5 Stages of Grief Every Entrepreneur Faces After Business Failure

Tiny Speck was founded by Stewart Butterfield to develop a great multiplayer game (Glitch) that ultimately did not have enough users to justify continued development, so the company was closed in 2012. This was a very challenging experience for Stewart and his employees due to the amount of effort, hours, funding and personal expectations they had put into Glitch.

Instead of giving up after Glitch, the team chose to take a different approach and continue working on one of the many messaging tools they built during the development of the game, eventually resulting in the creation of Slack. Since its launch, Slack has become one of the most successful workplace messaging tools in history. Stewart Butterfield’s experiences show that there are grief, sadness, and self-doubt that often accompany the failure of business, but with recovery from emotional disappointments, new opportunities can arise (Butterfield, 2015; Jenkins et al., 2014; Shepherd, 2003).

When businesses fail, they not only suffer from financial loss, but they also go through an emotional process. Due to the time, money, and personal identity that entrepreneurs put into establishing their own companies, failing will cause feelings of grief, anxiety, and insecurity for the entrepreneur. With the correct mindset and support system, this emotional experience may be transformed into a chance for learning and developing (Shepherd, 2003; Cope, 2011).

Read More: Why Young Indians Are Choosing Startups Over Stable Jobs

The Emotional Toll of Startup Failure

Launching any kind of new business involves much more than just making a good product or making money. Entrepreneurs put a great deal of time, effort, who they are, their connections with others, and their financial resources into their business operations. Their high degree of personal investment is why many founders experience varying degrees of grief when a startup goes down; they feel like they have lost a large piece of themselves.

Many founders experience multiple forms of sadness, guilt, shame, anxiety/frustration about the future, and fear. Several business founders also deal with symptoms of depression and sleeping issues, low self-esteem and social isolation after closing their business (Shepherd, 2003; Jenkins et al., 2014).

Failure in business can put many types of pressures on entrepreneurs with respect to their finances. The entrepreneur may lose their savings; they may have lost their investments; and/or they may have lost personal property due to the business, all under a great deal of stress thinking about how they will pay their debts and meet their obligations. Society often blames an individual for failing in their business, and this adds more anxiety and embarrassment to the entrepreneur’s experience.

There is substantial evidence that creating a new venture and dealing with its failure can cause high levels of stress. Higher stress makes it more difficult for entrepreneurs to think clearly about the future and make decisions (Cope, 2011; Ucbasaran et al., 2013; Cardon et al., 2011).

Read More: Job Hopping as Identity Exploration in Young Professionals: A Psychological Perspective

Understanding the Stages of Grief After Business Failure

Elisabeth Kübler-Ross outlines the emotional journey of an entrepreneur after a failed startup in terms of the five stages of grief. Most entrepreneurs pass through these stages, although the order and experience may differ. These five stages can help entrepreneurs understand and explain their common responses to startup failure (Kübler-Ross & Kessler, 2005).

• Denial: A difficult phase to acknowledge the defeat, where the entrepreneur is often hoping that one more round of funding, one more customer, one more pivot in the strategy could possibly save the startup.
• Anger: Founder might feel angry with the team, partners, investors, the market or with themselves and the entire unfair scenario they are in.
• Bargaining: When the entrepreneur keeps revisiting the “what ifs”, wondering “had I done x, would it not have failed”? “Had I been there”, whereas such reflection can be healthy up to a point, and it may have negative effects if an entrepreneur is constantly caught in self-blame.
• Depression: This phase has negative emotions such as sadness, loss of hope, loss of confidence and emotional fatigue, where the entrepreneurs might question their will to ever build anything new in the future.
• Acceptance: Once the entrepreneur starts accepting the reality of their failure, they have already come far in the journey of dealing with it. The acceptance helps them reflect on the learnings and to make peace with their past, to then prepare for the future and rebuild confidence.

Read More: Living with Loss: Understanding and Coping with Grief

Building Psychological Resilience and Bouncing Back

Psychological resilience is a person’s ability to bounce back from challenges. It helps them tolerate setbacks. It also enables them to keep working toward significant objectives after their efforts to accomplish something have failed. Resilient entrepreneurs recognise all of their feelings by embracing them. They learn from each instance of overcoming an obstacle. They also rebuild their self-esteem slowly and gradually through each experience (Bonanno, 2004; Shepherd, 2003).

• Let your emotions exist: Do not repress emotions like fear, frustration, disappointment, and sadness, but let your emotions exist and understand them. Letting your emotions exist and accept it has a positive impact on your life during your recovery phase (Shepherd, 2003).
• Distinguish yourself from the business: A startup may fail, but that does not make the entrepreneur a failure. Business failures should not have any impact on the worth of an individual (Jenkins et al., 2014). 
• Evaluate what went wrong, but not with too much self-pity: Each experience in a failed business should be taken as a learning experience, and each mistake that is encountered should be a way to understand the causes and conditions of the failure to make better decisions for the future (Cope, 2011). 
• Seek social support: There are many different outlets where support can be received, such as family, friends, mentors, colleagues, or professional mental health support. Such support has proved to reduce the stress levels in entrepreneurship (Ucbasaran et al., 2013). 
• Take care of yourself: Taking care of oneself through practices such as sleeping regularly, exercising, eating well, relaxation, and meditation can help to prevent any physical problems from the stress and emotional toll caused by the business failure and also has a positive effect on one’s decision-making capacity (Bonanno, 2004). 
• Be positive about the experience and use a growth mindset: viewing failures not as fatal and definite problems but as opportunities to acquire knowledge will boost an entrepreneur’s confidence and increase their motivation to make another business in the future (Dweck, 2006). 

Read More: Psychology of Entrepreneurship

Conclusion

Entrepreneurs experience more than just financial loss when their business fails. They may also feel a loss of identity or self-worth. In addition, they often experience increased negative emotions. This is because they have invested significant time and effort over the years and have lost the opportunity to achieve their dreams. This understanding would help them accept that these feelings of grief are natural. They are associated with starting and thriving in a new enterprise. It would also help them work through their business failure more effectively (Shepherd, 2003; Jenkins et al., 2014).

Meanwhile, the outcome of entrepreneurship doesn’t mean the rest of an entrepreneur’s life will always be miserable. A founder who acknowledges emotions can grow from failures. They can search for a community of supporters. They can also strengthen emotional resilience. This helps them learn from and get through the painful past. There are countless successful entrepreneurs who have failed previously and are still succeeding. This indicates that the courage to resist and bounce back is important. Continuous improvement could also always be an entrepreneur’s basis for lifelong innovation and expansion (Cope, 2011; Dweck, 2006; Bonanno, 2004).

References +

• Bonanno, G. A. (2004). Loss, trauma, and human resilience: Have we underestimated the human capacity to thrive after extremely aversive events? American Psychologist, 59(1), 20–28. https://doi.org/10.1037/0003-066X.59.1.20
• Butterfield, S. (2015). The accidental history of Slack (Transcript of keynote/interview). Slack Technologies.
• Cardon, M. S., Stevens, C. E., & Potter, D. R. (2011). Misfortunes or mistakes? Cultural sensemaking of entrepreneurial failure. Journal of Business Venturing, 26(1), 79–92. https://doi.org/10.1016/j.jbusvent.2009.06.004
• Cope, J. (2011). Entrepreneurial learning from failure: An interpretative phenomenological analysis. Journal of Business Venturing, 26(6), 604–623. https://doi.org/10.1016/j.jbusvent.2010.06.002
• Dweck, C. S. (2006). Mindset: The new psychology of success. Random House.
• Jenkins, A. S., Wiklund, J., & Brundin, E. (2014). Individual responses to firm failure: Appraisals, grief, and the influence of prior failure experience. Journal of Business Venturing, 29(1), 17–33. https://doi.org/10.1016/j.jbusvent.2012.10.006
• Kübler-Ross, E., & Kessler, D. (2005). On grief and grieving: Finding the meaning of grief through the five stages of loss. Scribner.
• Shepherd, D. A. (2003). Learning from business failure: Propositions of grief recovery for the self-employed. Academy of Management Review, 28(2), 318–328. https://doi.org/10.5465/AMR.2003.9416377
• Ucbasaran, D., Shepherd, D. A., Lockett, A., & Lyon, S. J. (2013). Life after business failure: The process and consequences of business failure for entrepreneurs. Journal of Management, 39(1), 163–202. https://doi.org/10.1177/0149206312457823