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What Happens to Founders of Failed Startups?

Failure sucks, doesn’t it?

I mean, who actually wants to fail at something?

Nobody starts a company thinking “Gee, I really hope this whole thing crashes and burns.”

But sadly, most startups do fail. And when that happens, founders are left picking up the pieces.

So what exactly happens to those brave souls after their startup dreams get shattered? That’s what we’re going to explore today.

Emotional Fallout

“Failure is simply the opportunity to begin again, this time more intelligently.” – Henry Ford

Let’s be real – having your startup fail can be crushing emotionally.

You’ve poured your heart, soul, time, and money into this thing. So when it doesn’t work out, it can feel like a huge personal failure.

Founders may experience grief, anger, anxiety, loss of confidence, and all sorts of other fun emotions. It’s totally normal to feel that way.

Starting a business is deeply personal, so it’s only natural that failing at it cuts deep.

The key is not letting those emotions consume you. Wallow for a bit if you need to, but then pick yourself back up.

Plenty of wildly successful entrepreneurs failed initially.

Financial Implications

For many founders, the financial hit of a failed startup can be devastating.

Most have invested a huge amount of their personal savings and taken on loads of debt to fund their vision. That money is pretty much gone once the company goes under.

Not only that, but there’s also the lost opportunity cost of not earning a steady paycheck during the startup years. Founders essentially go years without a real income. Yikes.

The good news? Bouncing back financially is very possible with some disciplined budgeting and taking on temporary work. Just be prepared for a significant lifestyle downgrade for a while.

Reputation Matters

How your failed startup is perceived can have a major impact on your future prospects as an entrepreneur. If you maintained a high level of professionalism and ethical behavior throughout, your reputation is likely intact. Investors and others may still be willing to take a chance on you again.

However, if you acted shadily, things can get very difficult.

Getting funding for future ventures becomes an uphill battle when people see you as untrustworthy or unprofessional. Word travels fast in the entrepreneurial world.

The moral? Always strive to protect your reputation, even amid failure. It could pay huge dividends down the road.

Starting Over

Get a Job– Stable income  
– Health insurance 
– Sleep better
– Loss of autonomy 
– Corporate red tape
– Clock-punching
Start a New Company– Passion project 
– Be your own boss
– Upside potential
– Financial strain
– High risk 
– Stress
Take a Break– Recharge batteries  
– Spend time with family  
– Find clarity
– Income hit 
– Removing routine 
– Risk of lethargy
Become a Consultant– Flexible schedule 
– Decent income
– Low risk
– Lack of permanence 
– Always selling 
– Little ownership
Starting over as an entrepreneur

After the dust settles from a failed startup, founders have to decide what’s next. There are a few common paths:

  1. Get a Job – This offers financial stability and the comfort of a regular paycheck. However, it also means giving up autonomy.
  2. Start a New Company – Many serial entrepreneurs quickly move on to their next idea. The upside is huge, but the financial strain continues.
  3. Take a Break – Sometimes you just need to reset. A break allows time to recharge but also risks falling into a rut.
  4. Consulting – Offering consulting services allows founders to still be their own boss with a flexible schedule. However, there is less permanence and they are always selling their services.

There’s no objectively right answer. It depends on the founder’s financial situation, risk tolerance, and personal priorities.

Lessons Learned

“Success is a lousy teacher. It seduces smart people into thinking they can’t lose.” – Bill Gates

While incredibly painful, failure does present an invaluable opportunity – the chance to learn.

Every startup failure contains crucial lessons about leadership, strategy, execution, and more.

The founders who can step back with a growth mindset and honestly assess what went wrong will be better prepared for future endeavors.

The startup journey is a marathon, not a sprint. By analyzing and internalizing the lessons from their first attempt, founders increase their chances of getting it right next time.

On the other hand, those who make excuses or refuse to engage in honest self-reflection are doomed to repeat their mistakes. Constantly learning is the only way to level up as an entrepreneur.


  • Failed startup founders face emotional turmoil and often financial ruin
  • Maintaining professionalism protects a reputation for future opportunities
  • Options after failure include getting a job, starting anew, taking a break or consulting others
  • Biggest opportunity is learning lessons to apply to the next venture
  • Self-awareness and a growth mindset are critical for bouncing back stronger


Q: Is it common for founders to take a break after a failed startup before starting something new?

A: Yes, it’s quite common and can be very beneficial. The startup grind takes an incredible toll, both mentally and physically. A break allows time to recharge, spend time with loved ones, and gain some perspective. However, breaks that go on too long can make it tough to regain momentum. Most founders feel re-energized and ready to get going again after 3-6 months off.

Q: As an investor, would you be more or less likely to fund a founder who previously failed?

A: More likely, as long as they clearly learned from the experience. First-time founders are always a bit of an unknown quantity. Those who have been through the startup crucible already understand what it really takes. Assuming the founder displays self-awareness about what went wrong and has a thoughtful new strategy, the previous failure could actually be a plus. It’s the founders who keep repeating the same mistakes that become impossible to back.

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