Frank Muscarello felt like a failure.

It was 2011, and he was in the crowd at the Chicago Entrepreneurial Center’s Momentum Awards dinner. The business he’d spent 16 years building was gone, vaporized after the 2008 economic collapse.

“I’m sitting there thinking: ‘My business has failed,’” Muscarello said. “It was a scary time.”

Then Brad Keywell and Eric Lefkofsky got up to speak, accepting the CEC’s Entrepreneurial Champion award. What the Groupon co-founders wanted to talk about was failure.

“They looked out and they said: ‘You should look at failure as a badge of honor,’” Muscarello said. “That, to me, was a kick in the pants. I looked at my wife and I said, ‘I’m going to make it.’”

Fast forward to one year ago, and Muscarello’s MarkITx was one of the first startups to move out of 1871, Chicago’s tech startup co-working space. The online computer hardware reseller now has inventory of more than $100 million worth of gear, with a goal of passing $1 billion.

Now riding a success, Muscarello doesn’t run from that earlier failure. He wears it like a battle scar.

It’s a trait more common in the Silicon Valley, where failure is embraced as part of the creative learning process. Muscarello and others say Chicago is slowly developing this healthy outlook.

The key, Muscarello said, is to praise failure. Keywell and Lefkofsky didn’t just say it was OK to fail; they reached into the audience and slapped him on the back, raising his arm in triumph.

“The reality,” he said, “is that you’ve got to celebrate failure.”

Sittercity.com founder Genevieve Thiers took it a step further, saying Chicago needs “to espouse a culture of failing fast. But even more than that, I think we need more support of the pivot,” she said.

A company needs to realize when it is moving in the wrong strategic direction and be willing to change course, she said. What this takes is friends, colleagues, partners and fellow entrepreneurs looking and talking about the pivot as good news.

“Sometimes it can take five or six pivots for a business to get where it needs to go,” Thiers said. “I think it would be nice for us to work here in Chicago toward having a better tolerance for pivots in businesses. That will get us more and more toward a mentality of being accepting of stuff that fails, so that we can get to what actually works.”

Jim O’Connor Jr., interim CEO of the Chicago Entrepreneurial Center, said a fear of failure can lead to “good money following bad money” as companies struggle in vain to succeed.

“We’ve evolved over the last five years,” O’Connor said of the Chicago business community. “Certainly people expect entrepreneurs to have had failures along the way.”

Troy Henikoff, managing director of Techstars Chicago, said a community that embraces a certain level of failure is a community that’s pushing toward greater successes.

“If you’re putting out a proposal, and 100 percent of the people are saying yes, you probably want to raise your price,” he said.

“We all have failures,” Henikoff added. “You learn more from your failures than from your successes.”