Startup Therapy Podcast

Episode #139

Ryan Rutan: Welcome back to another episode of the startup therapy podcast. This is Ryan Rutan from startups dot com, joined by my friend and the founder and Ceo of startups dot com Wil Schroder will one of the things that we talk a lot, a lot, a lot about in the founder space is failure, right? I mean, it's an inevitability for the vast majority of startup company, so it's an important topic, but I think you and I would, would agree and I want to get your opinion, but we hear a lot about, you know, it makes it sound so final, right? That failure is this this doomsday scenario where, you know, life is over and nothing happens after that. What's your take on that? Like let's let's unpack what failure actually looks like and what kind of losses we, we actually retain and what we recover from and what sticks around,

Wil Schroter: you know, I think we all feel like if this thing fails that it's just end of days, right? I mean that's, that's how this ends, right? Like um we sit up at night at three am staring at the ceiling saying, you know, how am I going to get out of this if this thing doesn't work just like the, the whole world is just like Armageddon. Yeah, I've been there, I know you've been there right in the problem is we get so paralyzed by that fear, which, which ironically, you know, kind of

Ryan Rutan: causes it to, to get worse, you know, that the outcome get worse. That accelerates bad outcomes real quick

Wil Schroter: agreed. But on top of that, I think where we get really messed up is we don't play these fears through, we just play the part where the bad guy jumps out. We don't play the part where we get away just like and so I think it would be cool to talk about today is what are the tools we can use to be able to shine a light on these fears, right? And more importantly, let's go beyond the fears. Let's pretend it all happened, right? Let's play it all the way through. Let's say that that everything we expected to happen happens then what, what does it actually look like? Because we've talked to no lack of founders in this topic, not to mention having lived it ourselves. Um, what does it look like at the end of that journey? And can we recover, Can we get on the other side of this and go build something, do something great. So, let's look at the entire timeline with this um, and unpack all of it to figure out what these fears actually are. Alright, so before we get into this next topic, I just want to let you know what we talk about here is like 1% of the conversation, you know, really this conversation is going on all day long online at groups dot startups dot com. Where Ryan and I pretty much talk endlessly with founders about every one of these topics. So if, by the end of this discussion, you like the topic and you want to dig into it a little bit more with Ryan and I just had two groups dot startups dot com and we'll pick it up from there.

Ryan Rutan: You know, it's funny just even thinking of the language that we use to describe these things. Think about some of the terminology we used to talk about these scenarios like the business is on life support, right? Right. We're at the end of our runway, right? Like all of these things literally lead to like death and disaster, right? The language that we use is important here. Um, and it misrepresents the reality, right? The business isn't on life support. Um, more importantly, you are not on life support, right? If you're not actually on life support, you're not on life support. Right? That's not a thing. And I think that this is one of those places where we talk about this a lot about how, you know, it's hard to extract ourselves from the businesses, but particularly in points like this, it's important to remember that you and the business will face very different consequences if things do go all to hell in a handbasket. Right.

Wil Schroter: Right. It's never what we think it is. Um, the first time that I was running my first company and I was doing what everybody else does, which I'm laying in bed at three in the morning staring at the ceiling saying, what the hell did I get myself into? Right, right. Having been through this nine more times, I understand this process much better. It gets marginally better. Not a lot better. Right? You know those, those moments of anxiety still exist, but what ends up happening is where it gets a little bit gnarly. What ends up happening is that um, we don't define this fear great enough. We know we feel it feel terrified, right? But because we don't define the monster in the corner, we don't give an infinite definition. Not only can we never beat it, But our fears are always 100 x worse than they should be. And so I think the first thing to do is let's talk about what losing it all actually looks like, right, because that's the worst case scenario. So let's just go there and let's play it out. How do you see it when you think about losing it all? What does that actually mean to you?

Ryan Rutan: Sure. Yeah, I remember, I remember a point with with the first business where I thought that was gonna happen. There were a couple of, you know, we had, we'd worked our way out of the small and medium projects into a couple of larger projects, felt great. The margins were way higher. Everything was was fantastic. And then a couple of those big clients pulled the plug on the projects, right? And that has a major major impact now because we've gotten rid of all the small clients. So it was looking pretty disastrous. And given the time frames on payment, all that stuff, it wasn't like I could just go out and hustle up a couple of clients and like, okay, well just prop things up. It was bad, right? We did find some ways to, to pull up eventually, but I remember if I put myself back in that time, right? And I was sure that I was going to lose it all. Uh what was that? What did that actually mean? Right. It was, it felt life ending to me at the time and let me give you like some, some of the like the nitty gritty here. So I developed, it's funny at 19. I don't really think that I had a great concept of 20 at that 200.20 I didn't have a good concept for what? Like anxiety and depression were

Wil Schroter: later.

Ryan Rutan: Oh man, I knew what it was later but I was absolutely suffering from it. Then I had this thing where when the phone would ring, when my cell phone would ring, I would get extremely tired like that. I mean like I just, my phone would ring, I just want to go to bed. I was just like, I just want to go to sleep. It was, it was, it was Pavlovian, right? My phone would ring and I'm like sleepy time, right? And that was anxiety, depression. I was so worried about what the next phone call was going to bring that my body was like, hey, rather than deal with that, let's just shut down, let's just make Ryan go sleepy time. Um And so like it was bad, but it was really bad at that point. And then, you know, again in hindsight, look back and I'm like, what was actually going to happen? Right, worst case was I had enough money to pay the the existing payroll, right? There wasn't gonna be, anybody was gonna get paid, they were gonna get paid again, but everybody's gonna get paid for the work that they had done. So that would be okay. There was about, I don't know, eight or $10,000 in credit card debt, which like when you're 19, that feels like a lot of money, it wasn't right, it wasn't at all. Um and there were some other small liabilities here and there, but let's say my total financial exposure was going to be like maybe 15 grand max, right? And that was, if literally everything just like blew up in my face. Uh And so, and that was really it because there wasn't like, there wasn't anything else to unwind. There wasn't work, we couldn't accomplish, there wasn't anything, I wasn't gonna let anybody down any major ways at that point, it was, staff was probably seven people, right? So they're gonna be seven people who had to go find new jobs, guess what? When I hired them, they didn't have jobs, they were college kids hanging out, literally just waiting for the next, the next allowance so they could go get some pizza. Uh So it wasn't like anybody was going to be really let down. And yet in my mind, this was the end of days was the end of every point where when my phone rang, I went to sleep. Like the amount of stress and physiological pressure that my body was under Was was insane. And over $15,000 in debt, which like compare that to what the other college kids remember. We're racking up in student loans. Um it was, it was a pittance, right? And so you know, and I wasn't factoring in a lot of other really important things like what I gained through this. I trained a bunch of connections with big businesses around town. I had, you know, met a ton of people and and developed some some notoriety and you know, people knew who I was and I knew what I was doing. Uh and I was, was respected within that community and none of that factor at that point. And I'm sure you're probably in the same boat. It's like all that goes out the window. We don't think about anything that we've gained. Its just, what are the losses? What's your point? They don't stack up too much. It wasn't really a big deal. Right. Long, long story, long. I, you know, we, we pulled out one of the, one of the clients recommitted. Um and we didn't have to return their deposit, which is what was really going to create the financial disaster and we proceeded and continued on for another with 2.5, 3 years after that before exit. And so everything was, everything turned out just fine. But boy I didn't feel like it right then. Not at all.

Wil Schroter: Of course. Well the other thing to that that we lose sight of is we still exist at the end of this scenario. Like when we play this scenario

Ryan Rutan: out, the company goes

Wil Schroter: bankrupt and in this scenario we're just watching it happen right? Like this car wreck that, that we can't stop right? The difference in this case is in this, in this car wreck metaphor, we just get out of the car right and another airbags

Ryan Rutan: deploy and yeah, I get picked up and I go home. My insurance company covers

Wil Schroter: one of the things that I didn't consider when I'm sitting, you know, sitting in uh in bed at night staring at the ceiling was if everything were to go to sideways and it did just to be clear. I still exist. 100% of me still exists to either go work on the next version of it, go leave it entirely right and just go work somewhere else. Here's, here's where I was at. Just give me a sense. Um, at this point, I remember this so vividly, how could I not, I'm $100,000 in personal debt, right? It's so funny because this is like in the 90s when they would give any college kid as many credit cards as they wanted,

Ryan Rutan: right? You know, there was a

Wil Schroter: grand experiment gone wrong. Oh man.

Ryan Rutan: How many did you have just to get t shirts? I had at least two just to get t shirts, ironically it was the same t shirt. It was just the john Belushi one that says college. I signed up for two different credit cards to have two of those t shirts. That was how it worked for a

Wil Schroter: first usa I don't even, I'm sure they're not even around anymore. First usa credit card, I'll never forget. They sent me a credit card, a gold card that had a $5000 limit on it. I took the card the same day, went down the street on campus and bought a 1988 Audi 5000 for exactly $4999 on my card because I had no way of getting, you know, financing in any other way and I needed a car. Um What a piece of crap that car was. Anyway, um but what I hadn't considered what I'm staring at the ceiling was that um I pictured the business goes bankrupt, which it was going to write and I'm basically forever locked into this, right? Like somehow this is a life sentence Where I have to be paying this debt off for like the next 1000 years, right? I just hadn't considered how debt works to get my scarlet letter. Yeah. Yeah. Mind you dude, I was like 20 years old, right? I, I had thought that like my career was pretty much over. It hadn't even occurred to me and my friends weren't even close to graduating from college, right? My career

Ryan Rutan: wasn't even remotely

Wil Schroter: started. If you talk four quarters of football. I wasn't even in the pre season. I was in spring training and I was already writing my whole life off right in my mind. I'll never forget this in my mind if this internet company thing didn't work out, I was going to be an associate at best buy like it was specifically that, right? And by the way, I'm not knocking the blue shirts at best buy right. Funny side note best buy wound up becoming our, one of our biggest clients at the agency totally random. But like I think I was like playing out this, this, this, this death fantasy. And so uh you know, in my mind, I was basically me wearing a blue shirt, Um selling people computers for the next 50 years, there was no other outcome. Right? Apparently that was the only thing that could happen. And the reason I say that is because I think when we start considering these outcomes, they're always so fixed, it's always based on whatever happens today is just projected for the rest of my life. Apparently I have no say, right? I just sit back

Ryan Rutan: passively. Yeah,

Wil Schroter: right? And watch the rest of my life

Ryan Rutan: happen. You are the bankrupt actually, emotionally morally you're

Wil Schroter: done. It's unbelievable. And so you know what I hadn't considered was that, um, the moment things go sideways, I'm still around and I'll give you an example. Uh, so the company did go bankrupt by the way. Like basically, like I had taken all the credit cards and used it to make payroll, terrible idea, terrible

Ryan Rutan: idea. Yeah.

Wil Schroter: And we just had like a bad quarter were like, just, you know, we didn't sell anything or receivables didn't come in whatever and I didn't have any money left, right? We weren't like infinitely bankrupt, Right? Like, like Lehman Brothers bankrupt. We were like, we're out $5,000 bank, right? But it's been $5 billion dollars is all the money we don't have, it doesn't matter. So everyone quit. No surprising. Like everyone said, I'm out, right, right? And there I am remember this moment I'm sitting in my apartment on campus and I'm sitting at this like really cheap, let's be honest.

Ryan Rutan: They're depressing anyways, right?

Wil Schroter: I'm sitting at this like, like cheap $100 dinette set that I had in my apartment. And I'm like, well that's it, right? Like it's just me. But, but then something really weird happened. I'm like, wait a minute. I got like, plenty of time, right? Like I, I still have the same 16 hours that I was gonna spend yesterday, I can go sell more web pages. Like, yeah, all these people are gone, but like, I'm not gone, I'm still here.

Ryan Rutan: They weren't here when I sold the first one. Exactly

Wil Schroter: like brian, I don't know why this was such like an aha moment where I was like, wait a minute, like I'm not consigned to working for best buy for the rest of my life, right in the, in the salt salt mines of personal digital assistants and like, and all of a sudden I was like, well ship I can go sell more clients to your point. I I saw the same road decks. If I saw more deals can I just hire some of those people back and lo and behold I could,

Ryan Rutan: who would have, you know, I think that there's this challenge that occurs where it's like, I remember at the time thinking that sort of everybody that I saw saw the same thing that I saw, right? That they all saw me as like, you know, this person was about to be bankrupt about to be failed. You know, living in the shadow of one of the, one of the nationwide towers downtown in a cardboard box. Um they didn't see any of that, that was the same guy that they saw the day before who was running this successful, you know digital digital company and they had no idea, didn't care. Uh, and, and their opinion of me had changed exactly zero. Um, I was living out this fantasy in my head, like you said, the death fantasy in my mind was more bleak and I was literally like thinking through like okay, how can I put my survival skills to use here as I go homeless? Like what kind of forage for in downtown columbus, you

Wil Schroter: know, by the way, I just want to mention if what we're talking about today sounds like the kind of discussion you wish you were having more often, you actually can, you know, we're online all day everyday working through exactly these types of topics with founders, just like you so any question you would have or maybe some problem you just want to work through, we're here and we love this stuff and we're easy to find, you know, head over to groups hot startups dot com and let's just start talking in current terms, I pictured failure to be what adam neumann goes through or Elizabeth Holmes from Theranos schools where they're making movies about my failure right there is just like billboards up about, you know, how dare you. And it's so funny how literally no one cares,

Ryan Rutan: punches, pilot was gonna come along at some point and poke me in the ribs with a spear, like I was going to be crucified, like it was, it was over over it. It was as bad as it could be. And yeah, you know, I mean, it's funny the same capabilities that we have as founders to be creative and project into the future. What are beautiful business is going to be absolutely cuts the other direction. We can be just as bloody creative and, and, and insightful in terms of destroying ourselves, right? We can project that same awful vision. Uh, so yeah, that, that was one that cuts both ways and, and it's bad for you. Okay, so let's talk about that, right? So you're, you're there now, right? You've, you realize you're still around. Um, and now now you've got carte blanche, right? You can, you can do whatever you want, right? Which in some cases it's go right back to doing what you're doing the day before and just build again. Um, which I think is one of the things that it's, You can't see it at the moment. You cannot imagine that after all the effort and time and blood, sweat, tears, money, whatever you've put into this business, that there could be a potential backslide. That backslide feels like death, right? I can't go back to it just being me again, I had seven people, I had 30 people and whatever. I can't be just me again the hell, you can't write to your point. Like you just went back and you're like, I'm just gonna go do the exact same thing I was doing. You can also go do something entirely different, right? Something that says, you have to recreate, doesn't have to be a story of the phoenix rising from the ashes, where the phoenix is the business. As long as, as long as you rise from the ashes,

Wil Schroter: you're good. Well, but the other side of it is all those things that were the problem to begin with, right? Whether they were clients or, or employees or investors or whatever. They all just went away. Right up until that point, I was sweating every night wondering how I was gonna make payroll? Not

Ryan Rutan: appropriately. So,

Wil Schroter: and everybody left and didn't have any payroll and I was like, well damn, I had another scenario right years later with another startup. That was, that was a funded startup. And uh, and for like a year and a half were out trying to raise more money. Like in our second round just never happened, right? And it's a shitty scenario. Um, but same thing, you know, the whole time, I'm like, oh my God, what's going to happen? And then it happened, we basically had to call it quits and you know, let the team go and we had to, uh, tell the investors and in my mind, the, the outcome to that, I was going to be held on forever. It turned out, this is the weird part and again, I can't emphasize this enough because at the time we just can't see this when we tell investors that we're not moving on. It's not like we've got a marathon discussion for the next seven years where every day they come and tell us what an abject failure we are. Right. Here's how my discussions went. And I had some pretty prolific investors that like maybe seven or eight that I had to have conversations with. No one cared. I think the longest conversation lasted a half hour and not because anybody was like beating up just because they were being polite right there. Hey, are you okay? And whatever. But most of the people were more or less the equivalent of saying, here's an email. And I called everybody like essentially the equivalent of an email and a conversation said, hey, things didn't work out. We tried X, y, Z And they're like, all right. You know, let's see if we can do something next time. Wait what? I've been killing myself for 18 months. And, and this is the outcome. This is the

Ryan Rutan: outcome. You know, it's funny like you, part of you actually wants it to be more than that, right? Part of you? Kind of feels like you want people to be more upset. You want them to like help you wallow in this a little bit. Um, they just don't write because it wasn't that big of a deal. Like you've said this before and I think you're referring to the same story, but a lot of those investors had given up on you a year before. They're like, Yeah, uh, totally. So like we're surprised you're still doing this. Um, yeah, it's, yeah, often the writing's on the wall for everybody else before it is for the founder.

Wil Schroter: So the other thing that happened was that, um, I assumed that like, you know, with the investors team, whatever that everyone would be like in my world all the time, right? And I forgot that it's kind of like in a breakup, right? You break up and that person just goes and does another stuff, right? Except unlike a breakup where you're wallowing, you know, in the breakup and like, you know, looking at their social media to see who they're dating. No one cares. Just, just heads for the hills. The staff like they're frustrated that week, deservedly. So right the next week they think about it a little bit maybe and by the next week no one cares.

Ryan Rutan: They're working at their new job.

Wil Schroter: Exactly. They were onto the next thing. The only person that wall owes is the founder and the thing is at the time before all this happens before this, this Armageddon happens. We put it in our mind that the wallow will last forever, Right? During all my brakes at best buy, I just go behind in the parking lot and just cry myself right in the fetal position about my failures, right? Um, anything that I failed at, I still feel the pain, you know, Ryan, when I'm describing, uh, you know what it felt like to, to part with investors, shut the company down. It wasn't awesome, right? Like, you know, even if I try to glamorize the story, it sucked. What amazed me was how quickly it just went away. Yeah, nobody else remembers all of these losses is they don't stick the way you think, you know what I mean? It's not the way it works.

Ryan Rutan: No, it isn't. Like you said, it's, it's the founder that holds onto it. Um, and without any real reason, because the rest of the world's forgotten about it. You know, it's, I'm just picturing these snares was like, you know, vinnie and Lenny are gonna come around and kneecap you, if you know, because the investors are mad, Like it doesn't happen right. They've already written it off, It's all done. Um, and then, and then you're in clean slate territory where you said, you know, like everything that was negative about the situation in most cases right there, they're going to be some outliers, but in most cases, let's say 95% of what was driving the negativity, the situation is now gone. The payrolls gone angry clients are gone. You know, the ham fisted monocled investors no longer pounding on the table. He probably never was in the first place and everything's back to kind of a new baseline normal and you get to decide what you're gonna do, you're gonna try to, you know, take the, take the debris and rebuild it or you're gonna go on and do something else, you're going to take a job, you're gonna, you know, uh, you know, start something new, you've got all the optionality in the world at that point. And again, I want to reinforce this, I had a conversation yesterday with the founder uh that that was very much centered around something similar and that was, this is an amazing experience that you've just been through. It doesn't feel like it now, but this definitely strengthened the armor. This definitely sharpens some skills, this definitely taught you some lessons, you are now a different and I would argue better person coming out the other side of this, even even through what might look like and feel like abject failure and that leads to a lot of doors being open, a lot of pathways that would not have existed had you not done this, had you not failed either? You know, marginally or spectacularly doesn't really matter, you're going to come out of the other side of this with different experiences and different capabilities and be a different human and you can leverage that if you choose to like, kind of the minute you stop wallowing, you'll start understanding, wow, there's actually an entire world of things open for me to go and do. Um, there was I I surfaced to tweet yesterday, I'm not gonna remember who it was, it was retweeted by paul Graham. Uh, and it was basically that this, this, uh, this person was saying, you know, I love ex founders, right? Former founders like there he is what he's looking for. He wants a technical lead CTO for a company he's running and he's like, I want an ex founder because of all the stuff that they go through. And he's like, I don't think they realize, um, that the path of being a founder, it doesn't only lead to having a startup. It also gets some of the best job opportunities and networks ever right now, I'm not saying go fail at your startup and then get a great job. That's interesting path. Maybe we'll see some people try that intentionally. I hope not. Um, but more to point out that this isn't where the road ends, it's not, you know, complete disaster at this point. You have more options than you had before you started this. Not less, but I don't think that that's apparent in the moment, um, when the entire world looks like it's on the other side of a keyhole from you.

Wil Schroter: Well, I agree. And ultimately what we're talking about is if everything goes sideways, the one, the one opportunity we don't consider is the clean slate, right? So I'm running the agency, we miss payroll, people quit, right? Clients bail. I'm like, oh shit. Um, the one thing I hadn't considered at all and this is starting, where we go to the part where we play this thing out is, wait a minute if I don't have any payroll, I don't have, you know, I can go to three months, however long without having to worry about this thing for a minute, Right?

Ryan Rutan: You've said this before, founders, businesses don't random money, founders do, right? So the fact that the business has no money isn't really that much of an issue.

Wil Schroter: Well, what happened was, I was like, well damn, I wake up the next day and I'm like, I can still sell to clients, right? I can still create more opportunities. Maybe I can't hire people full time. And by the way, maybe I shouldn't have, maybe I should have contracted with people. So this time around, when I do this again, I'm not going to replicate the same mistakes, I've got a clean slate, I'm not going to pay everybody before I pay myself, I'm not gonna make that mistake again, right? So I get a fresh set of downs to do to, to do all this differently, right? Or another example, um, some of the startups, I ran after getting into it for a year, a year and a half, two years. I was like, you know what, I actually don't want to run this company, right? Like I've kind of been pulled in this direction because it seemed like a cool idea and now that I'm into it, this isn't really what I want to be doing for a living, uh you know, I wanna bounce and so it was really interesting um, to understand you had to live through it. But on the other side of this, you get a clean slate to do whatever you want to do, including just go get a job,

Ryan Rutan: sleep through the night, things like that.

Wil Schroter: Yeah, I might just want to have health insurance and a regular paycheck for a minute. Right, go do that. Imagine that, right? Will have me. It's totally different.

Ryan Rutan: All right. So, you know, to put a bow on this, what we're essentially saying is that your ability to recover from a disaster doesn't have anything to do with your ability to navigate a disaster or some innate skills that you've got. You don't really have to do anything, right? It's going to resolve itself. In most cases, you're going to end up in this situation where you've got the clean slate carte blanche. Um, you're, you're back at zero or wherever, you know, wherever you started, plus all those experience that you've, that you've tacked on and so take some solace in that, right? And, and and and remind yourself that the options that you have available to you post failure are in almost all cases better than where you were before you started.

Wil Schroter: Alright, so that was fun, but let's actually keep this conversation going, you've heard what we think about this, but, you know, Ryan and I would really like to hear what you think and we're online like all day long, pretty much talking about every startup topic you could think of from fundraising, the customer acquisition to just really have to get all of this crazy startup stuff out of your head. And there's tons of other founders just like you, they're weighing in on these topics so you'll get a chance to just hang out and meet some really smart founders were also super, super easy to find you head over to groups dot startups dot com and let Ryan and I hear what's on your mind, Let's get to know each other a little bit and let's just start having more of these conversations.

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