Startup founders share how they bounced back from failure

Over two-thirds of startup founders have a fear of failure, per the Founder Resilience Research Report, 2024.

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Startup founders face immense pressure to succeed, but it can be even more challenging to let go of a failed business and find success after.

Building a startup has always been risky. Since 1994, the five-year survival rate of small businesses in the U.S. has hovered around just over 50%, per the Bureau of Labor Statistics. By 2018, the five-year survival rate was 57.3%.

By 2018, the five-year survival rate of small busineses was 57.3%.

Bureau of Labor Statistics

Serial entrepreneur Ismael Dainehine knows how it feels to fail, having been in the game for over a decade.

He’s founded multiple businesses — two that failed, then three that were successful — and recently co-founded his newest company, EverGive, a non-profit that invests in Bitcoin to compound donations.

Dainehine described his early failures, which saw his first two companies shut down within a few years, as painful.

“I definitely had that pressure that I put on myself because of the financial constraints I had in my personal life … There’s nobody that could have put more pressure on me at that point than I put on myself,” he said.

Dainehine said he was able to learn from these failures, and his next businesses brought in millions in revenue before he exited them. But even working on these companies began to feel “soulless and hollow after a while,” he added.

Entrepreneurship is often sold as something of a utopia — unshackled from the bureaucracy and politics of corporate life. But over the past few decades, founder life has also become synonymous with hustle culture.

Silicon Valley’s startup scene mythologizes seven-day work weeks, while China’s tech companies are infamous for the 996 culture – working 9 a.m. to 9 p.m., six days a week.

Harry Stebbings, founder of 20VC, says billion-dollar firms aren't built on five-day work weeks.

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So how do founders — who are used to this all-encompassing and high-pressure life — bounce back from failure?

‘I lost a lot of my identity’

Moving on from a failed business can require owning up to mistakes and disappointing people, including employees and investors.

Klaas Ardinois founded CommVision in 2024, a U.K.-based software development company that shut down a year later. He said the biggest emotional challenge of failing was disappointing investors who put money in the company, and laying off employees whose lives were upended.

Ardinois, who pins the failure on a market mismatch and being misled by a venture capital firm, said he had persuaded employees from a previous company to join CommVision.

“Emotionally, it was really hard to get to that point of A: admitting that your business is failing. Then B: having to deal with the fallout of ‘I’m about to upset people’s lives quite dramatically,” he said.

“It’s not like: ‘Hey we could work something out.’ It’s: ‘You’ve got four weeks, and I know you’re financially stretched because you bought a house and you’re about to have a baby,’ so that was really hard.'”

Meanwhile, Latvia-based Ainars Klavin founded augmented reality agency Overly in 2013, which nearly went bankrupt twice. But despite turning it around and making 1.5 million euro ($1.75 million) turnover in 2022, Klavins quit as a result of burnout.

He then gave startup life another chance and poured 500,000 euros into his next startup, which he left in 2024 as it was struggling.

“The biggest risk isn’t failure, the biggest risk is success without clarity.”
Ismael Dainehine
Co-founder of EverGive

Now a lead product manager at proptech startup Giraffe360, Klavins told CNBC Make It that he experienced an identity crisis when transitioning from being a founder to a corporate employee.

“When you exit through an unsuccessful business, you really start to question: what are you good at? Because at that point it seemed like I’m not good at anything,” he said.

“I have sacrificed so much to make this successful that I have lost a lot of my identity … It’s very scary to lose your identity, because you have sacrificed a lot of other things that were part of your identity to make this one work, and if you lose it, you have nothing.”

Founders are the best employees

Founders who return to corporate life as an employee may feel some shame or stigma attached to the transition, and employers could even discriminate against them.

A 2024 study, led by Rutgers Business School, sent fake resumes to 219 people with corporate recruiting experience. The fictional applications had identical qualifications, but some were former business owners.

It found that recruiters were less likely to recommend former business owners for a role, in what’s described as an “entrepreneurship penalty” in the study. Recruiters appeared to be more hesitant to hire someone who is used to being their own boss and working autonomously.

However, public relations specialist Alain Rapallo said that founders can actually make the best employees.

Rapallo left his corporate role as a PR director to start his own agency in 2021, but returned to employee life just three years later.

Entrepreneurship is an advantage, he said, “because when you are a founder and you work by yourself, if you make it past that first year, you pretty much did every role that any company does on a smaller scale, but you pretty much did it.”

Rapallo said running a business also sharpens skills like multitasking and time management.

“Startups are scrappy, but you [as an employee] don’t necessarily do every single job. You don’t have the mentality of growing the business. You usually just have the mentality of taking care of the client or the account,” he added.

Product manager Klavins agreed that his understanding of numerous business functions was what got him his current role.

Being an employee has also been an important lesson in humility, he said, as it eliminated his ego and allowed him to start fresh.