You’re Probably Going to Fail… Don’t Worry About It
Originally posted on 10/16/19
Collin Gutman is a Co-Founder and Partner at SaaS Ventures, with over a decade of cumulative experience as both an investor and a startup founder. Prior to founding SaaS Ventures, Collin co-founded Acceleprise, the world’s first pure enterprise tech accelerator. Collin also has been an entrepreneur, having founded WorkAmerica, a social impact workforce development startup. Collin holds a BA cum laude from Yale University, and is an avid DC sports fan.
When I was an entrepreneur, I’d sit up long sleepless nights worrying about failing. I wasn’t worried about myself, or my team. I knew I had a great set of people who would get snapped up in a minute by startups I knew, and I had confidence I’d land on my feet.
I worried about my investors. I had angels who invested in the company because they believed in me. I had funds just starting out that were trying to build their reputation. I wanted so badly to repay their faith that I worried about losing their money and becoming a write off. They’d hate me forever.
Don’t get me wrong — this attitude is important. There’s nothing investors dislike more than an entrepreneur who doesn’t value their money or the risk they’ve taken. You need to treat your investors and their capital as trust placed in you — and work not to betray that trust. You should appreciate the gamble they’ve taken on you, and do everything you can to do right by them from an integrity standpoint. If you have an acquisition opportunity, you need to make sure they benefit alongside you, not call the entire consideration “management retention bonuses.” So before I continue, know how important it is to value your investors, their money, and the risk they’ve taken on you.
However, don’t stay up at night worrying about your poor investors potentially losing their money. I was less effective, and have seen entrepreneurs paralyzed by fear. They can’t even function some days because of the anxiety of failing, largely based on the money they’ve raised. You need to stay focused and productive.
The best advice I can give is as follows — investors are generally (or shouldn’t be) investing money they can’t afford to lose into startups. Funds (and most angels) have broad portfolios, where the winners should make up for the losers. In a portfolio, investors assume that 50%+ of investments will fail, and that only a few investments will become big winners. So we don’t expect every single investment to be successful, and we won’t think less of you just because the company doesn’t work. Great entrepreneurs fail, for reasons beyond their control as well as their own failings.
So at the end of the day, breathe. Do your best. Treat your investors fairly and be transparent. Be sincere and give a crap about your investors and their investment. If you do that, you’ll win no matter what — whether the company is a win or a loss. One investment failing won’t be the apocalypse to your investors, as much as it may feel to you as though the world will end if your company goes out of business.