Startup Lessons From The Beatles’ Biggest Failure

A version of this article previously appeared on Inc.

The words "failure" and "the Beatles" seldom appear in the same sentence. However, the Beatles' early career was a series of failures, culminating in their unsuccessful audition with the leading record company of their era, Decca Records. This particular failure nearly caused the band to breakup.

At the time of Decca's rebuff, the Beatles had been performing under various monikers for nearly five years. Most groups would have returned to Liverpool and continued to play occasional gigs while beginning their working class careers. Fortunately, the Beatles were not "most groups."


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Failure Wasn't In Their Songbook

Entrepreneurs can draw a number of startup lessons from the manner in which the Beatles' addressed Decca's devastating rejection.

Wrong Product - The material for the audition was selected by the group's manager, Brian Epstein. Brian's musical "qualifications" were derived solely from the fact that he curated the record section within his father's furniture store. Of the thirteen songs, ten were uninspiring covers of American tunes, which the Beatles sang with exaggerated American accents.

Brian's intent was to showcase the group's multi-generational appeal by drawing upon mainstream songs, including Broadway show tunes. Brian only selected three Lennon and McCartney songs for inclusion in the audition. Notably, the Beatles subsequently never released these original compositions, as they were deemed inferior.

Lesson - Advisor input should not be unequivocally treated with reverence. Entrepreneurs must know when to listen to their advisors and when to reject errant advice. Suggestions drawn from an advisor’s expertise should be valued more highly than uniformed opinions masquerading as sage recommendations.

Wrong Audience - Per George Harrison, "It was unusual at that time to have a group where everybody did the singing. In those days, it was... one guy out front who sang." John's recollection is similar: "They were so dumb. When they listened to these audition tapes, they were listening for The Shadows. So they were not listening at all."

Lesson - Understand a potential investor's point of view (POV) and do not try to change it. Focus your time and attention wooing investors whose POV is aligned with your venture's value prop and ignore those with a contrary POV.

Wrong Team - The Beatles' ultimate lineup was incomplete at the time of their Decca audition. The affable, yet musically mediocre, Pete Best was the Beatles' drummer, rather than Ringo Starr.

Lesson - As described in Be The Beatles, one of the keys to the Beatles' ultimate success was the creative tension and balance they achieved once Ringo joined the group. A startup can likewise ill afford to compromise when establishing its core team.

Wrong Time - Timing is everything in comedy and business. The Beatles were simply not ready at the time of their Decca tryout. According to Paul McCartney, "Listening to the tapes, I can understand why we failed the Decca audition. We weren't that good, though there were some quite interesting and original things."

Lesson - Startups have limited opportunities to secure key customers, investors and employees. It is very difficult (usually impossible) to recover from a negative first impression. As such, entrepreneurs must balance their desire to accelerate their path to success with their startup's capabilities.

Wrong Motives - Brian paid Decca £15 to record the session (equal to $42 at the time, and equivalent to $317 in 2013). Thus, it is unclear whether Decca's motivation was a sincere desire to evaluate the band or an opportunity to score a small payday by utilizing an otherwise empty studio.

Lesson - An entrepreneur's two most limited resources, time and money, must be strictly guarded. Thus, when a customer, investor or partner makes a request, their motives must be dispassionately explored. If their motives are not congruent with your goals, the opportunity should be ignored.

Wrong Expectations - According to John Lennon, "I think Decca expected us to be all polished, we were just doing a demo."

Lesson - Establishing appropriate expectations among a startup's stakeholders is imperative, as over-promising and under-delivering can be its death knell. For instance, if you deliver a prototype to a potential partner who is expecting a commercialized solution, the potential partnership may be irreparably damaged.

Wrong Critics - After the group achieved success, John Lennon recounted the numerous failed auditions of their early career, recalling that, "They used to keep telling us, 'It's too much like rock and roll and that's all over now,' because they all thought rock and roll was dead, but they were wrong."

Years later the Beatles recalled their rejection by Decca with bitter satisfaction.

George: "... they (Decca) signed Brian Poole and the Tremeloes instead. The head of Decca, Dick Rowe made a canny prediction: 'Guitar groups are on the way out...'"

Paul: "He must be kicking himself now."

John: "I hope he kicks himself to death."

Fortunately, the Beatles handled their failures like successful entrepreneurs. They ignored the alleged musical experts, internalized their failures and improved their value prop by working their asses off.

Entrepreneurs can take solace in the reality that everyone, including immensely successful people, suffer soul-searching failures. Setbacks on the path to success are inevitable. What matters is whether you allow them to build you up or tear you down.

Follow my startup-oriented Twitter feed here: @johngreathouse. I promise I will never tweet about the Tremeloes' latest reunion tour or that killer burrito I just ate.

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John Greathouse is a Partner at Rincon Venture Partners, a venture capital firm investing in early stage, web-based businesses. Previously, John co-founded RevUpNet, a performance-based online marketing agency sold to Coull. During the prior twenty years, he held senior executive positions with several successful startups, spearheading transactions that generated more than $350 million of shareholder value, including an IPO and a multi-hundred-million-dollar acquisition.

John is a CPA and holds an M.B.A. from the Wharton School. He is a member of the University of California at Santa Barbara's Faculty where he teaches several entrepreneurial courses.

Note: All of my advice in this blog is that of a layman. I am not a lawyer and I never played one on TV. You should always assess the veracity of any third-party advice that might have far-reaching implications (be it legal, accounting, personnel, tax or otherwise) with your trusted professional of choice.

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