I’ve tried both failure and success. When I built my first startup Human Zoo, everything went well until 2001 — at which point we lost our largest customer and shortly after, ran out of money. I was probably too young to run a company, too inexperienced and I made a lot of mistakes along the way for sure but I tried and I fought hard but it didn’t help. In 2001 we were out of options, we couldn’t extend credit or raise new funding and so there was only one option: bankruptcy.
Well that’s part of startup life, right? Just go out and try again?
Not quite. See I lived in Denmark and in Denmark you don’t just go bankrupt. It haunted me for 10 years, not just financially, but also mentally. People I knew would avoid me, my parents would avoid talking about it at parties, I was branded a failure. Even 10 years later, running Tradeshift, I would still get skeptical questions that referred to those early days.
But this is not really a story about me. Instead it’s about something fundamentally wrong with Danish startup culture — or maybe just Danish culture. We don’t celebrate success; we just see it as a failure waiting to happen and when people fail, we can’t wait to kick them when they’re down.
Recently, my friends at AppHarbor had to make a tough move: close down their Danish branch with three employees or close down the entire company. They were still growing, had an increasing customer base and revenue stream, but it was just wasn’t happening fast enough and they soon knew they would run out of money before reaching break-even.
They made a very tough move; they made the Danish branch go bankrupt, even though the employees offered to work for free (under Danish employment law, employees would not be protected in such a case.) The result
was that the Danish authorities (by extension tax payers), other Danish companies collectively got stuck picking up the bill of 3 months pay for the developers and some creditors are owed money.
Was this a pretty move? No. Does this move have some bad karma? Yes. Did they somewhat exploit the system? Yes. But did they save their company? Yes!
What happened next was unfortunately predictable: the Danish startup scene exploded with scorn. The co-founder of 23 Video wrote this blog post, quoting:
“but it’s a symptom of a problem, a symptom of startup chic infecting us. There is honor and character in how we succeed and how we fail, and AppHarbor reflects poorly on the Danish startup community.”
The CTO of another Danish startup (who just got funded through Dave McClure’s 500 Strong – which I think is awesome) wrote this post , which I’m quoting from too:
Rumours had been going around for a while before this, that the heavily funded Y-Combinator alumni company, who’re supposed to be the Heroku of .NET, was not doing as well as expected. This is probably in part caused by the fact that selling hip cloud services to the enterprise, which traditionally uses .NET and Java based solutions, is a little more difficult than selling a hosted Ruby on Rails environment to young developers without a mortgage and thus also no concept of risk aversion — or “nobody ever got fired for buying IBM equipment.”
It’s interesting that it’s not outsiders, or even journalists ripping AppHarbor apart. In fact, not even the employees that were fired (who offered to work for free, because they believe in the idea) but fellow startup founders.
Nick basically states that he never believed in their business model and always found it hard to see how they would succeed. Steffen, who is a co-founder himself, called them “startup-chic”. There seems to be a good portion of jealousy at play here, with telltale use of phrases like “heavily funded.” Since when has 1.4M USD meant strongly funded?
This is Danish culture at play at its worst. Yes, they fucked up. They know it. But they are not fucking “start-up chic”, in fact I would go as far and say they are more real than most Danish startups.
They went to San Francisco without any money, shared a crappy apartment for 6 months without visas and coded like mad. They have built a platform that is amazing from a technical perspective and they have users who love them. They got into YC! because they were good and willing to take a HUGE risk personally. They bet everything on their dream.
I wonder how many of the armchair founders that are now calling them startup-chic (or expected them to fail) have ever have taken a similar personal risk? Or if they have, how come they suddenly forgot how it was…
In my opinion Nick & Steffen and the others ripping at AppHarbor don’t get it. Yes, it was not a good move, it was not a nice move, it was not the ethically cleanest move — it was the ONLY fucking move they had and they took it. There is no honor in failing. It’s always brutal, messy and dirty and everyone who thinks differently has never tried it.
To quote Ben Horowitz, from “The Struggle”:
You think you have no moves? How about taking your company public with $2M in trailing revenue and 340 employees, with a plan to do $75M in revenue the next year? I made that move. I made it in 2001, widely regarded as the worst time ever for a technology company to go public. I made it with six weeks of cash left. There is always a move.
I don’t expect journalists to understand this, or anybody in a normal job, but I’m sad that fellow founders don’t get it. This will never be a real community if we turn on each other at the first sign of trouble.