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  3.12. Petra and Failing Fast (2 min.)

Consider the case of a high-potential e-commerce startup we will nickname "Petra" that tried to revolutionize the world of small businesses online. They successfully built a beautiful online markets platform, raised seed funding from a prestigious investment group, and began building the business. However, when they got out of the building and robustly tested their hypotheses in the field, they discovered that the fundamental business hypothesis was broken. The team then tried out several more alternative hypotheses in rapid succession, only to discover that each one was wrong.

Then came the difficult part - or so they thought. Rather self-consciously, the team returned to their investor and explained in detail that they had tested the fundamental hypothesis, tested several alternatives, and found that the fundamental business model could not work. The investor’s jaw dropped while he sat in silence for a moment. Then he responded, “This is incredible! I would have given you another two or three million dollars if you hadn't told me that. You just saved me all that money.” The investor was so impressed that rather than asking for the remaining money back, the investor suggested that Petra shut the startup down in an ethical way, giving their employees severance pay and paying outstanding vendors. What’s more, the investor then told them, “When you two have your next idea, come to me first.”

Was Petra a failure? We would argue no. They succeeded in proving that an idea was not an opportunity and moved on to greener pastures rather than wasting their lives on a doomed plan. Pursuing a rapid experiment and finding out you were wrong isn't failure. That is the road to success.