Learning from failure

Few people speak as candidly about their failures as Roger Ehrenberg, 43. In 2004, he left an 18-year career on Wall Street -- he had most recently run a hedge fund platform for Deutsche Bank AG -- "to do something different, something entrepreneurial, something truly transformational." Four years later, his first endeavor, Monitor110 Inc., a New York-based online news and information service aimed at hedge fund traders and institutional investors, failed.

Ehrenberg wrote about the experience on his blog, Information Arbitrage, then last month talked about it at a Software & Information Industry Association conference in New York. There, he shared Monitor110's four key mistakes with other entrepreneurs.

1. "Lack of a 'buck stops here' leader." As president, Ehrenberg ran the business side, while co-founder and chairman Jeffrey Stewart oversaw technology. "When it came time to make hard decisions, the two-headed structure really didn't work," he says. "Neither Jeff nor I had the power, real or perceived, to simply change direction."

2. "Too internally focused." The company wasn't attuned to customers' needs. A rift developed between those who wanted to turn Monitor110 into a "Bloomberg for the Web" and those who wanted a pure technology company. "This argument played out over months and months and cost us an enormous amount of money."

3. "Too much PR, too early." The Financial Times profiled Monitor110 in September 2006, four months before the service was scheduled for launch. The article "raised the level of expectations so high that it made us reluctant to release anything that wasn't earth-shattering," says Ehrenberg. "It was also a catalyst for us raising our last and largest round of capital." Monitor110 received $20 million from investors including Draper Fisher Jurvetson, DFJ Gotham Ventures, Acadia Woods Partners and angel Ron Conway.

4. "Too much money." With such deep pockets, there was little urgency to focus on generating revenue. "Feel the stress of getting to revenues ASAP," Ehrenberg advises. "Be incredibly close to your customers. Raise two years of capital -- but ensure the plan gets you to cash flow breakeven if you can't raise more money at that time."