Lessons from a startup founder at the crossroads of failure

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Entrepreneurship Section | 1

Lessons from a startup founder at the crossroads of failure

By Andy Dunn | Fortune Magazine | Feb-March 2024 Issue

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In this “money is no longer free” market, that begs two questions: When should founders give up? And how should those founders manage their psychology while seeking the answers to such a momentous question?

According to the author he is facing this exact dilemma right now. His new consumer software startup has not gone particularly well by one sort of important measure: growth. It’s been a four-year grind to find some signal of product-market fit—and they haven’t found it yet. At one point, they had 12 people. Soon, it might just be his cofounder and him, at least until they rebuild in a more methodical way.

Should they try to sell or merge with another startup or company? Should they return capital to their investors, at 16 cents on the dollar? Or should they keep iterating, perhaps consider yet another pivot, even if it means they might run out of cash and end up with goose eggs for their investors, their team, and their time?

According to Ken Chenault, the legendary former CEO of American Express and current chairman of venture firm General Catalyst, the job of a leader is to deliver on two sometimes conflicting mandates: creating hope, and defining reality.  The reason we call the entrepreneurial journey a roller coaster is because—as with so much of the human experience—hope can be a peak and reality can be the pits. According to the author his observation is that it is nearly impossible to be hopeful and realistic at the same time.

To fulfill Chenault’s mandate, some days he publicly project hope, usually when he is genuinely feeling optimistic. Other days he privately suffers the reality of things going nowhere, and then attempt to share just the right amount of the difficulty with the team.  

His roller coaster is amplified by an underlying mood disorder called bipolar I.  In reality, there are droves of entrepreneurs with challenges like him. According to a study from the University of California at San Francisco, neurodiversity correlates with entrepreneurial drive. Bipolar disorder might affect 2% of the adult population, but 11% of entrepreneurs. 

After listening his story his mentor advised him “I wouldn’t stop right now. Keep going.”  Keep going.

According to the author those words rang in his ears the rest of winter break. His partner and he made some tough decisions in the ensuing days.  They downsized and focused on go-to-market rather than deepening their technical investments, they started growing at over 10% a week.

Things are picking up. Or are they? More aptly put: How long will it be before the roller coaster tops out and begins a new plunge?

Hope springs eternal in the world of startups. Because it has to.  As we embarked on 2024, the author resolved to microdose reality every day, rather than wallowing in the troughs, to make it possible to metabolize the hard stuff and stay more buoyant, more stoically and resiliently optimistic, every day.  Past need not be prologue.

3 key takeaways from the article

1. In this “money is no longer free” market, that begs two questions: When should founders give up? And how should those founders manage their psychology while seeking the answers to such a momentous question?
2. According to Ken Chenault, the legendary former CEO of American Express and current chairman of venture firm General Catalyst, the job of a leader is to deliver on two sometimes conflicting mandates: creating hope, and defining reality.  The reason we call the entrepreneurial journey a roller coaster is because—as with so much of the human experience—hope can be a peak and reality can be the pits. 
3. Keep going.  The truth is that we sometimes have a moral obligation to keep going—to our teams, to our customers, and to our shareholders. It’s not always about what’s best for us in the moment. 

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Topics: Entrepreneurship, Leadership, Decision-making