Thanks for broaching this discussion, Chris. There’s certainly more to startup stories than just epic success and epic failures, especially when you consider success isn’t just financial.
I also struggle with how to prioritize different stakeholders, and like much else in the class think that “it depends”.
Part of it is the deep philosophical question – do you owe more to yourself, or to people who’ve helped you along the way? The hedonistic school of thought says you should do whatever maximizes your own personal pleasure. Not particularly inspiring, but certainly a way of thinking that at least colors everything we do.
Part of the decision also depends on your ability to judge the value that each option would hold for these different stakeholders. For example, you may believe that your investors care primarily about financial success, but they may also care about reputation, ethics, and even maintaining a healthy relationship with you, the entrepreneur! Likewise, employees may care more about staying together as a team or continuing to work on a product they’ve invest so much in, than an attractive exit. These are things that are hard to know, especially as your company grows larger and you aren’t in as frequent contact with any one stakeholder anymore.
Thanks for discussion the psychological aspect of failure – something that is often overlooked!
Another aspect that helps determine whether an individual reacts constructively or destructively to failure it something called fixed vs. growth mindset – something popularized in the education world by Stanford psychologist Carol Dweck. Essentially, children who grow up with a “fixed” mindset believe that their abilities are statics which they cannot change, while those with a “growth” mindset see challenges and failures as an opportunity for growth and for developing their skills. Someone with a fixed mindset avoids challenges, while someone with a growth mindset embraces them.
Thus those who have developed a growth mindset may see failure as an opportunity for new learning – a trigger that could increase, rather than decrease, their dopamine levels.
“‘Tis but a flesh wound.”
Monty Python has a great bit about “the Black Knight” – https://www.youtube.com/watch?v=zKhEw7nD9C4. Essentially, King Arthur has to pass by a knight and reluctantly dismembers him, one limb at a time. After each of his arms and legs are removed the knight defiantly yells “‘Tis but a scratch” or “‘Tis nothing”.
Do entrepreneurs really know the difference between pain and injury? Do they truly understand whether a decision will have long-term, negative consequences on their relationships with investors, employees, customers, and even their family? And if they do, is it still more inspiring to work for or invest in a “Black Knight” entrepreneur who is seemingly blind to being slowly hacked away, stubbornly loyal to his or her one mission?
Just some additional thoughts that came to mind as I read your post – thanks for sharing!
Upasana – thanks for the blog post! I feel like a lifestyle business is something that entrepreneurs (especially entrepreneurs who are used to hearing about $1B+ valuations and rollercoaster-like startup life) rarely consider as a viable opportunity.
As I was reading your post, I was struggling with how to think about timing. For example, you (or your co-founders’) perspective on how big you want your company to be is something that will most likely change over time. I’d argue that most entrepreneurs truly believe that their company is going to be HUGE (most entrepreneurs probably get that their pitch deck is an exaggeration, but believe it’s not by much!). And on a similar note, a company that is aiming for incredible growth may focus on fundraising and customers first, and revenue/profitability later. They may only re-prioritize once they make the decision to become a lifestyle business.
So in that case, *when* should you make the decision on whether to switch to a lifestyle business? At the founding of the company? When your only other options are pivot or perish? Somewhere in between?
Of course, the answer is “it depends”. Like you’ve mentioned, industry, personality, preferences, and business model all affect both *when* you make the decision as well as the outcome of the decision itself. Either way, it’s a conversation you would want to have on a continuous basis with all your stakeholders, especially your other co-founders.
Victoria – thanks for the great suggestions! This is certainly something that many of us are thinking about as potential founders, given that the reason we go through the tough times is so we can enjoy the good (so we want to be around for the good!)
One thing I struggled to reconcile is how you take any of these pre-emptive actions without negatively impacting the company culture, or even contributing to a self-fulfilling prophecy. For example, just like people worry that having a lawyer draft a “founder’s agreement” could generate mistrust between founders, I worry that writing everything down on paper, planning your defenses early, and counterattacking could damage your relationship with your other co-founders, employees, or investors if found out. Not only could this lead to a faster ejection from the company, but it could also leave enough bad blood that would make it impossible to re-enter the company (a la Jobs) or even work with that group of people again (which is tough as a serial entrepreneur).
I’m not sure if I have the best answer, but part of it may be further upstream – being incredibly selective about who your bring on as a partner, with “likelihood of firing me” as a criteria.