Entrepreneur, Investor, Bestselling Author & founder of Play Labs @ MIT
The pandemic of 2020 has tested most sectors of the economy, and like the two most recent downturns in 2008 and 2001, this has been a very trying time for entrepreneurs running startups.
Many entrepreneurs are reliant on outside funding, whether angel investors, venture capitalists, or strategic investors, to keep the venture going. At the same time, many investors are being more cautious with making new investments, preferring to focus on their existing portfolio before investing in new companies.
While not all entrepreneurs are in the middle of raising funding, the need to get the company to some level of profitability, or at least to increase the runway, creates lots of stress. It turns out that this is even true for a number of entrepreneurs I know who had profitable enterprises before the pandemic; suddenly, the pipeline of customers that were expected to close was becoming smaller and smaller.
Figure 1: Entrepreneurship can be stressful. (Ruth Gwily)
While some level of stress is inevitable if you are running a startup, times like this can ramp up the stress factor considerably. At stake is not just your own livelihood, but the livelihood of everyone that works for you (and their families).
I interviewed a number of prominent VC’s and entrepreneurs for my recent book, Startup Myths & Models, and here is some advice I collected for dealing with the stress of such times while running your startup:
1. Remember that you are not alone.
Brad Feld, a partner at Foundry group and investor in many successful startups, gave me this piece of advice. I can personally attest that it’s very easy for a startup CEO to feel alone and isolated. This only makes the stress build up inside you. Brad says: “talk to people you trust, whether they’re investors, board members, co-founders, mentors, whatever; make sure you’re open about the stress and the struggle you’re going through both financially in the business and personally.” A startup is not a lone adventure and it’s important to enlist the ideas of others that are invested in your venture.
2. Join a CEO peer group.
On that same front, if you are in a peer group with other CEO’s, it’s much easier to get perspective on what’s happening to you. When I ran my very first startup, Brainstorm Technologies, I would go to our CEO group and there was always at least one other entrepreneur who was going through similar (or even tougher) challenges. Not only did I realize I wasn’t alone, but the best advice usually came from other CEOs — just by listening to their challenges and the actions they were taking was enough to help. Sometimes, you don’t feel comfortable describing your fears and frustrations to your cofounders or investors on your board, but a peer group allows you to do this in a safe way. During this pandemic, many groups are continuing online via zoom.
3. Deal with the Reality of the Situation.
Brad also added that it’s important not to deny what is happening and to deal with the reality of the situation every day. I’ve seen many entrepreneurs say “don’t worry, it’s not that bad, things will pick up” and delay taking action, whether it’s cutting a product or customer or laying off employees. This is almost always a mistake. Don’t delay making important decisions because you expect things to “get better”. I’ve almost never come across an entrepreneur who said “I wished I’d waited before cutting expenses”, but I have heard many entrepreneurs say, “ I wish I had acted sooner.”
4. Communicate with the Team.
Alex Haro, co-founder of Life360, one of the most downloaded apps of all time, went through many challenging times building up his startup from scratch to a public company. Alex says that one of the things that helped him during these times was being transparent and communicating the real state of things with his team. As a result, he wasn’t bullshitting them with rosy expectations when he knew things weren’t going so well. I believe being transparent can enroll your team in finding solutions, and make more people in the organization buy into the difficult decisions that you will need to make.
5. Manage Expectations in yourself.
When any startup isn’t doing well, entrepreneurs can be particularly hard on themselves. It’s this “inflated expectations” that often can make you feel like you are failing, even when you are not entirely to blame for a situation. Alex Haro says: “I think the more stressful part is that I think any great entrepreneur sets up expectations for themselves that are very hard to meet.” I remember another entrepreneur telling me when it looked like his business wasn’t going to make it, he was dreading telling his investors. It turned out his investors had been through this before and weren’t too upset, but he like a failure and just wanted to curl up in a ball in bed for the next six months. Stress build up over time and one of the best ways to get stressed out is by holding yourself to standards that aren’t being met. Manage your own expectations, and then manage the expectations of those around you.
6. Explore all options.
While most people tell entrepreneurs that they need to “focus”, sometimes a downturn or when things aren’t going well is the right time to explore and try all avenues. Alex Haro says that when they only had a few weeks of runway left and weren’t sure if their next round of financing was going to close, they tried every crazy idea they could think This can mean reaching out to business partner, possible strategic partners/investors, acquirers, angels, to look for ways to keep the company going through these tough times. This might mean taking services projects to keep the company going. Famously, Scott Cook, the founder of Intuit, once had to pay his employees with stock because he couldn’t make payroll.
7. Manage Your Stress.
Perhaps most important, is to manage the stress in yourself. The human nervous system was designed to deal with momentary stress, which induces the “fight or flight” response and floods the body with adrenaline. But chronic stress is something that can become debilitating. A startup is like a constant “fight or flight” situation, and when the economy turns, or you can’t raise the next round of financing, or customers that you had counted on simply put off decisions and projects, it can build up.
In addition to getting plenty of sleep, the lack of which, says Brad Feld, “can lead to shitty decisions”, be sure there are things you can do and places you can go to destress. My personal mantra was “Watch Star Trek, Do Yoga, and Walk on the Bay.” These activities are guaranteed de-stressors for me. In fact, Yoga is an excellent way to let go of the tensions that are accumulating in your body from not just this but all the stressful situations you’ve face. In fact, the ancient Yogis seemed to understand that stress gets built by increasing tension in certain parts of the body. In my case, I live near Google, and there is a park called Shoreline park right on the Bay — and a walk there has the effect of reducing whatever stress I’m holding in my body, making me feel like I’m a thousand miles away as I gaze over the bay to the mountains that surround Silicon Valley. Find your own stress mantra that you can not only repeat, but actually implement every day during troubled times.
Figure 2: Photo by Ian Stauffer on Unsplash
Every entrepreneur’s journey is a little bit different, but most entrepreneurs are finding the current situation to be a major cause of stress. This can be because customers are taking longer than expected to close, because investors aren’t jumping into new ventures, because payroll and expenses have far outpaced expected revenue, or for a variety of other reasons.
Whatever the cause of your stress, these 7 Tips can help you to keep things in perspective, reduce your stress level, and hopefully, make you or your startup more successful in the long term.
A graduate of MIT and Stanford, Rizwan Virk is a futurist, an entrepreneur, venture capitalist, video game pioneer, indie filmmaker and bestselling author. His books include Startup Myths & Models What You Won’t Learn in Business School and The Simulation Hypothesis: An MIT Computer Scientist Shows Why AI, Quantum Physics and Eastern Mystics Agree We Are In A Video Game. He is the founder of Play Labs @ MIT, and is a venture partner at several venture capital firms, including Griffin Gaming Partners. Visit his website at www.zenentrepreneur.com.
This article was originally published at The Entrepreneurs Organization network.