We like to say there is no stigma associated with a failed startup. Quite frankly I think that's bullshit. It may not hurt your chances of getting hired again as an engineer because you will likely have great experience from it.
But you will have just spent months/years promising people you were going to improve an aspect of their life (through your business solving their problems, or maybe through getting more financial independence for your family etc.), and you were unable to do so. In many cases you've been trusted with extremely important things. You will have been trusted with a leadership role (in society, not just a company), and you will have failed, regardless of the value of the experience. Startups don't really get traction (outside of social) without serious contributions: being involved in solving hair on fire problems.
So, let's say you're starting a banking/commerce related startup like PayPal, and some fraud happens on your network which ultimately leads to it failing to gain trust (though it is relatively secure) and thus failing to gain traction and failing. Sure, you may handle the breach well, and go on to have a high paying job as a security analyst or something based on your specific experience.
But good luck trying to raise capital again. Good luck getting your friends and family to support you and take you seriously when you're going down your second "I'm quitting my job to give everything I have to a startup." Good luck recruiting engineers who know you as the ex-CEO of failed startup XYZ, etc.
I worked for a startup that failed. My impression is that the founders were never quite the same. It can take a huge emotional toll, especially if you're in the business with your friends.
Around here we take pains to emphasize the bright side of failure, but that's because nobody needs to be coached in how to mourn. Mourning comes naturally. It is carrying on
in the face of negative feedback from the world that takes practice and coaching and teamwork.
I was just about to reply something along those lines.
Failing at your own startup is a bit like burying a child. You start with all these dreams of a bright future, and one day you find yourself facing the stark reality that it just didn't work out, that there's nothing you can do anymore to change that, and that basically the last X years of your life, where you sacrificed anything, were pretty much for nothing. "Well, at least I learned a lot!" is very little consolation in that context.
It's a pretty fucking tough time to go through, burying your startup. I've been there, and hell, I'll probably get there again some day, but it's not the kind of thing that you go through without after-effects.
As a startup employee, you're a bit like that neighbour who watches the previously happy couple tear each other apart and finally divorce. My, ain't it tough for them, geez, I hope it never happens to me.
As the founder, you're right in the middle, ripping your dreams to bits.
And the best part is, after all that, people still expect you to pick yourself up and do it all again!
Edit: I suppose I'm being a bit melodramatic here, as pointed out by the two responses. That said, I do think that shutting down your failed startup that you poured your dreams into is a deeply demoralising experience. Character-building stuff, I think they call it, when trying to cheer you up.
Guys, I helped blow up a startup in '01 that I started in early '99. At our peak we had over 50 people. I'm also a father of two, and I absolutely assure you that startup detonation is going to be nothing whatsoever like "burying a child". The notion that company failures are "mourned" by founders is what prompts head-explodey threads about what "fair" is for founder equity comp.
The reality is a lot simpler. The market simply values a lot of stuff that geeks don't pay attention to, including:
* The initiative to start a company and deal with all the personal, financial, and (importantly) logistical drama that comes with doing that.
* The various forms of capital (financial, relationship, intellectual) founders bring to the critical first 12 months of the company.
* The ability to recruit people into an unproven company.
* The risk --- particularly, the opportunity cost --- of burning 2-4 years of career path on a startup (being the CEO of a failed startup is not a resume bonus for a subsequent engineering role).
* The increased degree of difficulty of --- and, thus, to the market, the smaller pool of people available to perform --- operating a company in its unproven riskiest first 12+N months.
Geeks also apparently don't see the value the market places on the flexibility required to find the best equity comp package. Being "worth 5%" (kind of a nonsense concept, but roll with it) doesn't mean you can get it at any particular company; it just means there's a class of company wherein you might find that role.
The notion that company failures are "mourned" by founders is what prompts head-explodey threads about what "fair" is for founder equity comp.
Interesting. I believe I have observed this very correlation.
(And, considering that I went away for a few hours and returned to find this thread haunted by the ghosts of metaphorical dead children, perhaps I should not have used the word "mourning". Obviously the overtones are too grim. Perhaps "brooding"?)
I agree that such brooding is not rational, and that it is not a good idea; perhaps I could even be persuaded that it's pathological. I'm not yet quite convinced that it's fictional, though. Maybe it really is. I've never been a founder myself, nor especially close friends with one, and all you can really know of other people is what you see from the outside.
I know I am being too literal, and I am sure you did not mean it, but... it is nothing like burying a child. I started a company 2.5 years ago and had twin girls a year ago. The thought of losing one of my kids makes me well up while the thought of losing my company just makes me sad. I have heard lots of people in the world of start-ups say that starting a company is like having a baby. It's nothing of the sort. (I know you did not say that, and again, I know I am being too literal, but I just read your first line and the thought of burying a child filled me dread.)
That's true, but the phrase "burying you child" is a pretty common metaphor. When my dog died, I said something to effect of its was like "burying my child", but obviously a child will be far more important than a dog. I think his larger point is still valid (that failing at a startup is traumatic) is fair.
I will buy that it can cause problems with personal relationships, though working 12-hour days as a startup employee will do that too. But the idea that failure hurts you as an entrepreneur is just factually incorrect. Unless personal incompetence was obviously the reason for failure, failed founders have a much easier time raising money and hiring for a new startup.
I think it depends on how you fail. I'm not talking about a 25 year old's Y-Combinator idea not working out. I'm also not talking about a hyper-technical, experimental startup. Those have high expectations and tolerance for failure. I'm talking about something more entrenched in our mainstream culture, years in, people employed and health insured, etc.
Most people who "succeed" have likely "failed" before (that's where they got the experience), but there are definitely levels at which failure hurts you, in many different ways. To say it is "factually incorrect" is over-simplifying the reality.
We don't have a culture that embraces failure nearly as much as we should, though the tech world certainly embraces what it would call the "right kind of failure."
This is why I restricted my original statement to YC-style startups. A capital intensive startup that someone invests their life savings into at age 45 is entirely different than a software startup founded on a shoestring budget by new college grads. I don't think the latter is particularly risky, which is why there are so many more of them than even 10-15 years ago.
But you will have just spent months/years promising people you were going to improve an aspect of their life (through your business solving their problems, or maybe through getting more financial independence for your family etc.), and you were unable to do so. In many cases you've been trusted with extremely important things. You will have been trusted with a leadership role (in society, not just a company), and you will have failed, regardless of the value of the experience. Startups don't really get traction (outside of social) without serious contributions: being involved in solving hair on fire problems.
So, let's say you're starting a banking/commerce related startup like PayPal, and some fraud happens on your network which ultimately leads to it failing to gain trust (though it is relatively secure) and thus failing to gain traction and failing. Sure, you may handle the breach well, and go on to have a high paying job as a security analyst or something based on your specific experience.
But good luck trying to raise capital again. Good luck getting your friends and family to support you and take you seriously when you're going down your second "I'm quitting my job to give everything I have to a startup." Good luck recruiting engineers who know you as the ex-CEO of failed startup XYZ, etc.