Tracy Lawrence

An Honest Look at Founder Failure

Published about 2 months ago • 4 min read

When I sold my company, I felt like a failure.

My initial efforts to build my company came from a desire to support local restaurants and a love of sharing meals with other people. But as the company grew, my own erroneous expectations for success warped my desires into shame.

  • Shame that we couldn’t raise our Series C.
  • Shame that I couldn’t make my employees rich.
  • Shame that I couldn’t pay my investors back.

My misinformed expectations muddied my motivation. I believe my journey could’ve been speedier, more focused, and clearer without shame clawing into my back.

Truth has a purifying quality. As part of my myth busting series (including Female Founders Raising VC $), I want to shed light on the idea that most companies succeed. I think knowing the truth is liberating and motivating. I hope to catch you in your company-building efforts and shine light on the reality so you can stay true to the dream you started with.

Defining Failure

Founders feel failure many times before an exit. I believe these are all pointing at the ultimate feeling of failure, which is typically defined as the closure of a company, aquihire, or not paying investors back. If you want a technical definition, we can say failure is when companies pay back less than 1x of the capital they raised.

*There are founders who’s companies returned more than 1x but they were booted as a CEO and they felt like failure. There are also founders who return high multiples but fall short of their ultimate vision or personal “money in the bank” number and feel failure. I’m not necessarily addressing those scenarios, but failure comes in all flavors.

Founders have shared with me their fear that they’ll be a “unique” failure. That in comparison, everyone else succeeds at this game but they’ll be the one mucking it all up. And here is where the (self) lies start.

Most Startups Fail

When I attended one of the Foundry CEO Summits1, one of the partners, Seth Levine2, showed us this chart. Everyone’s jaws dropped in the room:

Tl;dr – The majority of startups fail.

65% of investment rounds fail to return 1x capital3.

Out of 10 investments, 6.5 will fail. Another 2 will return 1-3x. And 1.5 will deliver 3-20x.

Initially, I felt the horror of how many startups fail. But when that melted away, I realized that the default isn’t success. When you build a startup, the probable outcome is that you’ll fail.

Let’s wipe the slate clean, and realize you’re playing the slots where you’ll probably lose.

I personally find freedom in this information. The game of building a product or service that people love that has a profitable business model and scales efficiently is hard. Most lose the game.

  • That doesn’t mean you don’t aim to win at a game that others lose at.
  • That doesn’t mean you stop holding your vision for success.
  • It does mean you need to stop thinking of failure as the boogeyman.

From Failure to Focus

Release yourself from the fear of failure. Yes, it’s your statistical outcome.

Focus instead on the things that matter. Does your customer need what you’re building? Do you have the right team to build with? Are you listening to the market?

I was just watching the movie Argylle, where a spy shares a story of how he was free climbing a thousand foot wall. Instead of letting his mind wander to the probable outcome of falling to his death (“bursting like a water balloon”), he instead focused on working the three feet of wall in front of him.

That’s how a startup is built. Three feet at a time. Work the problems that are in front of you, then earn the time to work the next three feet. And eventually with more traction, you earn the capital to work more surface area of the problem you’re facing.

Yes, you’ve chosen to play a difficult game where most people lose. Use this as an opportunity to accept that death is the probable outcome, and make the journey count.

Let me wax poetic for a second and say there is a nobility in accepting that life will ultimately end in death. So many wisdom traditions and spiritual paths use death to illuminate life. Buddhists have death meditations where you use the visualization of your body dying and rotting to help you appreciate life.

Knowing the truth about startup failure is similar. Use the fact that the odds are stacked against you to focus on the right questions. And release yourself from any promises or guarantees of your success.

Venture capitalists know this too. They wouldn’t feel great about telling you, “Don’t worry, most of our portfolio companies fail!” They fear that it will make you lose motivation.

But I find the opposite happens. The obligation towards investors becomes so heavy that it becomes the focal point of the entrepreneur. The customer and team fall into the background of this all-engulfing fear of not paying our investors back.

  • You don’t raise to make your investors happy, since the odds are you will make them (financially) unhappy.
  • You raise money to pursue a vision relentlessly and build a valuable company.

I raised my money in good faith that I had a vision I would march towards with the best team, strategy, and mindset I could muster. This is an ideal mindset to go raise capital with.

I hope you raise money with a clear conscience and perhaps a little more joy on the journey :)

  1. I can’t gush enough about my VCs at The Foundry Group. I was lucky to have a true partner with them, and I can’t thank them enough.
  2. You can read Seth Levine’s original post here. Thanks for sharing your stats and wisdom, Seth!
  3. Seth shares an even steeper failure rate in his book, The New Builders:
    Failure is the reality of life and business, and especially in the life of venture-backed companies....Harvard researcher Shikhar Ghosh...suggests that 75% of venture-backed companies ultimately fail. The incestuous nature of the venture world makes it hard to measure this statistic because what constitutes “failure” is often obscured by companies buying other companies for their employees (known as “acquihire” in the industry - and acquisition for purposes of hiring staff) or for the technology. These companies didn’t succeed, but they didn’t exactly fail, either.

I'd love to hear your reaction to this information. Was it news to you? Did it scare you more? Did it offer some peace? Let me know by replying to his email!

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Tracy Lawrence


I help entrepreneurs and leaders find simplicity and joy at work through mindful, emotional intelligence, and culture hacks. Use techniques I've trained top CEOs to do in the amount of time it takes to order a coffee ⭐️ Exited Founder turned Executive Coach 📈 Raised $40M and managed 100s of employees 🧘‍♀️

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