Steve Blank, the serial entrepreneur, academic, and creator of the Lean Startup movement, was on the cover of Wired magazine in November 1994--just two months before he realized that his company was going bankrupt.

Then the co-founder and chief executive of Rocket Science Games, a San Francisco-based gaming startup, Blank had assembled a team of engineers who knew nothing about designing games. Rocket Science had raised $35 million in venture capital, but the company spent it all without coming up with a viable product.

Speaking at the CUNY Graduate Center in New York City on Wednesday, Blank described a painful phone call to his mother, in which he admitted that Rocket Science was done. His mother, a Russian immigrant, took several moments to "translate" what Blank told her from English into her native Russian.

"I said, 'Hey, Mom, I thought I'd let you know that I just lost $35 million," Blank recalled. That's when his mother, understandably, began to panic. "There was a long pause, and she goes, 'Oh, my God, the country we came from [the Soviet Union] is no longer there. There's no place for us to go!"

But Blank had left out a crucial piece of information: His investors, despite losing out on their returns, had promised Blank another $12 million in capital to start his next company.

According to Blank, his mother then reacted: "They always said the streets were paved with gold in the United States, and I didn't believe it until now."

Of course, it probably helps that by 1994, Blank had already launched and built six successful businesses, so his investors knew they'd most likely score another win. Still, the move speaks to one of Blank's biggest business lessons for entrepreneurs: Failure is fine, and even productive, as long as you do it honestly. Blank said he was upfront about his finances, and that every major decision was brought to the board ahead of time.

"I had a public, humiliating failure, and still the people who lost the money had enough confidence [in me] because it was an honest failure," Blank continued.

In the end, the investors are probably glad they stuck with Blank. He says he ultimately put $1 billion back into their pockets over the course of running his various businesses.

To CUNY's audience of aspiring entrepreneurs, the veteran reiterated: "You can make small mistakes, and you can make big mistakes--as long as they're honest."