Europeans are far less tolerant of failure than American are, but Alexander Galitsky believes that failure might actually be the best thing that can happen to an entrepreneur.
Voted EY’s Entrepreneur of the Year and a venture capitalist who has invested in dozens of companies, he clearly speaks from experience.
“One of the five companies I set up myself failed, and another was not very successful. But I always learned more from my failures than from my successes.
“When you are successful, you relax and enjoy the recognition – and overlook the small things you did wrong or could have done better,” he warned.
He is a managing partner at Almaz Capital, an early stage venture capital firm investing in high-growth tech sectors, and happily admits to having lost in three of the 15 companies they funded in the first tranche.
“In the second round of funding, we have not lost anyone; we were lucky. But in general you eventually realise that you made a mistake with regards to either the team or the product,” he said.
He is quick to point out that what sets the winners apart from the losers is how they deal with failure – whether they learn quickly and move on, and whether they are willing to tweak their original vision.
“It is rare to find a company which has still got the same vision it started out with 10 or 15 years ago. Everyone knows PayPal but do they realise that it started as a security company, not as a payment company?” he smiled.
Dr Galitsky, who was in Malta to deliver a speech on behalf of EY Malta, is not new to the island. Almaz Capital helped two of the most successful Russian tech companies to date: Yandex, which has a market cap of over $8 billion; and Parallels, a global software automation and virtualisation company which also has a presence in Malta.
Go ahead and do it. We never listened to our parents; we always repeat our mistakes. In business you also need to make mistakes and try to analyse what you did wrong
He describes the venture capitalist as a “nanny”, there to help a struggling single mother cope with her new “baby” – with all that implies in terms of reluctance to accept help from others. This is why, he explained, venture capital firms need to resist the temptation to play god – even though they naturally want to protect their investment.
“Sometimes when you see an entrepreneur making mistakes, you want to push him out of the way and take over! This is their biggest fear when they seek external investors. And this is why you should only get on board with people that you really like and trust – and more importantly who trust you.
“If you build the right synergy then it means that you can fight and disagree, but still work together,” he said.
“This is why we select companies on the basis of the team and the people. Technology can change and products can be developed faster. But people do not change very much. The important thing is that they are willing to learn...”
He pointed out the importance of coaching – no matter what experience the entrepreneur has – adding that even his friend Eric Schmidt, who had considerable experience from Sun Microsystems, was coached when he became CEO of Google in 2001 “because he had to learn so much about the start-up community and working with such young guys”.
The advice he gives entrepreneurs is deceptively simple. His first maxim is that you should not be afraid of mistakes.
“Go ahead and do it. We never listened to our parents; we always repeat our mistakes. In business you also need to make mistakes and try to analyse what you did wrong.”
His second suggestion was to get outside your comfort zone: “Normal people live normal lives. If you want to achieve something that normal people do not, then you need to get outside normal ways of thinking. You need to think out of the box,” he insisted.
“And thirdly, set your ambition so high that even if you achieve 30 per cent of it, you will feel proud.”