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Has Provo Labs Failed?
Provo Labs is a Utah firm (run by Paul Allen) that incubates web-based companies, providing funding and guidance to young firms. It has experienced some recent difficulties, and some people have asked, has Provo Labs failed?
No.
Paul Allen wrote a post about how Provo Labs has made some changes to return to its original vision and trim back on some over-extensions it has made in the last few months. He was very open about admitting some mistakes he’s made and about how what Provo Labs can achieve in the immediate future is more limited than the original scope of his vision. However, he didn’t use the words fail or failure in his post. Provo Labs still exists, and can still do amazing things.
Lindsey Snow posted a comment on Paul’s blog post that stated “I use the word failed because Provo Labs has failed many people.” In one sense, she’s right, Provo Labs didn’t live up to many people’s expectations, least of all founder Paul Allen’s. However, I would disagree in other senses. Provo Labs is a startup incubator. To work for a startup is to take a risk—many startup businesses fail or don’t live up to expectations. Estimates range from 40 to 80% of new businesses failing in the first 1 to 5 years! Your chances are 50/50.
Is a Startup That Folds a Failure?
Sure, people depend on the company they work for to support themselves. But is the startup that folds a failure? How did the employees of the startup support their families for several months or years? Did they learn anything? The skills that got employees hired at a startup and the skills they acquired while there will help them to do better in a new firm. Besides, jobs in stable, established companies often last just a few years anyway. This seems to me like a case of unrealistic or overoptimistic expectations, not a case of abject failure.
Is it the Incubator Firm’s Fault?
If the firms that receive funding from an incubator fail, is it the incubator firm’s fault? In this particular case, is it Paul’s fault? Paul apologized for being spread too thin, but who can be the CEO of 12 firms? The small teams in each company receiving funding from the incubator firm are ultimately responsible for the success or failure of their venture. It is dangerous to rely on the incubator firm too much for guidance and focus—especially as the sole source of inspiration or ideas. If you don’t believe in the idea, or if you don’t feel as passionately about it as the originator, or if you can’t see how to guide a company based on that idea, then you are in trouble even if the originator of the idea can hold your hand every step of the way.
In Paul’s case, he is reducing the number of firms he is personally working on because the firms in the incubator were unable to function without his attention, and no one can be expected to spread his or her attention so far. Paul is just realizing that, as the head of an incubator firm, he can’t personally attend to every firm. As the head of an incubator company, he is more of a portfolio manager than a business manager. Paul’s meeting to set things straight was meant to realign employee expectations to the way they should have been from the beginning—you will sink or swim based on you, whether we assist you or not.
All that being said, don’t take me or Paul as unsympathetic towards the employees and families who worked hard because they were promised much and were then let go. It’s a hard place to be in. I just don’t think that they can justifiably feel offended or unfairly treated. What startup begins without high expectations?
on September 6th, 2006 at 5:51 pm
“To work for a startup is to take a risk.”
I would add the word “calculated” to risk, which Provo Labs lacked. Calculating risk mitigates desistance.
“Provo Labs… can still do amazing things.”
Has it already done amazing things? Can you substantiate that claim or is that something you’d like to believe?
Keep in mind there is nothing wrong with admitting to failure. No accomplished entrepreneur makes it without first failing. What IS wrong is not admitting to failure and not taking responsibility for weaknesses which impede growth.
on September 6th, 2006 at 7:48 pm
“I would add the word calculated to risk.”
That is precisely what I was trying to say - you take a (calculated) risk when you sign up to work for a startup. Part of your calculation should be to judge whether the startup has calculated its risks well.
“Provo Labs… can still do amazing things.”
I meant it. Some of the projects begun at Provo Labs are about to bear fruit, such as 10Speed Media’s video affiliate network. Lacking inside information and data, I can’t give you hard facts, but I personally know nearly a dozen of Provo Labs’ (and its companies’) employees, and I know they have done, can do, and will do amazing things. Provo Labs as an incubator still has a future.
“Keep in mind there is nothing wrong with admitting failure… What IS wrong is not admitting to failure.”
I don’t see anyone “not admitting to failure and not taking responsibility” in this case. Paul and I both pointed to some mistakes, shortcomings, and failures that occurred in Provo Labs. To say that Provo Labs has failed as an incubator, however, is entirely premature - it still has funds and is still learning.
The whole point of parallel entrepreneurship is to try a bunch of things and see which work and which don’t. Mistakes and cutting your losses are part of the process, and to say that Provo Labs has failed after some mistakes and cut losses is inaccurate. If the fund never provides a positive return on investment before its investors and employees give up on it, then it would be a failure. That hasn’t happened yet.
on September 7th, 2006 at 11:07 am
Nice counter points, Michael, although “about to bear fruit” and actually bearing fruit are entirely different. Thus, using the phrase “still do amazing things” is flawed, even though you “meant it.”
The tone of your post resonates a desire to avoid using the word failure, which I disagree with. Are you assuming that Lindsey used the term “failed” as ultimate failure? On a constructive note, yes, Provo Labs is still alive. But it has made some sizable mistakes and needs to learn quickly from those losses to avoid inevitable failure.
Disclosure: I am married to the lovely Lindsey Snow.
on September 7th, 2006 at 11:36 am
This post raises an interesting question. Can the incubator be blamed for a startup failure that it is incubating. The author seems to answer with a qualified no.
From my perspective the answer depends on how much the incubator is involved in the startup. In the case of Provo Labs, the startups were being staffed generally by Provo Labs employees who were canned when the failing startups were shut down. This would indicate a direct day-to-day management of the startups rather than a seed funding relationship where the funding source has little to do with the startup’s daily affairs.
Given that, let’s call a failure a failure. It’s not a four letter word. The greatest businesses in the world are led by men who have failed at one time or another. The difference is they got up and didn’t spend a lot of time saying, “Hey, I didn’t really fall down, rather the earth moved vertically and hit me where I stood.”
Failure is always a bitter pill, but trying to dress it up with the clothes of the emperor just invited the laughter and derision of the crowd. Calling it what it is, learning from it, and being honest about it seems to be the most profitable approach to failure.
I think some of that has happened here. I think some frenzied activity in the dressing room has also happened. That’s unfortunate. Either way, the lessons of failure are taught and learned. Our only choice is how we take the pill–swallow quick and wash it down with new activity or chew it until the bitterness makes us ill.
I’d like to choose swallow quick.
on September 7th, 2006 at 12:32 pm
You are right, “about to bear fruit” is not the same as bearing fruit. I don’t have access to the numbers that would say anything about actual revenues. “Provo Labs… can still do amazing things” is entirely a statement about potential, not history, and therefore isn’t flawed—unless, of course, Provo Labs has no potential.
The words your wife Lindsey used were “Provo Labs has failed. Yes, I use the word failed because Provo Labs has failed many people.” The main point of my post is to point out an important use of the word failed. It is accurate to describe certain actions of Provo Labs as failures. It is not ok to call the incubator firm a failure. I said “I… pointed to some mistakes, shortcomings, and failures that occurred in Provo Labs” followed by “If the fund never provides a positive return on investment before its investors and employees give up on it, then it would be a failure.” Condemn sin (failed actions) without condemning the person (company). So yes, if your wife meant certain actions and disappointments, then that’s correct. If she meant ultimate failure, then that is not correct. I wrote to make sure the distinction was clear.
on September 7th, 2006 at 12:58 pm
Tyler,
Thankfully I qualified my no. Otherwise I could look like an idiot for claiming that it isn’t occasionally the incubator’s fault for a startup’s failure, even though it does happen sometimes.
Being an outsider to Provo Labs, I didn’t know the exact details of the management structure that was in place. If the incubator provides the day-to-day management, then I would be quick to admit that the incubator has a crucial role in the success or failure of the startup. I would still add, though, that those working under management still have the choice of waiting for commands from on high, or doing something about what isn’t happening.