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5.11.21   4:06 PM

Unicorns dominate news about startups. But for every new venture that soars above a billion-dollar valuation and becomes a household name, countless others collapse, liquidate or otherwise pull the plug after just a few years in existence.

To the extent those stories are discussed at all, it is usually in a tone of regret, shame or scorn. The stigma associated with failure is too much for many founders to face, even though that is the outcome for roughly 90 percent of new businesses. Some aspiring entrepreneurs never get over their first “L,” and abandon the startup path for less risky career options.

But that wasn’t the case for Rachel Greenberg. The former investment banker-turned-founder of an interactive sweepstakes platform published an essay in January on Medium exposing all the gory details of what went wrong. The title, “My Startup Failed and It’s All My Fault,” pulled no punches, delving into her struggles with trying to muscle a success through bootstrapping. Declining to fundraise a typical multi-million-dollar round for the venture, she carried most of the financial risk herself, and she grappled with those decisions in her piece.

Mindful of a potential negative reaction, she decided to be open about her mistakes anyway because “the potential outcome of sharing will do more good than bad.” She hoped it would spark more honest conversations among entrepreneurs.

“What’s the worst that can happen,” she wrote. “A more successful peer of mine may read it, laugh behind my back, and possibly share it with their friends?”

On the off-chance that they did, “then great,” she continued. “Maybe one of the people they share it with will be an aspiring founder themself, maybe one who’s even too scared to admit to their more successful peer how their startup journey is really going.”

She also found the process of writing about her experience “therapeutic,” and indeed it seems to have done the trick. Greenberg is working on building a new company, and is every bit as enthusiastic about the process as when she began her first startup journey. She has bounced back. 

This interview has been edited for length and clarity.

  • How you know when it's the right time to give up


    Business of Business: I’m here talking to Rachel Greenberg, a startup founder who is doing something a little unusual in that she is discussing experience of a startup that failed. I am grateful to have a chance to get to talk to her a little bit about it. Um, Rachel, um, you talked a lot in the piece about why you opened up about this. But I'm, I'm curious, what kind of response Did you get to it? And did anyone ever caution you against doing this?

    Rachel Greenberg: I think it's always hard in the startup journey [to know] when to call yourself a success. Like, is profit successful?  Is a certain number successful in terms of users or customers, or, you know, revenue or profit? What is that? And I have had multiple businesses since then that, you know, financially have done well, and one in particular exceptionally well. But it's never really a right answer. Do you talk about the one that didn't do well?

    And in my case, I wasn't the only person involved, though I was the majority shareholder, for sure. And I was carrying the brunt of, you know, not just the work, but the burden of if it goes wrong, I had the most to lose, because, you know, I quit a six figure job to go do this. No one else was full time like that on the team. But I was thinking about protecting [a] silent partner, who was a minority equity holder. And I was also thinking of protecting the technical team and the people who were a part of the “not success.”

    But at the same time, I thought there was a way to write the piece, without outing anyone, because everyone who had a hand in that business, in terms of at least the technical partners that we had, they were a startup, too. And they've grown and they've improved, and I would hire them back. I have hired them back for other things. And I would recommend them for certain things. It's just when you are new and a startup, and then you partner with other, you know, eager business-to-business startups, it doesn't always work out so well.

    So I was, you know, not sure. But the reception was really, really positive. And it got a lot of engagement, a lot of comments. It was interesting to see the people who acknowledged it, and I think they're people who have worked in startups and have their own failures. Some are just thinking about it and are like, “it's nice to see a failure story.” And I agree with that. I think when all you see are, you know, nine figure venture capital raises or billion dollar IPOs. From these non-profitable unicorns, it's a little bit perplexing. I think it's aspirational, and inspirational. But it can also be a little bit dangerous for startup founders to think that's just what happens, right? You start a company, and then at some point, you hit that tipping point, break even, and then you know, you're worth a billion dollars. And that's not really how it works for most companies.

    That makes sense. You said in the piece that you were relieved when you finally pulled the plug, and that kind of confirmed your suspicions that that was the right decision. But you also talked about how this is such a cool idea. And it does genuinely sound like a very cool idea very, like on trend, and everything. Do you ever get some regrets? What do you do when these regrets come up?

    So I have absolutely zero regrets about pulling the plug, when I did. That said, maybe I could have pulled it sooner. But that experience actually led me into some of my subsequent companies, which did make money or were profitable, or did really well, and then led me into other things that did, you know, much, much better.

    "I probably wouldn't have landed on my feet with a profitable company without a failure under my belt."

    And so I without that experience, I could never have gone from investment banking to just I mean, for me, I probably wouldn't have landed on my feet with a profitable company without a failure under my belt. And that's the case for a lot of people. And I don't regret anything about stopping.

    But the idea that you're saying, you know, it was a good one. We sat somewhere in between social networking and sweepstakes with monetization for content creators and also monetization in a way for the audience. Fans and in a way people betting on their favorite creator without giving away too much because there's still some IP that the current owner would like to keep under wraps. I was able to at the end package it up and resell to a private operator investor. So it wasn't, you know, all for not.

    But even when I did that years later, I felt guilty. And I tried to talk a person out of buying it, but you don't usually talk someone out of buying your company. But I told them all of the challenges. They wanted me to stay on for a bit afterwards to help them work through these horrible technical issues that I told them it was going to be mired in. And even they realize, like, “Oh, this is a big, big uphill battle.”

    Now, it's an uphill battle that I think can be accomplished. But this one had a lot of legal problems, because it's that's so close to the sweepstakes, which raises the question of is this legal? Is it an illegal lottery? Is this gambling, and then it's different in different states? So we had, you know, $10,000 retainer on our defensive lawyer. Yeah. So for that reason, it's doable. I think you need a good tech team. In house, preferably, I think you need someone with an understanding of the legal aspect of it. And that doesn't have to be someone in house, but it shouldn't be someone who just quits a six figure job and thinks, “Oh, if I pay this guy, cuz I've got, you know, six figures of savings in the bank, I'll be able to figure it out.”

    Because you might, but this to me required much deeper pockets. Even if I got together with, you know, friends and family investors, I don't think a million dollars would have solved the problem. And especially knowing what I now know now about influencers and the creator economy and also influencer marketing, because that ended up kind of leading me in that direction, where I had both failures and successes as well, later on, I realized what's a bubble and what's overpriced, and there's just no way we were going to get out without spending, at least, you know, $10 million to gain traction, and  deal with all the technical and legal issues.

  • Looking at failure as an “experiential MBA”


    Right, okay. Do you care to share an idea of how much money you lost on this? And yeah, how do you feel about that? Like, do you feel like you should have also risked the silent partner’s money the same way you risked yours?

    That's a really good question. Um, there's actually a specific reason why that silent partner didn’t put in more money. And I'm actually midway through a book writing about this. So in the book, it will kind of talk about that, and why that silent partner, why would I possibly allow someone to be a silent partner and have equity and have this say, with no financial incentive. There was a reason. I'm an unusual situation.

    But I guess, I can't say for sure that I regret spending as much as I did on it. And it wouldn't have gotten done without that. And I think at the time, it was probably a fair price for what I got from like a legal aspect, tactical, I mean, I could have hired a cheaper lawyer. But other than that, we probably spent like $70,000, on just technical stuff, which would probably get another $10,000, $15,000, $20,000 at the end when we added some extra features. And in total, it was over six figures that I spent and lost.

    But I had been saving for years knowing when I went into Wall Street, I was probably different from everyone or most people who went in, because I knew I'm doing this, I had a professor of venture capital professor in my business school tell me, “you can either go get an MBA after this. Or you can tell your friends and family like, ‘Hey, guys, this is my experiential MBA, I'm going to put my money into building a startup.’ And you're going to learn a lot more.”

    So actually looked at it more that way. And that's why I went into Wall Street thinking I'm going to save up this money so I can do that. So yeah, I mean, it sucks to lose money. I think most people would agree with that. It sucks more when it's, you know, six figures? And that's most of what you have, if not all.

    But yeah, I think it was a lesson learned the hard way. And it could have been learned what much worse, right? If I raised, in my opinion, it's worse, to raise money, and then fail much more publicly, when the failure is your fault. Sometimes, you know, there are market failures and issues out of your control. But in this case, no…we didn't have the right people on the team. We didn't acknowledge, you know, we don't have the money for this type of technology for this type of marketing we need. And it was something where either you try to raise capital, or, you know, you have a plan to monetize sooner, we didn't have either of those things. So it would have sucked more in my opinion, if we, you know, failed after raising, you know, a million or $2 million $10 million, even that wouldn't have been great.

    It must have been difficult to go through all this. We don't talk enough about mental health in our society. What you went through, how did you recover from it?

    When I left Wall Street, I had my then-boyfriend, now fiance. We knew we were going to relocate to California, for a lot of reasons we wanted to. And so I flew to our new apartment in Los Angeles. And when I started this, and I didn't realize, I think, from Day One that I was probably depressed, because I was scared. And it's always scary. That's probably normal, when you had this job, very lucrative, very prestigious, looks great on a resume, great exit opportunities, and you give it all up to do something, and you don't really tell anyone, because I was pretty secretive about it. And then it doesn't work. You know, if it doesn't work out, that's not great.

    But for me, I think I didn't realize I was depressed. It just showed up in different ways. As I was building this business, and I think it continued until, probably until I had some other projects. And until I let it go, because I felt like I was going on this uphill battle every day knowing it wasn't going to work out and spending more money and spending more time and feeling like I couldn't just almost confess to, you know, the few people who were involved like, “this is not gonna work. I don't believe in it. I feel like we're just, it's a money pit,” you know. And so I think that was difficult.

    And then, at one point, when I looked at how much I had left in my savings, and I looked at my timeline of how long am I going to, you know, not be employed? And how long am I going to be trying to make something work if I don't think it's going to work. And there was a point when I started reading startup failure stories, and that was so helpful. And looking at how many different startups I'm like, I think it's the Instacart guy who had like 20 failed startups before that, and even the GoPro guy. He was like working on data, the first version of GoPro in a garage and like, put a camera on a helmet while surfing or something along those lines. That's not what you think of when you think of GoPro or instacart. Right? Nobody even talks about that.

    "You're not seeing the full picture if you think that everyone is successful."

    So I read enough to realize, you're just not seeing the full picture if you think that everyone is successful. And I know firsthand, some people who have been very successful, and luck played such a huge part, like the right thing at the right time, the right connection. And they would admit it, right, whether you cash out or not. If it happens to be that the perfect acquirer is looking for your exact company, and they're headquartered in your same city. And you have an advisor on the board who knows them. I’ve seen that happen before. And then you sell this company that would have probably been completely defunct a year later if you hadn’t. There’s luck, right? And that doesn't work out for everyone all the time.

    So I think your mental health is challenged when you build a company. If it's not, you're probably not taking on the biggest challenges. And because I still, you know, I'm running profitable companies and I face challenges on a daily basis.

  • How startup people are “wired” differently, and why it’s “not about the money”


    Sometimes people being a little off-the-cuff or callous will say, “Oh, people who are who are entrepreneurs who start things up are crazy,” because this is a crazy thing to do to when you actually look at the odds, and you actually think about all the things that are all the obstacles in front of you. Do you think that there's any validity to that? Or is there something something special and unique, not necessarily negative, about startup people?

    Yes, I do think so. Maybe not everyone, but it's actually it reminds me the other night, I actually working on another project, which is under wraps right now. I'm different from anything I've ever done. It's not you learning not Ed Tech. But anyhow, I was keeping it even under wraps, even from my fiance. He doesn't need to know, everything. But he asked when he heard me talking to my business partner about it. “Are you ever going to stop starting new companies and just run the ones you have?” I was like, “No, do you know me?”

    It's not about the money. It's not about when you make a certain number or when you can retire. If it were retirement or a certain number. I don't think you'd go into startups. That's just it's not the smartest, most strategic, most direct route to just make money. Because I mean, you have expenses, the odds are pretty low of success, or at least a crazy outside success. You're not getting a pension most times from your own company that isn't profitable yet. Usually, non profitable companies also don't pay any type of health insurance benefits. I don't know. I haven't seen that typically, unless they're venture capital funded.

    So yeah, I think people who continually start companies, I think they're wired differently, but I think it's because they can't help it. So to me, it's almost like an addiction to starting new things. But I’ve always been that way. So when I was like eight years old, I started an art company that I ran for, like over 10 years. And I've started various things along the way. So I think the people who will find themselves burnt out and leave are more the people who only did it for the money or who put a timeline on it.

    I was actually talking to an entrepreneur who I might be working with on something recently. And he was talking about runway and how much because he quit a job. And he has limited savings, and he has a family. And he was talking about how much runway he has. And he felt like it wasn't very much. And he felt like he needed to make something work right now. And I actually think that's the most dangerous way for an entrepreneur to operate.

    Now, I'm not going to be unrealistic and say people don't have to feed their families. And I actually think that's why if I didn't have, you know, a partner who has a more stable job, I don't know, if I would have been as confident or if I didn't, if I didn't have a support system, where I knew I would probably be okay. It would be ridiculous for me to not acknowledge it, I wasn't in between this startup and living on the street, when that's your scenario, it's so hard to think rationally about what's going to be the best long-term objective for the company.

    But when you are in that position where you're really strapped for money, and you're thinking about runway right now, and oh, my gosh, I've only got, you know, three months at my current burn rate before I have $0 left. The danger of that is you rush things, and you make decisions that are solely based on near-term gains.

    That's actually why I'm more of a proponent of taking a second job or taking a freelance gig or doing something additional at the beginning. So you're not so worried about the immediate money, because you just want to build a company, and you just want to make some money or have some cash flow coming in. There are a lot of options, I mean, online, you can make a lot of money fairly easily. It doesn't mean you're going to be able to make a huge company that impacts the entire world, you know, that makes hundreds of thousands or millions of dollars, touches millions of people, that is a different thing. And that's a different risk profile. And I also think it's a different timeline and time horizon to success.

  • Founding Beta Bowl, a startup that helps teens become entrepreneurs


    Well, that makes sense. So you touched on it a little. And I know you can't be too detailed. But what all are you doing now, you said you were working on a book, you have some other startup thing?

    So I can be a little detailed about some of it. The most public thing that I do is Beta Bowl. It is an e-learning company, which is also kind of like a youth startup accelerator, kind of like Shark Tank for teens. And we've taken hundreds of students even in just the past year, and turned them into entrepreneurs. These are teenagers, most of them with no prior business experience, and who come out with real businesses.

    We have a girl who she has a product that saving honeybees all over the world. It's in, you know, labs and beekeeper, but beekeeper businesses globally. She has a second product, that's a business to consumer product going out into Whole Foods stores. Like in a month. We've got another girl who has impacted over 40,000 kids in poverty in poverty by offering them options to improve their literacy. So donating books, things like that. So my point is with Beta Bowl, we pretty much bring entrepreneurship, to the younger generation, people who you know, are 14, 15, 16.

    When I was that age, while I was running, you know, an art business and doing other ventures you can call them, I didn't know anything about startups, or entrepreneurship. And even in college, I feel like I wasn't learning that until about my junior senior year. And then in terms of things like financial modeling, I mean, I didn't learn that until I was working on Wall Street in my early 20s.

    That really doesn't need to wait until you're 18 to 24. There's just no reason you need to wait until 24 to learn the difference between revenue and profit, or to learn how to build a financial model. And it just holds you back. The young people who want to be innovative and want to bring new companies and new inventions to the world — there’s no reason to hold them back.

    I do have one of the prior companies is in the Ed Tech space. And we partnered and continue to partner with influencers and people with larger followings to help them create educational digital products, things like that. And our team, you know, helped them, build it, monetize it, and we took like a revenue percentage. We also have a separate subscription product along with that where we don't have a revenue split because we're not partnered on a subscription.

    So it's like a multi revenue stream. Digital host of products. People have seen products by our company that you wouldn't know, because they're partnered with someone with a larger following.

    That was one of the developments that came out of that failed business, when I, you know, looked into the influencer marketing space digital products, partnering all of that. That’s on a proprietary Ed Tech platform, which is another technical blunder of ups and downs and many downs.

    Then I'm working on something else that's in the media space, I can say, and I've also come to Medium kind of on a whim. Not exactly, um, I'm just a fairly private person, I, you know, don't do much on social media, I don't really put out my journey, because I'm usually working on it more than talking about it. But I do like writing and I actually have a screenplay about startups and technology and failure and all that stuff that actually won a first place award at a Los Angeles independent film festival back in 2017. And I figure I do like writing, and it was suggested by a few people that, you know, I look into it. So that is how talking about the startup failure story came about. I already knew of book was in the works. But this also pushed me to kind of work on that a little bit faster.

    What was the process like for bouncing back from, you know, calling it quits walking away, and then being ready to take on new projects and a new startup?

    Yeah, it was actually simultaneous, I never let myself have a moment of like, “I'm gonna wallow in my failure,” that didn't happen. And that's actually what allowed me to step out of the failure, because I was wallowing while I was doing it. And I figured maybe I should, in some of the time that I'm implementing what I think is not gonna work, do something else. So I was already looking forward and thinking, what else can I possibly do? What have I learned? What skill set have I amassed that I can repurpose?

    Knowing how much money I lost, it actually is what led me to look for some cheaper alternatives and find some different technology partners and really cool teams. And then that that's what led to that proprietary platform that we ended up developing. So I think the key to not ever getting bogged down in the failure was I just didn't have a moment of not working on multiple things. And some of those things never saw the light of day. And I think that's how it should be. Every idea you have for a new business, maybe doesn't need to be a new business. Right. And I think most of us can agree with that.

    I can be a little bit impulsive, when I'm really inspired about a thing. And I need to tell myself sit with this. Do your research really take the time. And I think that that was what I did. I took the time I took the months of working on this thing that I was very unsure of becoming more and more unsure of as I saw the developments in the industry, and, you know, pivoting into something else. So I was always working on more than one thing.

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