Source: Dumb Little Man
“I think the best companies are those that can recognize when something isn’t going right, and fix it, instead of just turning a blind eye because it’s easier.” — Ben Lerer
You’ve got an awesome idea and a sleek brand. You’re ready to create a successful startup that solves your target customers’ biggest problem.
After hundreds of pitches, you and your team have managed to convince Angel investors and VCs to support your idea.We all know how startups work. Every time you get funding, you give up equity in your company with every investor becoming a shareholder. Unfortunately, things don’t go as planned.
Despite high hopes and a successful launch, your company’s slowly sinking. You can’t give value to your shareholders and your product isn’t selling. You’ve lost the millions of dollars you received in seed funding and you’re still losing. Your business is heading for a catastrophic failure.
When fear of failure kicks in?
What will people say? How will you tell your investors that you lost all their money? What about the public and your customers who were relying on your product? Will you have to carry the stigma of failure forever? Will you be marked as a bad risk for future endeavors?
Failure is not something you celebrate everywhere. In Japan, an entrepreneur whose venture has failed is expected to give a personal apology for letting people down. For Germans, failure is seen as a weakness and great risks are taken to prevent it from happening. In African culture, failure carries a heavy stigma. “If you fail, there is no glory, only shame,” says Hilda Moraa, co-founder of Weza Tele, a Kenyan fintech startup.
To avoid the negative effects of failure, many founders of failing startups use what social psychologists call impression management. It’s also known as “fake it till you make it”.
Robert McHenry, CEO of OPP Limited, describes impression management as “the process whereby people seek to control the image others have of them”. Recent research shows that founders of failing startups use impression management strategies. They do it to control the flow of information in social interactions, create a positive self-view or foster a desired new image.
Failing entrepreneurs choose the impression management strategy they believe best avoids or minimizes the stigma of failure. Let’s take a look at these strategies which foster social legitimacy with stakeholders and the public following a business failure.
The strategy of withdrawing
Also known as entrepreneurial distance-taking, withdrawing is when an entrepreneur accepts responsibility for the failure but withdraws from the situation. For example, you may exit your financially distressed company as a means to dissociate yourself from the negative implications of a failing business. Or if you choose to remain with your crashing company, you might limit your social engagement and public appearances.
Exiting is a drastic choice and you should carefully consider it. On a personal level, your exit means an abrupt end to your career, the loss of the company that you have worked so hard to create and the risk of the long-term regret for things that, in…
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