Unit 6, Listening 1, Failure and Success in Startups


Failure and Success in Startups

Professor:           So, for the past few weeks, we’ve been talking about starting a business and what it takes to be successful. Over the weekend, your assignment was to research a successful startup. Can I get a couple of people to start off? Yes, how about Elena and . . . Rob.

Elena:   So, I read about Scott Nash, who is the founder of MOM’s Organic Market. He started his business with only a hundred dollars. When he was 22 years old, he opened a business in his mother’s house. First, he delivered food to people. He even brought people food in the middle of the night. Then he opened a store selling organic stuff. Because his company grew slowly, he could focus on his values, which were the environment and his customers. That was good. However, he didn’t really start making a profit for the first 20 years. Then, in 2009, there was an economic crisis in the United States, and he had to start thinking more about money and not just about the environment. He says it was a very scary time. However, he just took it step by step, and slowly his small company grew into a chain of stores that makes 200 million dollars every year.

Rob:       Hmm. That’s interesting. Some of it sounds a little like the business owner I researched, the chairman of John Paul Mitchell Systems.

Elena:   The shampoo guy?

Rob:       Exactly! His real name is John Paul Dejoria. He started his career by trying to sell all sorts of things to people at their doors. Unlike Scott Nash, he wasn’t a very successful salesperson at the start, and he was even homeless a couple of times and had to sleep in his car. However, he thinks these failures were important lessons, because he learned how to deal with rejection. He became a better salesperson than he was before. Then he met Paul Mitchell, a good hairdresser. Paul had quality hair products to sell, and John Paul was a good salesman. They started their company with only $700. Now, the company sells more than 80 hair products and is very successful. Like Scott Nash, John Paul Dejoria also focused on his values as his business expanded. He gives a lot of his money to help solve environmental and social problems.

Professor:           OK. Thank you for sharing. So, sometimes entrepreneurs start small and steadily grow a business. More often, starting a new business is a journey of mistakes and failures. Now, we’re going to watch a video about another famous businessperson whose journey to success was full of failures. This is an interview with Michael Acton Smith, the creator of Moshi Monsters, a children’s website.

Unit 6, Listening 1, Part 2, Activities A and D

Listening Skill, Activity B. Video also available on iQ Online.

Page 130, 131, 134

Peter:   So, Michael, I’d love to know where it all started and what was your first business?

Michael:              Went to university up in Birmingham and met a friend of mine called Tom Boardman. And we had this idea to sell toys and gadgets and games. And a wonderful chap[1] called Tom Teichman decided to invest half a million pounds into our business. And we decided to do it on the Internet, which was very new and shiny back in 1998. And the great thing then was that there weren’t many competitors. The downside was there were hardly any customers either.

Peter:   And then from there where did—

Michael:              Well, then—

Peter:   What was your next—

Michael:              Then we almost lost everything in the dot-com[2] bust[3] in early 2000. We overextended[4] ourselves. We spent too much money. We got carried away[5]. We teetered on the brink of bankruptcy. It was a pretty, pretty scary time.

Peter:   Michael’s business might now be a multimillion-pound hit, but he’s clearly had more than his fair share of near misses. After the dot-com bubble burst, Michael swapped selling gadgets for developing an adventure game. Perplex City launched in 2005. Players bought puzzle cards and followed clues in a bid to find buried treasure worth a hundred thousand pounds. Amazingly, having nearly lost it all, Michael persuaded his previous investor and others to give him another chance and more money.

Michael:              I’d managed to raise further financing[6], and in total, I’d raised about six million pounds for this business. Yes, so I got some very, very well respected, huge venture capital[7] firms came in and invested between them many millions of pounds. So the pressure and the stakes[8] really, really raised at that point.

Peter:   Did it succeed? Was it good for you?

Michael:              There were people in different countries around the world helping expand this treasure hunt. It was a pretty big operation, but unfortunately there weren’t enough people playing to cover the costs of running this very expensive business.

Peter:   But what did you put—you didn’t spend six million, surely, on a website and a treasure hunt?

Michael:              Well, helicopters are pretty expensive.

Peter:   Real helicopters, you mean?

Michael:              Real helicopters we hired to do flyovers of these live events we did. We had a massive burn rate[9], and our outgoings were a lot higher than our incomings.

Peter:   Wow.

Michael:              Very, very—

Peter:   Six million.

Michael:              Six million pounds. And you can imagine how stressful and tense it was to have all this money, but the business not working.

Peter:   So did you lose all the money then?

Michael:              Well, we had about six hundred thousand pounds left in the bank, about a million dollars.

Peter:   And how did you front the investors? Were they camping outside, like sort of protestors?

Michael:              Well, we had to go to the board and tell them in a very stressful board meeting that, you know, that six million pounds you’d given me? Well, most of it has gone. I’m really sorry this idea hasn’t worked out. But I’ve got one more idea, one final roll of the dice.

Peter:   What did they say? I mean, if you came in to me and said, “Peter, look, it’s not all bad. You gave me six million and I’ve got six hundred K[10] left. So, hey, we’re all right.” No, we’re not all right. It’s like what is going on?

Michael:              I was terrified. But to their credit the board were supportive. You know, they listened and they said, “Michael, fair enough. You know, we invested in you more than the idea. And if you’ve got one more idea, let’s see what happens.” I think if I’d screwed up[11] with Moshi Monsters, there wouldn’t have been a third chance. So fortunately it worked.

Peter:   Have you been told that you were mad before?

Michael:              Well, I think there’s always been a very fine line between insanity and genius. And a lot of entrepreneurs with big visions kind of weave between that line.

Peter:   Insane or genius, Michael certainly doesn’t lack confidence.


[1] chap: noun used in Great Britain to talk about a man in a friendly way

[2] dot-com: noun a company that sells goods and services on the Internet

[3] bust: noun a period of economic difficulty in which people and businesses struggle to survive

[4] overextended: adjective involved in more work or activities or spending more money than you can manage without problems

[5] get carried away: phrasal verb to get very excited or lose control of your feelings

[6] financing: noun money used to run a business, an activity, or a project

[7] venture capital: noun money that is invested in a new company to help it develop, which may involve a lot of risk

[8] stakes: noun something that you risk losing, especially money, when you are involved in an activity that can succeed or fail

[9] burn rate: noun the rate at which the money available for a project or new company is spent

[10] K: noun abbreviation for $1,000

[11] screw up: phrasal verb to do something badly or spoil something

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