How Startups Deal With the Constant Threat of Failure

If you’re going to do startup, you’re eventually going to fail. It will be shocking, painful, and costly. And until you’ve failed a few times, you won’t be ready for it, because failure is one of the most misunderstood topics in startup.

Let’s fix that.

Look, I’m obviously not the first person you’ve heard bang on failure as an inevitable outcome of startup, or for that matter any type of business. In fact, I’m willing to bet that you’ve also heard a lot of noise about how it’s good to fail, you need to fail, you will recover, and the business community will be right there waiting with open arms when you’re ready to try again.

Having done startup for the better part of 25 years, let me assure you that there’s a lot of truth there. But also a lot of little white lies.

Failure comes out of nowhere

About a month ago, I had an hour’s discussion with a co-founder of a compelling startup. During that call, I mostly listened as she talked about their model, their progress, and where they felt like they were headed next. It was all good, verging on great, and I hung up the phone excited to hear from her the following month.

Last week, she sent me an email. The startup was done. Just like that. So we hopped on the phone again the next morning.

The reasons for the failure were neither unique nor surprising, to me anyway. To her, they were like sucker punches to the gut. Basically, her company lost a massive contract they had spent a lot of time and money preparing for, and almost immediately after that, their largest investor got cold feet on their next round. It was a perfect storm that shrunk their runway from comfortable to zero.

Heard it. Lived it. More than once. Still felt awful for her. But not as awful as she felt.

What I told her was that this was a terrible thing that will become a good thing, if she plays it right. And that is indeed a truth. In my bio, I call myself a “multi-exit, multi-failure entrepreneur,” because if the failure part wasn’t there, I’d just be a bullshit artist. Those failures came for me well before any of the exits, and what I learned from those failures paved the way for those exits.