While deeply fulfilling, establishing and growing a startup poses serious dangers for your mental health. During the expansion stage, a founder will often face brutally long workweeks, pressure from different sources to manage the startup while raising funding and the stress of having to make many decisions — all at the same time.
Unfortunately, there remains a serious stigma surrounding mental health in entrepreneurial circles. Sometimes, these issues are discussed implicitly under the framework of founder burnout or work-life balance. Perhaps you know, for instance, that a founder who is burning out may go through different stages. The key is to identify when you are on the verge of burnout and take steps to address it immediately.
A Case Study
Mike founded a quickly growing, direct-to-consumer startup in the midstage of expansion, valued at just under $7 million, when he hired me as a coach. He already went through a couple of rounds of fundraising, and his Board of Directors consisted largely of investors from those early rounds. Mike retained about 32 percent of the equity, and those on the Board had more than 57 percent.
He brought me in partially because he wanted to figure out what to do. Mike wanted to shift from the rapid growth stage of burning cash to seize market share, focusing instead on more gradual growth funded by revenue rather than investment capital to get to profitability. His Board of Directors overwhelmingly wanted him to keep growing the company rapidly.
Although either position might have merit, the underlying challenge that Mike experienced was a sense of growing anxiety, even dread, over asking more investors for money. While there’s extensive advice for entrepreneurs about asking fundraising and fear of rejection, it often doesn’t address underlying complications from clinical anxiety and depression.
Signs That Shouldn’t Be Ignored
Mike eventually started going to therapy and taking psychiatric medications. However, while I strongly urged him to reveal his mental health condition to the Board, he refused to do so, insisting that it wouldn’t support him and might even question his competence to lead the company. Mike shared with me a number of instances when he saw other startup founders hide their mental-health challenges due to fears about problematic reactions by Board members.
As someone struggling with anxiety myself, I empathized with his concerns, but thought he was taking it too far. His fears fit with his broader pessimism bias, an excessive perception of potential threats common for those with anxiety or depression.
Pessimism bias is one of the many dangerous judgment errors that result from how our brains are wired, what scholars in cognitive neuroscience and behavioral economics call cognitive biases. Fortunately, recent research in these fields shows how you can use pragmatic strategies to navigate these mental obstacles.
His pessimism did not serve him well. The Board continued to pressure him. Despite his wise decision to seek professional help, his anxiety and stress undercut his fundraising capacity. Since we did not yet have a close relationship, Mike had trouble accepting the uncomfortable information that his gut reactions were failing him.
Turning Point: Timing Matters
Pretty soon, Mike was close to burnout. At that point, when he told me he considered quitting, I finally convinced him to reveal his condition to the Board by asking him what he had to lose, and guess what?The Board expressed a great deal of support. Several members who pressured him revealed they did so because of their own anxiety. Namely, they felt fearful of larger competitors who might try to catch up to the early mover advantage held by the startup. They saw such scenarios happen way too often, and that’s why they were pushing for rapid growth fueled by investor capital.
These Board members suffered from pessimism themselves, taking it out on Mike, pushing him to his breaking point, and agreed to step back from their fundraising goals, focusing instead on more gradual growth.
Nevertheless, the story did not have a happy ending. Badly burnt out, Mike couldn’t go on to achieve even these goals. He lost his passion for the company and hated getting up for work. He thought he could carry on, but he couldn’t make it work no matter how hard he tried. He turned in his resignation letter and offered to sell his equity at a discounted price to the rest of the investors.
The company launched an extensive search for Mike’s replacement. Unfortunately, this person did not work out very well, as he lacked the credibility and branding that Mike had, which is so important in direct-to-consumer offerings. It didn’t help that many of the startup employees felt loyal to Mike’s leadership and vision. Most of them felt discontented with Mike’s resignation, blaming the Board, and many of them left in the subsequent weeks and months, further crippling the startup.
In the end, without Mike’s drive and guidance, the company foundered. A larger company that wanted to enter the space bought the startup at under $2.5 million, a fraction of its earlier valuation.
Burnout in Hindsight
Part of the blame lies with me. Looking back, I believe I could have done a better job as a coach by supporting Mike’s intent in sharing his mental-health challenges with the Board. The whole fiasco could have been prevented with a timelier revelation. An earlier strategic shift to gradual growth would have solved the need for some of the fundraising efforts, thereby letting Mike focus on his passion of satisfying customers and building the brand, instead of forcing him to deal with his most hated task: soliciting investor cash.
I share this story, for which I acknowledge a degree of blame, with the hope that startup founders will take it to heart and influence key stakeholders to be more aware of and attentive to mental health. It should also serve as a cautionary tale for startup leaders wary of disclosing their mental-health struggles to major investors and Board members, as well as a warning to major investors and Board members to encourage founders to take care of their mental health as a major priority.
The Fight for Mental Health and Strength
In an increasingly disrupted and uncertain future, which will only breed more stress and anxiety, we cannot afford to lose talented startup founders by failing to pay attention to the dangers of mental-health challenges. Founders and employees alike need to encourage and model transparency around mental wellness, as well as training in how to spot and support colleagues in times of trouble, while fighting stigma at every turn.