Pulling The Plug: Shutting Down Your Startup May Be The Best Way Forward For An Entrepreneur
Join Entrepreneur’s The Goal Standard Challenge and make 2017 yours. Learn more »
As an entrepreneur, you know that, statistically, your venture is 90% expected to fail but how does one learn to accept and manage that probability of failure? Rest assured that no one and nothing will ever prepare you for that painful moment when you will be asked to unplug your dream. You’ll be asked (or even encouraged) to do so by your investors, your advisors or even your team- the founders are rarely the ones initiating the euthanasia, but they are definitely the ones who should turn off the last light.
It is often said that the best way to manage difficulties and overcome them is to face and accept them. But then again, that’s easier said than done. Here are three pointers that may help in this regard though- these are lessons that I have learnt observing some entrepreneurs, as they went through the process of shutting down their own companies.
1. The ‘I’ in failure is you
It’s not destiny, nor is it bad luck. It’s not just bad timing, nor is it just fierce competition. It’s all of the reasons you can imagine, and none at the same time.
When your startup fails, take on all of the blame and save all the lessons you’ll learn. Blaming everything except yourself will not allow you to truly move on- indeed, doing so will also hinder your future moves. Blame is surely part of the healing process, but unfortunately, what some entrepreneurs fail at is taking responsibility, admitting their shortcomings, and most importantly, putting the much-needed effort into understanding the reasons behind these shortcomings.
Some argue that failure in our part of the world carries a heavy cultural impediment, a “what if and what would” mentality that stalls the entrepreneurial drive. Such cultural nuances are irrelevant when reality hits and it’s time to move forward. Avoiding responsibility and blaming the universe (and the investors) will not take you far.
The founding team of a tech startup blamed its failure on a new competitor that entered their market with more funds and a larger team. While such a threat is undoubtedly substantial and the decision to raise the white flag might have been the wisest, what this team did not demonstrate was humility and accountability.
I have, in admiration, listened to founders take the blame and admit failure due to rushed and uninformed decisions they made to later, admiringly witness their triumphs after long, soul-draining and cashless hassles. Some of them are still hustling today- but they find excitement in difficulties as much as successes.
2. Fool me once
When you accept your shortcomings and your responsibility, the liberating decompression will allow you to investigate what went wrong with a clear and open mind.
Don’t close the chapter before making sure that you are ready to open a new one. Some entrepreneurs rush into pivoting by capitalizing on the 1% success they had, before taking the time to understand why the 99% was a flop.
Most challenges are industry agnostic, whether it’s a product flaw, a marketing misstep, a budget blunder or a fundraising muddle; make it your duty to understand why certain decisions or actions did not yield the desired results. Analyze the data and stay away from assumptions and personal hunches; dissect the data, benchmark it, and it will unveil itself to you.
You could also talk to those who suffered the same losses, don’t be ashamed of your failures, talk about them and discuss them with mentors and advisors who can help you understand what went wrong.
3. Just do it
Shutting down a startup is no walk in the park. I have closed two in the past, even after raising funds from angel investors. It is a painful process but one that has to be triggered and concluded by the founders.
Mentors and investors will advise you, encourage you or even push you to close your company, but the ultimate decision should be yours. It takes a great deal of courage to admit that there is nothing more you can do to save your dream, and I have seen entrepreneurs run in circles and delay the decision for many reasons, some quite absurd. Some founders, mainly those who have been hustling for more than two years, think that they lost their way back, and that the marketplace will not understand or appreciate their failed entrepreneurial experience.
While such assumptions might be true, it all boils down to packaging. The way you package and present your failure, turning negatives into positives, will obviously impact your potential employer’s perception, and ultimately, the hiring decision as well.
True entrepreneurship has no dead end
If it runs in your blood, then an entrepreneur, you will be. Failure can only make you stronger, smarter and wiser. You have to lose some to gain some, is what I personally believe. Ask the knowledgeable internet, and it will tell you interesting stories of successful multimillion entrepreneurs who failed miserably more than once.
I once witnessed a very entertaining conversation over dinner between two co-founders of a Silicon Valley startup that recently exited, making them very rich at a very young age. They competed over who made the most expensive mistakes trying to scale the company, and the figures were in hundreds of thousands of dollars. They were able to joke about it now, but those lessons helped them scale a new business they started together.
One cheesy bit of advice I leave you with: stay true to yourself, and if the corporate world is what you are destined for, don’t fight it. If entrepreneurship failed you, you can either try again, or venture into intrapreneurship. Good luck!