You’ve heard it before: 20% of businesses fail in their first year, 30% in their second, and 50% are gone after five. My first startup failed, so trust me when I say this: it hurts like you can’t imagine. But because no one plans for it, when your startup fails, you don’t learn anything. If you’re facing startup failure, this is a critical growth juncture in your life… but only if you fail the right way.
The entrepreneurial explosion is here, and alongside the successes will come epic failures. This week, one entrepreneur asked me about my own failure experience as he struggles to keep his startup afloat. Yet another founder who took on funding told me he just broke the news to his staff they’re going under. Chances are good this will happen to you.
If you’re in the muck, focus with me: now is the time to fail the right way. After the pain, things will get way better than you can possibly imagine. (You’re here for a reason. Go ahead and bookmark this. When I’m right drop me a line.)
What to do when your startup fails
When you’re looking down the barrel of startup failure, you begin to question everything, including your sanity. You had convinced yourself you’d be successful and knew precisely how to make things work. You saw the plan. But you were wrong. What else are you wrong about? Do you actually have any real knowledge or skill to contribute to another company? Will anyone hire you? Here are a few tidbits I learned from my failure experience, and my podcast guests’ failure experiences.
You Need To Grieve.
Losing a startup is traumatic. I lost my revenue stream, which was terrifying. I also lost my passion project and what I thought was my dream. While it’s vital to know you will professionally grow when your startup fails, it’s also important to take the time to fully grieve the loss. I didn’t get therapy when my startup failed, and today I know that was stupid.
Today I have psychological damage, perhaps permanent, that I could have avoided if I’d found a therapist. Not to mention the burden on my wife would have been lighter—she put up with a lot. Please learn from my failure. Get help. Dr. Scott Barry Kaufman of the Psychology Podcast recommends Better Help. (Not a paid ad.) The best performers have coaches, so why not hire a mind coach? This will help you put things in perspective. You need that right now.
Write Down Why You Failed
Don’t tuck away your failure or sweep it under the rug. Fully confront it, own it, and ask yourself why it happened. Failure is fuel, capable of propelling you to greater success, but if you ignore it, you can’t learn critical lessons from it. Every high performer has dozens of epic fail stories because high performers learn more from failure than success. You can too, but only if you write it down.
It turns out, we are really crappy at remembering trauma in our lives. Seriously, just check out this episode of Build for Tomorrow on Covid Nostalgia. According to Dr. Bill Klemm, we’re also crappy at remembering things we don’t write down. Because failure provides such a data-rich learning experience, write it down no matter how uncomfortable. You don’t have to share it, but write it down. The lessons you stand to learn are valuable, don’t lose the experience.
You will thank me later.
Look Deeper At Your Identity.
I believed my identity was being a successful entrepreneur. After all, I was featured in The Wall Street Journal and some other high-profile publications. Not only would my failure invalidate all my previous meetings, pitches and keynotes, but I figured no one would listen to my advice on being a successful entrepreneur in the future. I was wrong… so wrong.
The reality is that successful entrepreneurs are experts at failure. When true entrepreneurs see another entrepreneur fail, they see themselves. Hyper-successful people have an intimately close relationship with failure. When they see another entrepreneur fail, the only thing that turns them off is when they don’t own it. Soon Yu, the former VP of Innovation for VF corp, got his prestigious job because he was open about his many failures. Smart leaders want failures because they’ve already learned what not to do. When your startup fails, it’s a beautiful right of passage. Intelligent leaders find non-failures suspect.
Sadly, many entrepreneurs forget or hide their failure—this is why you feel alone right now. Not enough people talk about their failures in the open, because they have the same feelings of inadequacy.
Don’t Question Your Sanity
You probably convinced yourself your startup was the exception to the rule. You wouldn’t fail because of XYZ. Now, you’ve discovered you were wrong. This may lead you to ask yourself some hard questions. What else were you wrong about? When your startup fails, do you have any skills worth applying elsewhere? Were you a fraud this entire time?
Just because you were wrong about your startup means nothing. Steve Jobs had lots of ideas that failed. The brightest people are wrong, and heck, you may not even have been wrong. The better idea and better startup fail all the time for various reasons. Consider Chemex, originally invented in the 40s, never saw commercial success until 2010 when Intellgensia’s CEO Doug Zell just randomly happened to talk about them. (I’m stunned the company limped along for so long.)
Consider Joshua Bell, one of the world’s best violists played in the Washington DC Subway for almost an hour and no one recognized him. (They he played in concert that night, and sold the place out.) People don’t know great ideas when they see them.
Know Your Future Is Strong
Getting back into the workforce is somewhat straightforward if you fail in under 2 years, according to Gustavo Manso’s research at the University of California, Berkeley. So, it should be relatively easy to slide back in the workforce if that’s what you want to do.
But what of the entrepreneurs over that time limit? While it may be challenging for them to re-enter the workforce due to HR’s fear of entrepreneurs (been there), entrepreneurs tend to make more money over their careers than people who haven’t worked for themselves. It’s a rough road for entrepreneurs, but according to the data, when your startup fails, you may actually make more money than your entrepreneurial endeavors.
When you have the stomach for it, you should tell others. Acknowledging failure makes you a better leader—failure hypocrisy is toxic. People know when you’re lying or denying your own failures, and it creates a wedge between your future employees or other entrepreneurs. I used to believe hiding my own failures fooled others. Lol. Nope.
Today, I see right through entrepreneurs or leaders who are hiding their failures. I heard the veiled language. I see the false confidence. I hear them describe scenarios that are innacruate. If you pay attention, the people who are truly successful are quick to acknowledge what they don’t know. Disturbingly, many entrepreneurs think their ruse is working.
In an informal poll I conducted, around 40% of entrepreneurs admitted to lying and misrepresenting their own success. In many ways, entrepreneurialism is a bunch of losers talking only about their successes. The fear, sadness or anxiety entrepreneurs feel is because failure isn’t openly discussed—don’t be a part of the problem.
Failing With All of Us
I’ve interviewed so many people with incredible failure stories and will continue to highlight how bone-crushing failure is a part of the big-idea process. If you’re a failed entrepreneur, let me know what else needs to be included and sign up to get updates. I’d love to meet you and share other failure stories with you.
But before you click off this article, know this: if you fail the right way and follow this advice, you will look back at this moment and be glad you failed. I promise.
Now get back in there, you have some work to do.