Startups · Entrepreneurship

What to do after/if a startup fails?

Eduardo Fonseca Cloud Architect, Senior .NET Software Engineer

August 10th, 2015

As far as I know in Costa Rica, more than half of startups fail in the first 3 years.
I know that failing is not the end, and that it actually teaches a lot.

The question is, how do you do to continue working towards another startup if one fails,
since chances are you would have lost the money.

I ask the question because if a startup fails chances are you won't have lots of savings to invest again,
(if you used family and your own savings)

Is it required to get a part/full time job, generate new savings and continue?

Brian McConnell

August 10th, 2015

Probably the most important thing to do is to take time to rest, including taking a few months off work altogether if its possible. Running a startup is exhausting even if everything goes well, so jumping right back to work, and especially another startup without adequate time to rest and reflect is best avoided. The good news is that even in failing you've obtained an education that few people ever get which will prepare you for whatever comes next. Quite often the difference between success and failure boils down to luck and/or timing, so don't let anybody tell you that it reflects badly on you. Anybody who knows anything about business knows how difficult it can be, and how a lot of things have to go the right way to have a good outcome. Also, its important to remember who you would want to work with or do business again. You'll probably keep crossing paths with them, so make sure things are good with them. It is equally important to note who you would not want to work with again. People's moral character tends to reveal itself most in adverse situations like this, so if someone threw you under the bus during this process, you can be sure they will do so again (its best to separate one's self from toxic or dishonest people, little good comes from working with them any more than is absolutely necessary). My $0.02

Dan Maccarone Co-Founder/CEO at Charming Robot

August 10th, 2015

Eduardo- It's always hard for a founder, especially, when a startup fails and the reason it didn't succeed isn't always someone's fault. it could be timing, could be anything. I think some good advice can be heard from Christina Wallace in her interview here: and Ashley Granata in her interview here: Both of them have had challenges dealing with the end of their startups but have picked themselves up and gone on to amazing careers with new ventures. Take a listen.

Steve Everhard All Things Startup

August 10th, 2015

There isn't much detail in your question so the answer is going to be somewhat generalist by definition. I'm assuming that you are contemplating what failure means rather than actually going through it yourself. If this is the case then the goal is to avoid your startup failing in the first place. Although timing is an important part of hitting the kind of success that grabs headlines, building a startup business can be paced in order to avoid common causes of failure.

One of those is "my timing was wrong - I was too early/too late". Research your market(s) and stay in contact with them through your development phase. Ensure through testing that what you are building reflects where your market is. That doesn't mean you are a follower but that you create a product or service that has a defined audience, whether they expect your arrival or not, and that the business is able to deliver.

Preserve cash at all costs. If you raise money the be clinical about what you will use that for. Don't tolerate cost overruns by using good management and careful planning. Don't let anyone scare you into running faster than you can afford or in investing in things that aren't core to your tested proposition. Negotiate everything you need.

Find your revenue model,even if you don;t exercise it right away. Don't assume that cash naturally follows popularity or early adoption. If you don;t plan for it then it won;t happen.

What happens if you fail? Well it shouldn't be a sudden situation if you have practised good management. Be honest with their funders. They should understand at the outset the risk of their investment, so let them know early if you believe the business is worsening the risk. This will make things easier if you have to wind it up. This is equally true of creditors in general - don't take money or credit if you don;t intent to service it.

A sabbatical is sometimes necessary. I know a couple of startups who took 6 months between early beta and late beta simple to take outside contracts and build up their war chest. It also gave them the space to evaluate their direction and perform a small pivot and avoid running headlong into a brick wall of failure. Space to make good decisions is necessary but underrated in the overheated environment that commentators place on start-ups.

Plan to win and not to fail. Make good decisions. Pace yourself. Do your homework to ensure your assumptions about product/service features and markets are defensible. Look up occasionally to see what others are doing and whether the environment has changed. These are all sources of failure. 

Gaurav Khanna Intercontinental Business Connection

August 10th, 2015

More than money you need to be in touch with other startup enthusiasts. When u fail u learn and none onto next gig.
Contacts are more important and valuable then money.
Email me
Entrepreneur / thinker

Michael Farmer Managing Partner, MNSA: Inspire, Aspire, Achieve: 2-10x results from strategic conception to field implementation

August 10th, 2015

Excellent responses and advice here, particularly by Steve and Brian, and with which I concur.  Start-up failure in the first couple of years is as much as 95%.  The number one reason is "owner/founder's ego" and the number two is cash and cash flow management.  One of the best things to do, is to sit back and objectively review why - the how, the what - the venture failed.  What could have been done to prevent failure.  Usually there is a trend or a pattern that will become evident.  Also, none of this happens overnight.  To a trained observer, the "sickness" is in place long before the illness becomes obvious, or too obvious, and by that time, too late to save.  So, what happened in your experience?  Dig deep, ask yourself why to a level of five (a "why" to each answer until you get to the root of the matter).

A start-up failure is not necessarily a failure - perhaps it was a trial run for later.  What did you learn, what experience did you gain.  What do you know now that you would never have known if you hadn't "failed".  Real success is linked to many failures on the way.  Learn and move forward - as Gaurav also advised.

In our Entrepreneurs Blueprint, we cover the 11 essential areas of Must-do's that will lead to success.   These eleven come from analysis of thousands of entrepreneurs, the few who made it and the majority who did not.  The eleven are cost-free, but require serious dedication, desire and commitment. If these are performed well, attracting investors is significantly easier.  Money is there if you are prepared.

Don't give up.  Do your homework and start-up again. 

Rick Feldman CEO at Universal Quality Machine LLC

August 10th, 2015

Start-ups are typically resource-lean, yet the entrepreneurs tend to spend resources quickly.  The first part of my response to this question is: learn an approach that prevents quick expenditure of resources by mastering a lean start-up approach.  There are a lot of materials and now web-sites that are helpful on this topic, many based on the work of Steve Blank, Bob Dorf, Eric Ries, and others.  
As part of a lean start-up approach, the entrepreneur wants to think clearly about what "failure" means: did he or she launch too soon, with a fully developed product or service, before finding out whether or not there were real buyers in the market place?  Then the failure here was inadequate preparation. Or was the failure the discovery that the initial plan or path was ill conceived, or off on the wrong track, in which case the entrepreneur needed to "pivot" in a new direction?  That's not a failure: that's a valuable discovery to continue to build on.  
If failure means that the entrepreneur has now spent down all available resources and is now less than lean, then a new plan of action needs to emerge: what to do differently in the next iteration, how to gather the necessary resources to get it started inexpensively and thoughtfully, what assumptions were proven incorrect and what new assumptions emerge that now need to get tested, and how will these assumptions get tested that result in productive information without carrying large costs?  
And yes, sometimes the new plan requires one step back: get a job, build up some capital, but be networking and learning like crazy: it doesn't cost anything to meet and interview customers and those thought to be possible customers.   

Thomas Sutrina Inventor at Retired Pursue Personal interrests and family

August 10th, 2015

I spent 20 years working for aerospace OEM I obtained two dozen patents and not one of those patents turned into a product.  That means that I have failed at least dozens of times.  A big cost.  
I think that Costa Rica more then half of the startups fail within 3 years is actually a better return on investment that my OEM.  
People that invest in a startup look at the projected return on the investment and set a return amount greater then the losses from all there investment in start ups.  So if you can get a 2X return in two years you earn money.

Robert Eikelboom Empowering the Powerless

August 10th, 2015

Take time off to relax and honestly examine the question: Why did it fail? Ask all involved the same question and don't accept standard answers.

Only after you know that answers, design a new strategy for the failed company.
If you are able to do this, you show yourself that you have learned from the experience. After that all options are open.

Laurie Wright Commercial Real Estate/ Design Industry

August 10th, 2015

Please take me off these emails. Thank you!

Taj Sateesh CEO at Sphinx Resources--The Preferred Recruitment Partners in Hi-Technology R&D & Manufacturing

August 11th, 2015

As far as the failure of startups goes, it's the same story all over Eduardo...only the frequency & grade differs. So Costa Rica isn't that much different.

Thomas Alva Edison didn't invent the Electric Bulb in a jiffy [and that's talking of JUST ONE of his many inventions] somewhere that it took him close to 1000 iterations to make one that glows, but more importantly 'stays glowing' without the filament burning. And when someone asked him 'does that mean that you failed 999 times?', his reply was: No. It's just that the invention of this Bulb consists of 1000 steps".

Like Steve & Brian suggested.....FIRST just relax.
If you have the chance, go to some place where you don't get distracted while you begin to do the review & analyse on what went wrong & MORE importantly 'why'.

Brian is bang on target when he says 'People's moral character tends to reveal itself most in adverse situations like this'. Adversity brings out the Best in people and ALSO the Worst.
Like the Quote goes: "A true friend is the one who walks in, when the world walks out". Mark those who walked off when you were in the dumps for they are SURE to come back when you begin to rise again. Now you know whom to let in & to what extent & whom to avoid. I have seen many such 'friendships' collapse by the wayside in my journey.

I am not sure to what extent one can put it on 'luck', but timing surely is one critical factor for a Startup to succeed or go bust. Unless you do your groundwork--about what you have to offer & what is currently acceptable--properly, chances of going off the 'timing' curve would be high. If you realize that you are either too early OR too late with your product, it's your groundwork that will show the way on how to calibrate your approach while hitting the market. Microsoft was one early example & so too Apple.

And again, CONTINUE with your short, keep your eyes & ears open all the time, EVEN when you are chilling-out to regain your energy levels for the next Startup. Just don't think of the past startup BUT think of everything else on the face of the Earth.
It does happen that most pathbreaking ideas come-up in the most unexpected situations......

All the Best.