Embracing Risk and Failure with Groupon Co-founder Brad Keywell, BBA '91/JD '93 :: Video
Serial entrepreneur says intelligent risk and learning from failure are keys to entrepreneurship and economic growth.
View Video of Keywell's Presentation
ANN ARBOR, Mich.—Brad Keywell, BBA '91/JD'93, thinks government and society have it wrong when it comes to risk and failure.
As a serial entrepreneur, he knows how valuable both can be. Keywell is co-founder and director of Groupon Inc., which utilizes social networking to enable group purchasing. Groupon is a daily Internet coupon offering substantial discounts on goods and services ranging from trendy restaurants to Zipcars. But the deal-of-the-day is only valid if the required quota of people participates. Founded in November 2008, Groupon has grown to 7,000 employees and offers deals in some 43 countries.
Keywell also founded MediaBank LLC, Echo Global Logistics Inc., and venture fund Lightbank. Those are the successes, and he points out that everyone loves a winner. But there were failures, too, and those aren't as celebrated. In fact, "the popular press generally burns you at the stake" if you fail in business, he noted. And the focus in government and society seems to be on risk avoidance rather than intelligent risk-taking.
If Keywell had followed that formula, none of the companies he founded would have gotten off the ground.
"It's not win or lose, it's win or learn," Keywell said during his
keynote address at September's Entrepalooza 2011: The Path Forward. The annual symposium at Ross, hosted by the Samuel Zell and Robert H. Lurie Institute for Entrepreneurial Studies, brings together leaders in entrepreneurship and venture capital to share the secrets behind their success with students, alumni, faculty, and members of the broader business community.
Keywell likened the process of being an entrepreneur to that of the Maasai warriors of eastern Africa. Massai men go through a series of tests — enduring pain without flinching, herding cattle for days, and hunting — before becoming warriors.
Failure is possible, but the goal is to learn and grow, Keywell emphasized. "That, to me, is entrepreneurship — risk, inevitable failure, and hopefully overcoming all of it."
Schools are coming around on the idea, but government and media lag, he noted.
So why does it matter? The latest economic downturn, which began in 2008, has seen the worst job loss since 1945. Since 1995, most of the net new jobs in the United States were created by companies five years old or younger.
"Entrepreneurs matter. They matter now more than ever," Keywell said. "If you are becoming an entrepreneur, you hold the key not only to your future, but the future of our country."
Keywell's own journey includes taking risk and enduring failure, but that's what helped build his current portfolio. After all, sometimes success can become failure and failure can become success, he pointed out.
Keywell and partner Eric Lefkofsky, AB '91/JD '93, founded Starbelly, a tech boom-era business that was supposed to disrupt the logo merchandise industry. Less than a year after they launched, Starbelly was acquired by Halo Industries for $240 million and Keywell accepted the role of Halo president. That's the good news. The bad news is that Halo later filed for bankruptcy and Keywell's payment was mostly stock.
"Failure, massive failure," he said. "But we made a list of things we thought we were good at and not good at, and things we wanted to do more of and less of. We still have that list and it guides us."
For one thing, after they founded Echo Global Logistics in 2005, Keywell and Lefkofsky hired a CEO to take that venture public. Keywell learned from the Starbelly experience that he didn't want to be a top executive in a public company again.
Tenacity is another quality Keywell has honed over the years. In fact, the startup that became Groupon initially was born of failure. Along with Andrew Mason, Keywell and Lefkofsky funded and co-founded the Point, which was designed to spark collective action. A year later, it had zero revenue and was on its way to failure.
"Do you throw in the towel and just forget it, or do you dig a little deeper and ask, 'What's the logic behind this?'" Keywell said.
So they reworked the business model, tweaked the site's functionality, and renamed the operation Groupon.
"Underneath every failure is buried an opportunity," Keywell said. "Some are immediate opportunities, some require investigation. The question is whether you can see it. The question is whether you can pivot and find a gem of greatness."
Keywell urged budding entrepreneurs to put any idea through a series of tests by creating a business plan with the intent of convincing oneself that it won't work.
"Eric and I are big believers in business plans — writing your idea down, seeing what it looks like on paper, and beating it up before you do anything with it," he said. Sticking with the "precious few" that survive the process increases your odds of success.
Keywell also suggested that students mine business school for the ideal opportunities and partnerships that will set them up post-graduation. "Are you using your school, in this wonderful city of Ann Arbor, to help you explore opportunities, learn, and explore risk?"
At their core, entrepreneurs need a philosophy that keeps them on mission when things get tough, Keywell said. He creates businesses simply because that's what makes him happy.
"Artists create because they have no other choice but to create art," he said. "To me that is the world of an entrepreneur. You have no choice but to create a business."
Keywell discounts the notion that a rough economy isn't the time to start a business. He said more than half of the companies on the Fortune 500 started in a recession or a bear market. And despite government and society not appreciating the entrepreneurial process, there are some key factors that favor the business creator today — capital markets are more efficient, data and information are cheaper and sometimes free, technology is more accessible, and mobile and social media technologies create opportunities that didn't exist a few years ago.
"How exciting is that?" Keywell said. "You hold the future of the vibrancy of our nation. If you win, great. But if you fail, that's often the precursor to something better."
For more information, contact:
Terry Kosdrosky, (734) 936-2502, firstname.lastname@example.org