang from our few customers, who were pretty disgruntled by the lack of effective discounts. Worst of all, every time we sold a card we lost money. The cards were beautiful plastic cards, like credit cards, but we had to get one embossed for each new user. Embossing at scale would not have been an issue. If we ordered even 100 cards at a time, we would pay just a dollar or two. However, when we ordered one embossing at a time, it cost us $50, as a minimum. This wasn’t so good when the card was being sold for an average of $50 each. Pricing the card higher had failed and we were losing what little capital we had with each sale. With summer jobs coming up and the site appearing to be a money pit, we decided to throw in the towel. We didn’t pivot. We didn’t come back from the dead. We just killed it. It was a good thing. In the end, we learned a lot. We didn’t know much about startups back then and information on the venture capital world and its inner workings were much harder to come by in Southern California around 2002. So we took the lessons and went on our way. Over the years, my former business partners and I took our lessons, our experience and the knowledge that we could, in fact, start and build something, to lead us to better things. After a couple of years of strategy consulting, I moved back into technology startups and high-growth companies, which led me to found Wallaby. We raised money from top-flight venture capital firms and sold the firm for a great profit last year. One of my other partners worked on Wall Street for a time, started a mobile software company and sold it to IAC last year for a nice sum. The third partner worked in venture capital, ran a startup and moved on to Google and is now in a senior position at LinkedIn. LAClubbin.com was an epic failure in our minds. We went from a wonderful, award-winning idea, to losing all of our money (and probably some points on our GPA from the distraction). We pivoted and persisted. Now we’re all successful technology executives.
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