Try and try again

Skier Image copyright AP
Image caption Young entrepreneurs use the skiing term 'pivoting' to describe changing the direction of their business plans

Everyone tells you in start-up furnaces such as California's Silicon Valley that every successful entrepreneur has failure as a necessary part of his or her CV.

Failure is what you learn from, goes the argument. You launch something that crashes and burns, and from that experience emerges the ability to avoid the same mistake again, and the resilience to bounce back. Failure precedes success.

Another familiar word for the process is "iterate".

Only rare geniuses get things right first time. Most ultimately successful business people have many attempts at an idea behind them. Each iteration fails for some local and immediate reason.

But by changing the business model or the customer interface or the price point, and being pushed back again and again by the cruel realities of the marketplace, eventually a robust and effective company emerges from successive disappointments.

In this Darwinian way great businesses are created. The internet payments system PayPal is a potent example, particularly eye-catching because its alumnae have spawned so many other striking start-ups that they are known as the PayPal Mafia.

PayPal's founder Max Levchin came west to Silicon Valley because he had tried to set up two businesses on the campus of the University of Illinois at Urbana-Champaign and both had not worked.

Seeking the cool of an air-conditioned lecture theatre in an unusually hot Silicon Valley summer, Max Levchin ran into the serial investor Peter Thiel at Stanford University; he pitched to him the idea of a mobile phone payments system.

It was set up with the help of Mr Thiel, and the company burnt up money. When an importunate caller suggested that there was a need for PayPal for ordinary Internet transactions, the company single-mindedly spurned him. In the end, it listened, and computer payments became a major part of the business.

Then something the founders had hardly thought of, security, became a major challenge, which some clever software eventually dealt with.

And by dealing with it, Paypal established its credibility, and its business success. Iteration after iteration, Mr Levchin, Mr Thiel and a clutch of others associated with the company are now billionaires.

Changing ideas

I recently encountered this iterating phenomenon in a new guise in London, at the new ambitious project to turn recent university students into immediate start-up entrepreneurs. It's an attempt to new convince graduates that there's a compelling alternative to a professional job in the banking, the professions, or consulting.

Image copyright Reuters
Image caption The founders of PayPal took a while to find the core focus of what the business should be about

Entrepreneur First was dreamed up by the consultants McKinsey and with some high level support 30 clever, ambitious and fearsomely fluent graduates worked up their business ideas in a room in the City of London for an intense three months starting last September.

I followed some of them since they were chosen before their finals. They were buzzing with ideas ready to be launched on prospective investors even while they were swatting for their exams.

But when I caught up with them again in October, the original ideas were (for the most part) dead and buried; the teams were working on completely different ideas.

I came back in November and they had changed again. The same in December, with the date of the pitching session to real life outside investors ticking ever nearer.

The team pursuing the idea of an online method of teaching users how to pass the written part of the driving test had dropped that as insufficiently attractive to customers. Instead they were now working day and night on a user-friendly smart phone application to enable diabetes patients easily to send their blood sugar level data to the nurse or GP.

They showed no shame or inhibitions that the business plan they had pitched so convincingly to me a month before had now been transformed into something quite else they seemed equally enthusiastic about, and equally convincing.

But they did not call the changes "iterations". They brazenly used the more modish term "pivoting", taken (I gather) from skiing.

I ventured my hesitant reaction that there was something shallow here; that instead of a clutch of business people with burning ambition to turn their new inventions into world beating companies, Entrepreneur First might simply be creating a parade of striking pitchpersons, wondrously persuasive salesmen and women.

No that's not true, insisted the chief executive of Entrepreneur First, the very youthful ex-McKinsey staffer Matt Clifford. They are learning at top speed from the friction of the marketplace. It is better than they reject insubstantial ideas after a few weeks of trying, rather than wait months to discover their lack of viability.

I hope he is right. I hope that those fluent young graduates will all turn out to be hugely successful business entrepreneurs with the real business products that transform the world... rather than just super salesmen.

And if they do, then I will have to iterate, too... and put my old-fashioned suspicions about pivoting back in the bottom of my little drawer of out-of-date prejudices.