Logan Lenz's avatar image.

Entrepreneur. Marketer. Investor.

My name is Logan Lenz, Ask me anything about anything.

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  • How do you deal with a failed startup?

    Entrepreneur here. Long story short, I will be closing down my first startup this month. We raised 750k from an accelerator and angel investors. I have never been so depressed in my life. I'm fine with failure, but I'm not ok with losing other people's money. Writing that email to my investors was the hardest thing I have ever done. I was searching on Wiselike for entrepreneurs (or investors) who have gone through a similar experience. Not sure you have gone through a similar experience, but you must have seen a lot of startups that have. maybe they lost your money? I would appreciate any words of advice on how to come to grasp with reality. Despite all the wild valuations and funding amounts in the valley, 750k is a lot of money. How do I deal with the fact that I let my investors down? What is the best way to shut down a startup? Is there a way to salvage the relationship with the people I let down?

    Logan Lenz's avatar image.

    There are rough figures out there that paint the most realistic picture of failure. Some of them are as follows....

    48.8 percent of small businesses opened since 1977 never make it to age 5. As an investor, that could mean 4 years of time plus capital loss.

    Forbes reports that 8 out of 10 businesses opened fail within the first 18 months. That sounds like a quicker burn, but 80% suggests how common this is.

    Inc. shared a metric suggesting that 96% of all new companies fail before year 10. This means that building a long term business model is extremely uncommon and difficult.

    But these are all general statistics. You launched a startup within an accelerator. Angel investors were counting on you and your team. In your eyes, you laid out unique expectations that should have defied these metrics. Right?

    The reality of the situation is that no matter the startup, 92% of them have to close their doors within 3 years. This aligns with my usual expectation as an investor. I always say that I expect 9 out of 10 of my companies to fail. However, my hope is that the 10th one is a unicorn, and that it's success heavily outweighs the failure of the other 9.

    I urge you to think like an investor might. Did the investors have faith in you and your startup? Of course. They wouldn't have thrown money at you if they didn't. Did they expect to make 10x returns from your company? Probably not.

    Don't beat yourself over this. Learn from the experience and try it again when you're ready. You didn't con or trick anyone out of their money. As long as you put forth the necessary effort, investors will give you another shot when you have your next stellar startup idea. It's even riskier for them to ignore you after everything you've learned this time around.

    Anonymous profile image
    Anonymous

    Logan,

    Your answer is very appreciated. Especially the last two paragraphs, it struck a chord with me.

    As one might imagine, this has been an extremely difficult time for me. I have felt the world on my shoulders. If thinking rationally, I know that's an exaggeration, but it's the first time I lost so much money. I have felt that I conned or tricked people out of their money. I probably already knew what you just wrote, but reading it has helped calm me down, even if it's slightly. Thank you.