Posted Sunday, November 9th, 2008 at 10:47 pm under companies, me.

Expecting and embracing startup rejection

When I was younger, I didn’t know what to make of it when people rejected my ideas. Instead of fighting it, trying again, or improving my delivery, I’d just conclude that the rejector was an idiot, and that it was their loss if they didn’t get it.

For example, I put considerable time and effort into writing academic papers, several of which were rejected, to my surprise. I’d never considered that the papers might not be accepted. When this happened, I wouldn’t re-submit them or try to re-publish them. By then I would usually have moved on to doing something else anyway.

When I applied for jobs, it never entered my mind that I might not be wanted. How could anyone not want me? After a couple of years working on my current ideas, I applied for a computer science faculty position at over 40 US universities. I refused to emphasize my well-received and published Ph.D. work, of which I was and am still proud, because I was no longer working in that area.

I was convinced the new ideas would be recognized as being strong.

But guess what? I was summarily rejected by all 40+ universities. I only got one interview, at RPI. No other school even wanted to meet me. I kept all the rejection letters. I still have them. (Amusingly, I was swapping emails with Ben Bederson earlier this year and it transpired that he’d had the same experience, also with 40 universities, and he too kept all his rejection letters!)

You never learn more than when you’re being humbled.

I’ve now returned to those same ideas and have been working on them for the last 3 years. In January 2007 I went and met with a couple of the most appropriately visionary VCs to tell them what I was building. I was naïve enough to think they might back me at that early point. Wrong. They suggested I come back with a demo to concretely illustrate what the system would allow people to do. That was easier said than done – the system is not simple. I spent 2007 building the core engine, a 90% fully-functional demo of the major application, several smaller demo apps (including a Firefox toolbar extension built by Esteve Fernandez), and added about 20 sample data sets to further illustrate possibilities.

That’ll show ’em, right? I went out in November 2007 armed with all this, and began talking to a variety of potential investors. I was sure VCs would be falling over themselves to invest, especially given that we were working on some mix of innovative search, cloud computation, APIs, and various Web 2.0 concepts, and that tons of VCs claimed to be looking for the Next Big Thing in search, and for Passionate Entrepreneurs tackling Hard Problems who wanted to build Billion Dollar Companies, etc., etc.

You guessed it. Over the next year literally dozens of potential investors all said no. The demo wasn’t enough. Would people use it? Could we build the real thing? Would it scale? Where was the team? What are you doing in Barcelona? “Looks fascinating, do please let us know when you’ve released it and are seeing adoption,” they almost universally told me. The standout exception to this was Esther Dyson, who agreed to invest immediately after seeing the demo, and whose courage I hope I can one day richly reward.

What to make of all this rejection?

One thing that became clear is that if you’re smarter than average, you’ll almost by definition be constantly thinking of things too early. Maybe many years too early. Your ideas will seem strange, doubtful, and perhaps plain wrong to many people.

This makes you realize how important timing is.

Being right with an idea too early and trying to build a startup around it is similar to correctly knowing a company is going to fail, and immediately rushing out to short its stock. Even though you’re right, you can be completely wiped out if the stock’s value rises in the short term. You were brilliant, insightful, and 100% correct – but you were too early.

Getting timing right can clearly be partly based on calculation and reason. But given that many startups are driven by founder passion, I think luck in timing plays an extremely important role in startup success. And the smarter and more far-sighted you are, the greater the chance that your timing will be wrong.

So the that’s the first thing to understand: if you’re smarter than average, your ideas will, on average, be ahead of their time. Some level of rejection comes with the territory.

But I’d go much further than that, and claim that if you are not seeing a very high level of rejection in trying to get a new idea off the ground, you’re probably not working on anything that’s going to change the world or be extremely valuable.

That might sound like an outrageous extrapolation (or even wishful thinking, given my history). Later tonight I plan to explain this claim in a post on the connections between passion, value, non-obviousness, and rejection. That’s the subject I really want to write about.

For now though, I simply want to say that I’ve come to understand that having one’s ideas regularly rejected is a good sign. It tells you you’re either on a fool’s errand, or that you’re doing something that might actually be valuable and important.

If you’re not going to let rejection get you down, you might content yourself by learning to ignore it. But you can do better. You can come to regard it as positive and affirming. Without becoming pessimistic or in any way accepting defeat, you can come to expect to be rejected and even to embrace it.

If you can do that, rejection loses its potential for damage. As Paul Graham pointed out, the impact of disappointment can destroy a startup. That’s an important observation, and a part of why startups can be so volatile and such a wild ride.

I don’t mean to suggest that you don’t also do practical things with rejection too – like learn from it. That’s very important and will help you shape your product, thoughts, presentation, expectations, etc. Again, see Paul’s posting.

But I think the mental side of rejection is more important than the practical. The mental side has more destructive potential. You have to figure out how to deal with it. If you look at it the right way you can turn it into something that’s almost by definition positive, as I’ve tried to illustrate.

In a sense I even relish it, and use it for fuel. There are little tricks I sometimes use to keep myself motivated. I even keep a list of them (and no, you can’t see it). One is imagining that some day all the people who rejected me along the way will wring their hands in despair at having missed such an opportunity :-)

I’ve not been universally rejected, of course. There are lots of people who know what we’re doing and are highly supportive (more on them at a later point). If I’d been universally rejected, or rejected by many well-known people whose opinions I value, I probably would have stopped by now.

I’ve had to learn to see a high level of rejection as not just normal but a necessary (but not sufficient!) component of a correct belief that you’re doing something valuable.

Stay tuned for the real point of this flurry of blogging activity.