Facing Failure as a Founder

I've been there. It sucks. But hiding your head in the sand is the opposite of what you should do.

Most startups fail. You know this. I know this. Every investor who wrote you a cheque knows this.

And yet, when it actually starts happening to you, something strange kicks in. You go quiet. The investor updates slow down, then stop. You stop returning certain messages. You start spending a lot of time alone with your laptop, refreshing dashboards that aren’t going to save you, telling yourself you’ll deal with it once you’ve figured out the next move.

I’ve been there. It sucks. But you can’t hide.

This isn’t a post about how to shut down a company. I’ve written about when to shut down and I’ve picked apart my own failure in detail. This is about something narrower and harder. It’s about what you do with yourself, and with the people who backed you, when the thing you’ve poured years into is going sideways.

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Hiding feels safe. It isn’t.

When things go bad, the instinct is to retreat. Curl up. Go dark. Pretend it’s not happening until you’ve got it under control.

This instinct is exactly backwards, and there’s decent evidence for why.

Avoidance feels like relief in the moment. You dodge the hard conversation, you skip the update, and the anxiety drops for an afternoon. But psychologists who study avoidance coping have found the same thing over and over: ducking the thing you’re afraid of gives you short-term relief and makes the anxiety and depression worse over time. The relief trains you to keep avoiding. The problem keeps growing. (Here’s a decent overview of the research if you want to go deeper.)

Founders are especially exposed. Michael Freeman’s research on entrepreneurs found that mental health conditions touched 72% of the founders studied, with 49% reporting a personal history and 30% reporting depression. That’s far above the comparison group. We are not a population that should be white-knuckling a crisis alone in a dark office.

Read enough founder postmortems and you see the same trap described from the inside. Nancy Hua, who ran Apptimize, wrote that she spent years hiding her struggles from her own team: “This was not fun for me because it was lonely, but I didn’t know another way to operate.”

That’s the thing about hiding. It doesn’t just fail to protect you. It walls you off from the exact people who could help.

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Your investors already know

If you raised money, you have a second obligation on top of looking after yourself: you have to be straight with the people who funded you.

There’s an old adage that as soon as the investor updates stop, everyone knows there’s a problem. It’s true. Silence is its own message, and it’s the worst one you can send. It reads as either “things are bad and I’m hiding it” or “I’ve checked out.” Neither builds the trust you’re going to need later.

Rand Fishkin put it well when he wrote candidly about Moz going sideways: “It’s a hard time to be transparent, but to me, that is the most important time to be so. If we shy away from transparency when things are rough, then it’s not really a core value, it’s just a marketing tactic.”

That applies to how you treat investors, your team, and yourself.

Founders need to remember: investors run portfolios. They expect most bets to fail. That’s the entire model. So when your company is the one that doesn’t make it, you are not the disaster you feel like you are. You’re a known, priced-in outcome. A good investor would much rather hear “I’m done, I can’t do this anymore” than watch you disappear.

You don’t owe them an apology. They took a bet. It didn’t work. That’s the job. What you owe them is the truth, on time, even when it’s bad. You took the money. Be responsible for it.

The upside of doing this well is real. When a founder handles failure with transparency, good investors remember. I’ve backed founders who failed and then went on to win, sometimes watching the same investors write cheques two and three times. It happens all the time. Good investors back people. People occasionally fail, but that doesn’t mean they won’t win the next time.

A big part of whether I’d back someone again is decided right at the end, when things are falling apart, by watching how they carry themselves through it.

The flip side: some investors will treat you like garbage on the way down. They’ll talk down to you, go cold, or worse. Those are bad investors, and there are plenty of them. It stinks, but it’s not a reason to start lying or hiding. Be forthcoming anyway. You’ll know you did it right, and the people worth keeping in your corner will notice.

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The day I learned investors care less than you think

Late 2009. Standout Jobs was failing. We’d let the employees go. I went to my investors expecting help devising a plan, some type of direction, and what I basically got was, “Do whatever you want.”

I don’t like how they approached it, but I get it. The returns weren’t going to be there, and it isn’t economically rational for a VC to pour time into a company that’s going to lose. They’d moved on.

I remember sitting alone in our empty office, lights off, feeling completely abandoned.

I was depressed. Abandoned, angry at everyone, caring way too much about what other people thought of me. I should have gotten help. I didn’t. I just gutted it out.

I decided not to go quietly. I reached out to a bunch of potential acquirers, aiming to recover whatever value was left. It worked, sort of. We sold Standout Jobs for cents on the dollar. Everyone still lost money and time. But I did what I felt I had to.

Don’t think of that as a playbook. When it’s over, it’s over, and a good investor should help you get to that ending cleanly. I’m not even sure the perseverance was healthy. Part of it was me proving to myself, and I suppose to my investors, that I wasn’t quitting.

I pulled through and moved on. But I’d have traded a lot of that grim solo determination for someone to lean on. I definitely could have used it.

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What I’d actually tell you

1. If your startup is going sideways, don’t put your head in the sand. Deal with it, and deal with it fast, for your own sake. The avoidance feels protective. It isn’t. It just lets the problem and the dread compound while you pretend.

2. If you took other people’s money, respect that. Most investors are adults who know the business they’re in, and they lose most of the time. That’s not a license to lie, withhold the truth, or disengage. You took the money. Own it all the way to the end.

3. Get help from people who’ve been there. Other founders with real scar tissue. A therapist. Your family (although in my experience family doesn’t quite “get it”). Failing is isolating by design, and the founder population is already carrying more than its share of anxiety and depression. The Lago founders, writing about scrapping their first product, said the thing that helped most was simply talking to friends a little further along the road: “It was good and refreshing to talk to them.” Don’t go dark. You’ll suffocate in there.

4. Don’t pin your worth to one outcome. Success isn’t all the founder’s doing. Luck plays an enormous role, and timing, market conditions, plus a hundred things outside your control. Failure usually isn’t all the founder’s fault either. Mistakes get made. That’s how this works. A startup dying isn’t necessarily a verdict on the person, unless you ignore it and shut everyone out (include those that supported you), then (as an investor) it starts to feel that way.

5. Everything has an opportunity cost. You are not immortal and Father Time is undefeated. Wasting time is a huge mistake. You are better off admitting defeat, moving quickly through the shutdown and grief, and restarting something new. Maybe you start another company, or join a startup, or take a break. Whichever way you go, I bet you’ll be stronger for it. The lessons learned from failure are real (and often more powerful than the lessons from success), and most founders go through it. But dragging things out, surviving on life support, is not worth it.

Failing hurts. A lot. Spending years of your life, singularly focused, and losing anyway is brutal, and it’s worse when it’s other people’s money on the line because the responsibility sits heavy. I’m not trying to soften any of that. I’m telling you the opposite of what your gut is screaming at you to do.

Don’t hide in your shell. Face it. Tell people what’s happening. And move on (for the better).