- Founders are struggling with their mental health as startups grapple with dried-up funding.
- Many of them have remained silent as they worry that speaking out openly will erode their credibility.
- Josh Felser, a successful founder and outspoken investor, said, “It’s like don’t ask, don’t tell.”
On November 15, Mirai Labs launched its virtual horse-racing game, Pegaxi, the startup’s entry into the world of Web3. The crypto industry at large was riding a tailwind, with venture-capital investors struggling to support the next Coinbase or Axi Infinity. On launch day, thousands of people bombarded the site to race the winged, steel-plated stallion and win digital tokens, which were kept in an online wallet. The adrenaline-high staff from making the game public jumped into tech support to keep the servers from melting down, while Corey Wilton, Mirai’s enthusiastic, 25-year-old cofounder, cheered them on on Telegram, feeling the rush of excitement tokens. Price increased.
The party didn’t go on. The Pegaxy token’s market cap rose to $45 million in February, falling 96% in the crypto-market crash that occurred at the end of that month. Players of the game created a ruckus, abusing employees on social media as their assets disappeared. Wilton said he is concerned about how his team is dealing with the stress of it all.
“I want to build a company that is able to provide for them,” Wilton told Insider. “My decisions snowball into his life. That worry and pressure is something I carry on my shoulders.”
The emotional burden carried by entrepreneurs is known in startup land. Ben Horowitz, a successful founder of Andreessen Horowitz and veteran investor, famously wrote in his book: “If you don’t like to choose between terrifying and doomsday, don’t be the CEO.”
But being a founder in a bear market is a more challenging game. The economic fear and uncertainty of the past six months have put pressure on founders who are already trying to do the impossible: building iconic tech companies. The founders are trying to save face for employees and investors, while grappling with worries of a tech crash that has slashed funding for the startup. Startups like Fast and Airlift are in ruins. Layoffs prevail. And in an otherwise turbulent year, the founders are also grappling with a global war, mass shootings and a lingering pandemic.
“Most people are not well. The founders are not particularly well,” said Caitlin Holloway, a former human-resources leader and now an investor and partner at the venture firm Seven Seven Six. “Founders who are in the middle of fundraising or expanding, are not doing well.”
According to interviews with more than a dozen founders and investors, the experience of being a stressed founder is widely shared, and many still suffer in silence. He worries that talking openly about his mental health could erode his credibility with his team. Investors may see their mental-health struggles as a weakness and try to change them. So some founders hide behind a steely, hard-driving exterior. Many people share their secrets with other founders or spouses.
“Most VCs don’t want to hear about a founder’s mental health,” said Josh Felser, an investor who has long been vocal about mental health. “It’s like don’t ask, don’t tell.”
Burn rate and burnout
A recession only gives a founder sleepless nights. Last year, venture investors pumped cash into startups at a breakneck pace, but they’re taking a more cautious approach amid the current stock-market chaos. This has terrified many founders, whether they are struggling to raise funds or get investments before they can get the money, the founders and investors told Insider.
Two years ago, in June of 2020, Anvil, a software startup that helps businesses convert paperwork into simple Web forms, raised an oversized seed round from Google’s Gradient Ventures and others. Money took the company through last year, so the company’s cofounder and CEO, mang-git ng, pushed the fundraising to the next. Then, in February, word spread of the term sheet for startup funding is being pulled. Emails to investors were not returned. The era of easy money was over.
Ng said startups have felt “the rug has been pulled from under them.” For the past few months, they’ve slashed Anvil’s advertising spending and rented out additional office space to cut rents and expand the company’s runway, postponing a new round a bit more.
Being a founder requires some risk tolerance. But it takes a toll, said Linda Kim, a psychotherapist and therapist who has worked with many of the founders over the years. In times of uncertainty, the brain enters a hyper-vigilant state. It sifts through and makes predictions about future outcomes, studies show, If the uncertainty persists, “the brain gets tired,” Kim said. It succumbs to stress.
Brightline CEO Naomi Allen shouldn’t worry, but she does. Her startup, which provides virtual-behavioral-health services to kids, closed two investments just four months apart: a $105 million mega-round in March and a $10 million expansion in July. Even with her coffers and cost-cutting plans in place, Allen said she can’t ignore the pressures she’s facing.
“I feel significantly more stressed because of macroeconomics, because it increases the pressure on CEOs to be overly prudent,” Allen said. She wants to avoid a scenario where she has to go back out and fundraise before Brightline hits major milestones.
In the beginning, investors care a lot more about the founder than they think. They look for signs that the individual has expertise and passion that makes them uniquely suited for the job.
“You are being told how you are made for this. That is your calling,” said Thomas McLeod, a serial entrepreneur and founder of the blockchain-powered museum, Archive.
The pep talks are meant to inspire, MacLeod said, but they only made him feel more vulnerable. At his fourth startup, Omni, in 2014, he struggled to make it a success, clocking 12-hour days and very few days off. But as the company grew from a handful of employees to a hundred, she realized the stress took a physical toll. He twice rushed from office to hospital in pain.
“I have had as many kidney stones as a startup,” McLeod said, adding three cysts to the tally.
It seemed that MacLeod’s prize for scaling the Omni was of more concern. Typically, the bigger the startup, the more problems it becomes, said Alexa von Tobel, who created the personal-finance app LearnVest and sold it for $375 million in 2015. Von Tobel, now a managing partner at Inspired Capital, said the reward for success for an entrepreneur is often more mental stress.
The founders say that the pressure never lets up. Employees look to them for inspiration and answers, not to mention a steady paycheck. Investors rely on them to multiply the money they put in, so their firms can pay nonprofits, foundations, and schools back up-front of capital. And founders may even have partners and families fighting for their attention.
During her startup’s fundraising this spring, Tricia Biggio said she would hang up the phone with a venture capitalist, who explained her reasons for passing the deal, and anticipating the next investor call. She would then attend a team meeting and try to maintain a friendly disposition for her employees.
“You have to reassure everyone that it’s all right, but you’re also reading the same article they are,” said Biggio, whose startup, Invisible Universe, develops animated characters for social media, like Serena Williams. Ki doll, Kai Kai, and Jennifer Aniston’s pet schnauzer, Clydeo.
help is on the way
In recent years, more investors are showing founders they have their backs. Firms like Felicis Ventures and Seven Seven Six commit 1% on top of each new investment to pay for services like coaching and therapy to the founders. The founders, backed by Freestyle Capital, receive three months of free therapy sessions and paid tuition at the Hoffman Institute, which offers a one-week retreat to help people recognize negative personality habits and learn new ways to deal with them.
His intentions are not entirely altruistic. These firms are part of a new generation of venture capitalists who offer personalized services to help founders win deals, said Zaal Billimoria, cofounder of Refactor Capital. He pays the founders and employees of the seed-stage startups in his portfolio to receive free coaching and therapy from the firm’s management fees. Doing so gives the refactor “a leg up in winning more deals,” he said, “but it’s also the right thing to do.”
After Dan Siroker left his last startup, Optimally, to start something new, he had his own pick of investors to support a repeat founder. They chose First Round Capital, partly so they could participate in its “founding forums,” where founders meet monthly with the firm’s talent partners to support each other.
“It’s a lonely job,” Sirokar said of running a startup.
The stage ended after six months, but Sirokar still meets with his teammates. In June, they gathered for four days at a First Round partner’s home in Lake Tahoe, where they kept sharing stories of late, and taking advice on how to get positive and negative feedback from their employees.
In tough times, the founders say they often rely on each other in loosely formed support groups and group texts. They can overcome their fears and frustrations without worrying about setbacks, said Ri Wang, cofounder and chief product officer of The Grand, a startup that provides group coaching to professionals. Its investor, Seven Seven Six, pays its founders to participate.
And the challenges are not always business-related. Caleb Frankel, whose Seven Six-backed startup, Earlybird, helps families invest in their child’s financial future, wants to have children, but he and his wife are struggling with pregnancy loss. After her first miscarriage this spring, she burst into tears over a video call with her staff.
Frankel was unwilling to talk about what was happening to him. But when the couple lost another pregnancy in July, she told a group of her employees and other founders in a session with The Grand. They supported him and thanked him for his vulnerability.
“I had previously trained myself to believe it was a weakness,” Frankel said of his vulnerability. “It’s becoming a core force.”