How Big of a Failure Can I Survive as a Founder?

"I'm on the brink of losing everything at my startup. I'm up every night thinking about what happens when I have to shut it down, let everyone go, and get annihilated with my personal finances. Right now, this sounds like the end of days. Is it possible to recover from this?"

September 28th, 2022   |    By: Wil Schroter

No matter how much we stand to lose, there is always a way to recover.

At the time it sure doesn't feel that way. Nothing keeps us up at night more than playing out every possible scenario of catastrophic outcomes for our startup. We think about the cost of losing our startup, our team, our investor's trust, and ultimately, our personal well-being.

And yes, all of this is super terrifying. But here's the thing, Founders have an amazing ability to recover from catastrophic losses because, in the end, we never consider the fact that the one thing we can't lose is our own tenacity.

It's important to think beyond the "monster in the corner" and play out the entire scenario of what a big loss means, looking all the way past to the other side of it, so that we truly understand what we're dealing with. When we do, and when we go through it, we learn that we can recover from a metric ton of loss.

What Losing it all Looks Like

Let's just start with the worst-case scenario (which rarely happens) — we lose everything. In this case, our startup goes out of business, we have to layoff everyone, all of the personal debts we signed off on come crashing in, and we're working the drive-through at Starbucks, crying while serving a venti half-caff frapp, light whip, sugar-free caramel, with an extra shot.

That's it, right? We're finished. Game over.

Not exactly. While all of that does indeed suck, there's one thing that it does not remove from this scenario -ourselves. Our recovery is 100% based on the fact that we don't lose our own ability to perform, rebuild, and be great again. We tend to completely overlook that important fact when we do our doomsday planning.

Losses that Leave vs. Losses that Stick

We also overlook the fact that most of our losses actually don't stick around — they leave entirely. It doesn't make them suck less, but we do a bad job of factoring this into our recovery estimate. For example, if our startup goes bankrupt and we lose everyone — it's done. People leave, investors bail, and the next day — it's just done. Those losses don't keep showing up every day at our doorstep for the rest of our careers. They all move on to more important things to do.

In fact, short of any personal debt that lingers, most Founders realize that post-apocalypse, their slate of life gets wiped clean entirely, which is a great thing. The moment we wake up the next day and don't have a crashing fiery zeppelin to pilot, we all of a sudden have a fresh set of downs to play with.

Therefore, we need to separate the losses that will stick around from the losses that won't. The losses that stick around are typically way less impactful than we think they are. We assume our reputations are forever tarnished — they aren't. In a year no one will remember or care. We think our finances will be forever ruined — they won't. That's because we'll go on working on something that actually pays us for a change. Our worlds have an amazing ability to self-correct if we let them.

The Clean Slate Plan

What we need to factor into our doomsday planning at 3 a.m. when we're staring at the ceiling of our bedroom is what we'll be able to do with a clean slate. A clean slate assumes the worst-case scenario is long since over, we're re-focused on our next thing, and we have our entire lives to make it awesome. As Founders who recover, that's what the future actually looks like. If you're not sure, remember that Elon Musk filed for personal bankruptcy just a decade before he became the world's richest person.

That's not to say that the path is all sunshine and rainbows — it's not. There's going to be a lot of strife in the middle, but we'll motor through it like we always do. We'll change our focus, we'll reload.

Our ability to recover from a brutal loss doesn't come from some grand strategy that we formulate. It comes from the fact that we can never lose ourselves, we can always build something great again, and every day we spend serving those goddamned Venti half-caffs is going to be the most powerful motivator we can ever have to rise back up again.

In Case You Missed It

Treat Departing Employees like Future Employees While saying goodbye to departing employees isn’t easy, how we handle it is totally in our control and can impact our future professional relationships.

Should I Pay People With Equity? (podcast) Paying people with equity is a time-honored tradition in cash-starved startup land. However, have you ever stopped to consider the real cost? Join Wil and Ryan as they break it down.

When is the Right Time to Give up Equity? Equity is the most important asset of a startup, both in its formation and as it grows. As such, we have to be super mindful of when (and how hard) we pull that trigger.


About the Author

Wil Schroter

Wil Schroter is the Founder + CEO @ Startups.com, a startup platform that includes BizplanClarity, Fundable, Launchrock, and Zirtual. He started his first company at age 19 which grew to over $700 million in billings within 5 years (despite his involvement). After that he launched 8 more companies, the last 3 venture backed, to refine his learning of what not to do. He's a seasoned expert at starting companies and a total amateur at everything else.

Discuss this Article

Comments
 
Unlock Startups Unlimited

Access 20,000+ Startup Experts, 650+ masterclass videos, 1,000+ in-depth guides, and all the software tools you need to launch and grow quickly.

Already a member? Sign in

Copyright © 2022 Startups.com LLC. All rights reserved.