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When startup success is built on startup failure

A startup that launched to great fanfare and venture capital attention started to crumble less than two years later. How did the CEO pick up the pieces?

For some startups, the rise to fame and fortune is relatively easy; think Instagram. But for others like PayPal...

and Twitter, startup success comes only after substantial startup failure.

The numbers for first-time businesses are hardly promising. According to the Harvard Business Review article "Performance Persistence in Entrepreneurship," only 18% of entrepreneurs succeed in their first startup launch. And a University of Michigan study found that the rate of success for entrepreneurs increased, counterintuitively, as they accrued failures.

For Justin Nassiri, CEO of San Francisco-based StoryBox, success has been an iterative process. StoryBox aggregates and sells user-generated content --photos of consumers using companies' products and the like -- to help companies like Columbia Sportswear boost sales and increase exposure.

Nassiri first launched his company as a video-storytelling site. He raised more than $2 million in venture capital, launched his company to great fanfare and was working with companies like Levi's. But then everything fell apart. Nassiri was nearly inconsolable -- until he met with another entrepreneur who headed a multimillion-dollar venture, who revealed just how many times he had failed before succeeding.

It was Nassiri's aha moment to relaunch the company and "get back to basics," he said. He revised the idea of StoryBox as a repository for user-generated content that helps companies like Columbia Sportswear sell a company's brand: The idea is that nothing sells a product like genuine customer-fans shown using that product.

Nassiri sat down with SearchCRM to talk about his experience before becoming an entrepreneur and what it's like to launch and fail in Silicon Valley.

Justin NassiriJustin Nassiri

What did you do before you ran a startup?

Justin Nassiri: I went to the U.S. Naval Academy in Annapolis, Md. Afterward, you have five years of service. I went into submarines. It's a rigorous path. And it involves a year and a half of training. Then you spend four years out at sea on a submarine.

After I went through all these qualifications processes and [got] permission to be the senior watch officer, I was on the bridge at 2:00 in the morning, and I would be the most senior person on duty. I was responsible for this 27-ton warship, $2 billion machine -- and looking over my shoulder, thinking, 'What idiot put me in charge of this?'

Why did you decide to launch a startup?

Nassiri: I wanted to have a family and saw how difficult that was to do with all the frequent trips out in the water. So, I went to Stanford Business School. That was one of the places I learned about startups. It planted that seed.

For 99% of companies out there, it's, 'How long can you stay in the ring? How long can you continue to grow even though things are against you?'
Justin NassiriCEO, StoryBox

After school, I was accepted at McKinsey in New York, but then the economy went south, so my offer was delayed by nine months, and I had this idea. I started a company as a way to kill the time before going to McKinsey. The idea was, 'I want my kids to know my history; I want to create a means of preserving what people mean to us: Something like Facebook timelines."

The original idea was to have a timeline where people could contribute photos, essays, even a scan of ticket stubs from a memorable event. The one sliver that survived from that original idea was the power of video. If I really want someone to know you, there is nothing like video to capture all the millions of ways that make you, you.

It wasn't the right idea for me, but it expanded into video testimonials, which expanded into testimonials for businesses, which expanded into what we're doing now with StoryBox.

What happened in the early days of StoryBox [then VideoGenie]?

Nassiri: We raised a first round of $2 million and grew rapidly to a team of 15. We were working with brands like Levi's and Intuit. It's a story you hear a lot: Everything is going well, the wind is behind you, and two and a half years in, we hit a lot of problems. There were team problems, hiring mistakes.

We went through a period of layoffs, firings. It was emotionally crippling. To go from such growth and promise to, 'Everything is going wrong; everything has crumbled down.'

I was ready to throw in the towel when I met with an entrepreneur. His company had raised $150 million. We met for a beer, and I poured out my heart to him. We had gone through this cycle of hiring, firing. After that 45 minutes, his reaction was, 'Yes, and what's your point? I did that 20 times in the first five years of my company.'

What did you learn?

Nassiri: You're always hearing about the Instagrams, the successes. But that's either the .00001% of stories where that's true, or it's a revisionist history where people skip over that turmoil. For 99% of companies out there, it's, 'How long can you stay in the ring? How long can you continue to grow even though things are against you?' That was my first major breakthrough.

What kinds of changes did you make to your strategy?

Nassiri: We went from a place where, going from 15 to four employees, every single measure of success was better with four people than it had been with 15 -- sales, conversion [of prospects into customers] and [customer] retention -- were all higher.

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There was more ownership of everything because everyone needed to do more. At the heart of it was that because we were smaller, we had to be focused on everything we did. We can focus on two or three things, how do we measure success? We may have done 10 before when we should have been doing three. Really focus on what it would take to succeed. The big-picture thought was, 'We need to go back to basics: redefine who we are, what we're selling, who our customers are.' And that meant get rid of 70% of what we were doing and hold onto the 30% that is really our mission.

How has getting back to basics changed your approach to sales?

Nassiri: We want to work with companies where we believe we can challenge their full potential. So sometimes, if it's not a good fit between us and them, we walk away from the deal. We know we could probably make some money, but if we can't make an impact, we should reconsider doing it at all.

In a sales call we had recently, one of our engineers -- who is not a touchy-feely guy -- said to me, 'You guys were using that same language with your clients and identifying where their need is not within our skill set and where it is.' When you start thinking that way, you drop this, 'Hey we're selling something,' and instead focus on building a relationship.

Have you had to change your management style, and how?

Nassiri: We are a data-driven business. But early on, I was so eager for data that I was asking the salespeople for a million different things. The sales team said it was slowing them down. There's only so much you can ask.

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How has startup failure led to success at your company?
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Slack is another example of a company that learned from failure and pivoted to great success. They started as the game developer Tiny Speck and closed the business when they realized they would never live up to VC funders’ expectations. The idea for Slack came from the communication style used in the company and the failure of the first startup put the team in the right place at the right time to work on the idea for the communication platform.
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