The CEO of a $4 billion education startup shares how rejecting Silicon Valley’s obsession with failing forward can lead to real success

Hollis Johnson/Business Insider

Chip Paucek is the cofounder and CEO of the educational tech company 2U.
His first company failed after 10 years, and he considers the day he laid off most of his staff to be the worst of his career.
He says the startup culture of "failing fast" is cavalier and not helpful. Paucek recognizes the value of learning from failure, but recommends building a company with focus and deliberation.
C-Suite Insider is a collection of exclusive interviews with leaders of the world’s largest companies.

Research has found that about 70% of venture-backed startups, those that are looking to scale, fail to ever return money to investors. It makes sense, then, that as a startup hub, Silicon Valley would develop a particular culture around failure, where you can "fail forward" and keep throwing ideas and cash out there until something sticks and you get a billion-dollar company.

Chip Paucek got that billion-dollar company — as of this writing, his education technology firm 2U has a market cap around $4 billion — but he hates that culture. "Drives me nuts," he told Business Insider in an interview last month, after announcing 2U’s earnings.

Paucek started 2U in 2008 as a way to take elite college classes and make them fully online, without compromise, and for credit equal to those offered on campus. 2U helped transform this concept from a radical to mainstream one, with partners like Yale, MIT and Oxford. It went public in 2014 and brought in nearly $412 million in revenue in 2018. Paucek has said it’s on track to see $1 billion in revenue within the next few years. It’s the third time Paucek has run a venture-backed company, the second time he’s built one, and the first one he’s comfortable calling a true success.

"I would say without question, the fact that I did what I did and failed is part of what makes me now, no question. But the failure itself is not the value, and the notion that people run and fail forward fast is ridiculous," he told us.

Shortly after he graduated college in 1992, Paucek built the Cerebellum Corporation. Its flagship offering was the kids’ educational program "Standard Deviants," which ran for a time on PBS and featured young talent like an upstart Kerry Washington, of "Scandal" fame. But eight years, the Cerebellum Corporation was running out of money.

He had about 100 employees at the time, and one day he put 70% of them in one room and 30% in the other.

"I laid off the 70 and it’s the worst day of my career, without question," he said. "Nothing’s close, still today. If you go through that and it doesn’t change you, you have no brain or soul." He shut down the Cerebellum Corporation two years later.

Through all of this, his wife’s steady salary kept them afloat. Taking your business through failure is lonely, he said, "and most people don’t recover from it."

He veered into a job as the campaign manager for US Sen. Barbara Mikulski, and then joined Educate Inc., which owned the educational series Hooked on Phonics. He eventually decided it was time to take another shot at building his own business, despite the pain of the first.

But he had learned. "In my first company I did way too much, way too fast," Paucek said. He explained that he was able to build a team that allowed 2U to grow effectively, but, "One thing I will take credit for is our focus. I had been burned enough by a sort of desire to do too much."

Sure, 2U’s business model of partnering with universities on developing an online learning experience and sharing tuition was untested, but he was deliberate about ensuring that the team nailed execution before pitching new clients or expanding the business. It was OK to make mistakes, but he and his team were not going to be reckless and force unnecessary challenges.

Paucek wants entrepreneurs and would-be entrepreneurs to know what they’re getting into, respect they’re part of a company with other people, and to not fall for the myth of embracing failure. "The reason that it gets me amped up is this whole idea that somehow failure is something beautiful," he said. "No, it’s rough."

NOW WATCH: A Wharton professor and organizational psychologist says leaders promote the wrong people, exit interviews miss the point, and there’s an easy way to find out if someone is stealing

Source: Business Insider – rfeloni@businessinsider.com (Richard Feloni)