I'm writing a story for Forbes about what really happens when your startup company fails. I need to hear from entrepreneurs who have had failing startup companies with an honest explanation of how they were affected financially and emotionally.
The story looks to explore the difference between what potential entrepreneurs expect to go wrong and what really happens. This isn't a postmortem on why your startup failed - it's a short summary of what was lost in the process and how you dealt with that loss.
Some basic questions -
- How did you expect the first few years of your startup company to go?
- What did you risk to launch your startup?
- What do you felt you lost when your startup company failed?
- How did you recoup from this loss?
- What advice would you give aspiring entrepreneurs launching their own startups?
Please respond to - wschroter <at yahoo
About the Author
Wil Schroter is a serial entrepreneur and startup columnist. His columns appear in Forbes and are syndicated in newspapers nationally through American City Business Journals.
I'll add some bullet points: - I'm still in good spirits and not destitute.
- Out of the last 5 employees, the majority are still friends, including my partner in the venture. This seems to be rare to me, but perhaps not.
- I am in a significant amount of personal debt. We did a few personal guaranteed items from the LLC, and now I'm stuck with paying them, including corporate credit card debt. The debt occurred when we were being a little irrational about survival in the last 6 months. It was easy to do because we were being led on a little by a big client. Overall, this debt is going to keep me poor for a while and limits my new startup options some (but not a lot).
- The money invested by my family, friend, and contacts is now completely lost. Software startups really have very few assets worth a damn afterwards. I think most of them are OK with it, but they aren't happy with it, and likely wont loan/invest money again anytime soon. In other words, most of my potential startup cash pool has dried up for future startups.
- I have an immense knowledge now of what it takes to make a business, a software project, a success, and some huge pitfalls that we hit that we can avoid next time. Hiring pitfalls are the most costly and damaging, especially when they are programmers. Good programmers, on the other hand, can basically save a company almost single handedly. We had one of each; unfortunately the good came too late.
- Immediately after we closed, I was terribly unmotivated to do anything. Partly I think this comes with being burned out. I wouldn't call it depression, but it wasn't far from that. I drank too much, and really didnt do much except sometimes try to find a job and watch movies. Luckily I had some investments that I sold that could sort of pay for my worthlessness during this time.
- Slowly I came out of that pseudo-depression, and I am now collecting my ideas, plans for a new startup. This time I'm taking things a little slower. I know I will hire employees a lot later, and look for investment a lot later. That means the business will take longer to get running and gain traction, and will be a side-project to my job for longer, but I don't have much choice monetarily. I think it will benefit me in the end.
- I wouldn't trade my experience for debt reduction -- What I went through was kind of a form of an MBA crash course, and I think the experience will be highly valuable in the future.
Hope this helps.
Two things helped me reach this point after my first company fell apart. First, I taught myself how to program. (I wasn't a hacker at the time.) No new skill has made me feel more empowered. Second, I got a job with a big company, where I was surrounded by a lot of people who -- to be totally frank -- weren't as ambitious or capable as I was. That experience was also very empowering. I saw my strengths, whereas before I'd been dwelling on my weaknesses.
I only lasted about a month at the big company before I got my mojo back and thought, "screw this, time for another startup." =P
So the whole thing, which was based on my idea from the start, failed. This was in mid-January.
The way it happened, however, gave me a great deal of what I would call "negative inspiration." When I first got the news that I was off the team, I spent a weekend away to relax and collect my thoughts. When I got back, I went to the library and checked out books on programming, called and emailed several contacts who I had talked about working with before, and got to work. I learned PHP and started writing a Facebook app, talked with the CEO of a video game art outsourcing company about working on a spinoff project, and talked with some young founders I had met along the way about joining their teams.
It's a great way to harness energy (though I wouldn't recommend the way it happened to anyone): I ended up in a state of "Oh yeah? I can't program? We'll see about that!" and had a working prototype of a Facebook app coded from scratch within two weekends (no fancy frameworks, which I now know is a stupid idea but I wanted to do it more to learn the language). I worked my ass off on the other fronts for several weeks, spinning plates left and right, while taking extra work at my freelance/contract 'day job' running A/V at meetings in the corporate penthouse of a very large company.
There was a bit of panic because I had expected some compensation for my first startup which never arrived, so I had to borrow a bit of money - about a month of living expenses.
About a month later, I started at my current job, which I love. I've learned new skills on the job as well as sharpening old ones - as employee number 2 at a startup, I can pick up tasks that interest me. I'm now coding in Actionscript 3, RoR, and occasionally Java (with a few tiny bits of PHP and Javascript here and there).
So it all worked out in the end. Though I'm disappointed that my original idea and company didn't work out, I realize that it wouldn't have worked out between the other members of the team and me anyway, even if I knew how to code and wasn't occasionally a jerk about things. In that respect, I'm glad I was out when I was and not later, because I would have been wasting my time.
(edited for grammar. COMMAS!)
http://airik.blogspot.com/2008/06/where-you-want-to-be.html
It didn't work out from a business point of view, but it was probably the best experience of my entire life. And in that sense, I feel like I succeeded. Frankly, I'm quite proud of it.
Link?
I never really got emotional about failed startups. I just took the code and the experience and used it as much as possible when I went on to the next project.
This is one of the neat things about software development. When you are the coder you own the code regardless of any agreements that were signed. They can "sequester" the actual code on the hard drive. That's fine, but they can't sequester what's in your head.
If your startup is an internet business or a software product then the worst case scenario is that you will have a lot of code and a lot of knowledge for jump starting your next startup.
I could have used that money to get a master's degree, or put a down payment on a house.
I didn't have to live on the street and go to soup kitchens, but startup failure did set me back about 5 years economically. I had to work at jobs I did not particularly enjoy, and live in shitty shared roommate situations for longer than I would have liked in order to get out of debt.
If I had simply taken the job I was offered at Google way back when instead of trying to do my own startup, I'd be as rich as Marissa Meyer right now.
So yeah it isn't that bad and you do recover but it isn't the greatest experience.
"This is a very important lesson. You must never confuse faith that you will prevail in the end -- which you can never afford to lose -- with the discipline to confront the most brutal facts of your current reality, whatever they might be." The Stockdale Paradox, coined by Jim Collins in Good to Great (Collins, 2001).
nuff said.
Nonetheless, most grownups understand that things don't always work out, and that it's not sufficient reason not to pursue ones dreams.
