Make Failing Cool Again

Helena Hlas

Nov 23, 2020
minute read

“Failure is success in progress” – Albert Einstein

Entrepreneurs will be the first to say that learning from experiences is the greatest gift that venturing into the startup game can give us. Intrigued by the long and winding road to success, we dive into the biographies of our favourite startup founders and wait eagerly for new podcast episodes, like those at Swisspreneur, to learn from those who struggled and then succeeded. In turn, it seems as though struggle itself has become increasingly admirable and sharing our #startupstruggles on social platforms has become a relatable if not validating component of entrepreneur life.

If letting everyone know we set the alarm for 4am or stayed in the office extra late is the new sexy and stories about struggle sell, where does that leave those of us on the flat end of struggle, those of us without a salary, without sales, and without a valid job title?

Well, having to close the doors on our business at Alethena and the weeks leading up to it were far from instagramable. As a strong-minded group of co-founders, acknowledging that we were at the end of the journey was closer to heartbreak than #hustle. Entrepreneurs aren’t programmed to “give up” and eventually, it was my job to help us realize we didn’t. We had done many things right, just at the wrong time.

What Happened?

At our startup Alethena we built a set of legal and technical tools to enable the digitization of unlisted shares such as over-the-counter (OTC) shares, to make them tradable and easily transferable. The underlying technology we deployed was the Ethereum blockchain and therefore the product itself is also referred to as the tokenization of equity. We built an automated market maker based on smart contracts that would empower a company on its own website to sell and buy company shares, a so-called “Share Dispenser” (in German we called it “Aktienautomat”).
With this, a company would not need to be publicly listed anymore and could have a personal exchange for shares on their own website. Our vision was that through the digitization of shares, the corporate householding would also become much easier to manage (e.g. employee stock option plans, execution of corporate actions such as dividends or shareholder agreements, online cap table etc.).

Our business model set us up to earn a lump-sum fee for the digitization of the shares and a fee on every trade and there, with enough volume on trades, the model would be very scalable. Although the model would hold true, we learned that our barrier to scalability wasn’t the model itself but the market. Our logistical challenge was to make a concrete link between the token and the share in a legally binding way and after a lot of hustle we realized our vision was only possible (and still is) in Switzerland due to regulatory hurdles in European and the US market. In simple terms, our leap-of-faith we took 2 years ago was just simply too optimistic, our product was ahead of the market and functional infrastructure of our economy.

The last few months, when things started to look bleak, our work turned to obsession, like chewing on glass and bleeding out while staring into the abyss looking for answers. We tried working with different scenarios, defining them, evaluating them and giving them a timeline only to re-evaluate those scenarios again the following week. Constantly going back to the drawing board searching for something that wasn’t there, without using up resources that weren’t there to save our asses was a challenge like no other.

When it was clear we had reached the end we used 1:1 meetings to explain our decisions to the team and customers in a transparent way and elaborated way. Though difficult conversations to have they went surprisingly well, due to our complete honesty in combination with the open-minded nature of the type of people likely to have engaged with us. The communication with investors was also tough, and we wanted to always have these conversations over the phone or in person, though writing might have been the easier route, I am convinced that these conversations have made me even more resilient.

I’d like to believe that in a few years our type of solution will resonate in a more progressive industry, but until then I have closed this chapter. Although we fought hard and were sad when it ended, I can confidently say that I haven’t let this perceived failure bring fear into my mindset and I am excited to have already begun formulating my next authentic innovation!

What Did We Learn?

So what is my big learnable moment to pass to you in my progression to success? Like my dreams, it’s hard to pick just one…

  1. Scalability is key! Having a wide range of market potential is imperative, especially in the industry we were trying to digitize. Not having a common denominator across markets for example same language, same regulatory frameworks, and cultural mindset was our greatest limitation. We learned that global distribution is a function of similarities.
  2. Product engineering is the magic sauce in digitized products and the team needs to be able to match that. By definition, innovation means new, but new doesn’t always mean better. For example, digitization is associated with innovation but digitizing something doesn’t always make it better. In our case we digitized equity, shareholder agreements, ESOPs etc. but intentionally left out some aspects of investor relations that people still prefer to have tangibly such as certificates or gifts. Another example of products that outlast innovation is business cards which have managed to stick around in our wallets despite our tendency to digitize everything. Perhaps it resonates with our deeply ingrained forms of communication and gift-giving when someone reaches out to offer you something but somehow the experience of exchanging business cards has yet to be made obsolete. Therefore, I believe that there can be a gap between innovation and the solutions that will truly drive progress and good product engineering needs to be able to close the gap between technical development and customer needs to ensure product-market fit.
  3. Customer acquisition cost needs to be as low as possible otherwise it kills your scalability. Sometimes we had to spend months on a customer and it simply isn’t an efficient way to run or scale a business.
  4. Four co-founders were too many. We found when it came to decision making four wasn’t our lucky number and often lead to split opinions on decisions.

What Is Next?

In addition to the points above relating specifically to my time as co-founder with Alethena, I strongly believe that despite increasing growth in the startup space, our Swiss culture remains highly risk averse.

For example here you can see the amount of money allocated to equity investments from the average citizen of a variety of countries. Consider that equity and risk-taking are intertwined in that equity is a long deferred huge payday and equity represents skin the game needed for long-term incentives. At the link above you’ll notice Anglo-Saxon and Asian countries are leading, where one can observe a more risk-seeking culture.

I’ve spent a lot of time thinking about how we can make a positive impact on reframing the fear of failure and like any good solution it starts in the community with the youth. I believe it is crucial to promote risk taking at a young age in schools and as part of learning experiences.

From there on we, as a culture, need to learn more about the value of equity. Whether that be by continuing to see more successful exits coming from Switzerland or learning about paying employees with equity. We should get accustomed to perceiving value in ourselves and offering up our most valuable assets as reward.  

Lastly, I’d love to see more VCs investing into Swiss startups and big corporations walking the talk, and hiring out of house innovation. Inhouse innovation is inherently biased and has the tendency of playing it safe resulting in only 60% true innovation. This might also require us to hire more talent globally. If you’re bold with the business idea you should be also bold with your hiring.

Remember, “If you’re not prepared to be wrong, you’ll never come up with anything original.” – Ken Robinson.

Further economic data can be found here

About Pascal Caversaccio

Startup Podcast - Make Failling Cool Cover - Pascal Marco Caversaccio

Pascal Marco Caversaccio is a 30-year-old deep-tech enthusiast, entrepreneur at heart, and avid reader. He is currently the Founder and CEO of DAITA Technologies, a Swiss-based startup specializing in transforming raw data into AI-ready data sets at scale. Furthermore, Pascal is a Blockchain Advisor at the Swiss-based digital agency Apps with love. Prior to that, he was the Co-Founder and Chief Product Architect (former CEO) of Alethena, a Swiss fintech startup specializing in blockchain applications and digitalization. Pascal holds a Master’s degree in Quantitative Finance from the University of Zurich and the Swiss Federal Institute of Technology Zurich (ETH Zurich).

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