Error exception must derive from BaseException even when it does (Python 2.7)

__new__ is a staticmethod that needs to return an instance.

Instead, use the __init__ method:

class TestFailed(Exception):
    def __init__(self, m):
        self.message = m
    def __str__(self):
        return self.message

try:
    raise TestFailed('Oops')
except TestFailed as x:
    print x