As noted in a previous post ‘What Makes an Entrepreneur Different‘, embracing the work of doing things that might not work is an essential trait of the entrepreneur. That’s nice, but how should we respond when failure happens? When associates scream at each other seeing their investment disappear?
Failure does happen in the life an entrepreneur because we try things and statistically they won’t all work. And often at these occasions, the nice agreement with partners and shareholders suddenly becomes tense and difficult. It then requires a lot of emotional work to keep steady through the management of the tough moment.
Now that I have had some of these, I have decided to stick to some principles to drive my conduct in those moments. They are not applicable to everyone, but they are aligned with my values:
- Anticipate failure to keep some reserves even when things don’t work. This means always accounting for the worst case, and making sure you react before all resources are exhausted to keep some margin for the response
- Put people first. Find solutions for employees to keep their payroll running, even if that means for them doing other things than was planned. It helps being involved in a few other ventures to find some opportunities for them. If needed, find solutions outside through your network
- Show commitment to finding a solution. Fleeing from the scene as an investor is not the solution. It might take years to recover from a business attempt that fails, but that is always possible. The priority is to stabilize the situation, so as to be able to assess it, learn from it, change what needs to be changed.
- Demonstrate your commitment to the people and to stabilization if needed by putting in more money or buying out fleeing investors
- Looking for a providential investor is not the solution. You will be in a weak negotiation position, who would invest in a failed venture, and you have other things to do (this does not apply, of course, to situations where the activity works but the start-up is short of cash runway).
There is always good learning and good stuff to learn from a failing company, and ways to recover by changing things. I believe it is important in any case to show a responsible behavior as an interested investor in particular to the people in the team who have often worked intensely during months.
