startups

The agony of entrepreneurship

In November 2011 Ilya Zhitomirskiy, only 26 and one of the co-founders of Diaspora, the “open-source Facebook” which received notoriety after raising over $200,000 on Kickstarter (at that stage the most successful project on the crowdfunding platform) killed himself. His mother still believes that if he didn’t start the project he would be alive today. On January 11 this year Aaron Schwartz, a celebrated and much-loved hacker and activist took his own life. He was also 26. I never met Aaron but several friends were very close to him. One was his partner. Reading the tributes that poured in it was impossible not to be deeply saddened that someone so young, so talented and with so much to contribute had given up like this. The loss not only to his friends and family but to all of us is immense.

And just two weeks ago I read about the passing of Jody Sherman, co-founder and CEO of Ecomom. I didn’t know Jody either but he was also admired by people I admire. The initial reports avoided specifying a cause of death but he too had committed suicide.

As Jason Calicanus asked  over the weekend, should we talk about this?

Yes, we should.

Entrepreneurship is a really hard road, filled with rejection, misunderstanding and self-doubt. You pour yourself into a project only to see the world disparage or, worst, ignore it. You must deal with people telling you to get a real job, with the stresses of poverty and uncertainty, with the constant possibility, indeed the likelihood, of total failure. But your job is to project constant positivity, to always be selling your vision and product, to inspire people to join you on this mad mission.

You probably work long and unhealthy hours. You might struggle to find time for exercise, or to socialise, or to take time out to be alone and reflection.

In other words it can be a very unhealthy pursuit, not only physically but emotionally.

During the eight years I led Vibewire I had many dark days, days when I was so exhausted I was reduced to tears, days when I couldn’t see how we would continue. But then I’d go to a meeting with the Vibewire team or a potential funder or a media interview and I’d have to summon all my positivity and energy and pitch our programs and vision of the future, convince them all that there was a pathway to the future we sought.

After I left Vibewire in March 2008 my successor as CEO had an emotional breakdown just a few months later, crushed by the complexity of our projects and the constant workload and stresses involved in bringing in the funds required to keep them alive.

So how did I survive for the eight years before that? First of all, I didn’t entirely. By the time I departed I was utterly burnt out, and for the year prior to that I was just barely nursing myself through, on many days just focusing on the day before me and what I needed to do to get to the next one, like a prisoner in jail, desperately pushing myself to get what needed to be done, done to get the organisation to the point where I could walk away. Once I did it took me months to feel like I could be productive again.

I pushed myself through thanks to incredibly supportive parents, sibling and partner and a group of friends outside the world of social entrepreneurship, who cared about me rather than Vibewire, who valued me as a person, not just an entrepreneur. I would go out with them to parties in the forests which wrap around Sydney at least monthly and stomp my frustrations and stresses into the dirt dance floor until there was just the freedom and joy of movement and dancing and friendship, and my heart filled up with love, community and connection to nature. Being part of this creative, DIY community kept me balanced, with dancing allowing me to be in my body, not my head, and the friendships I formed giving me an identity outside of Vibewire, outside of entrepreneurship.

I don’t know what drove each of these innovators to take their own life. For Aaron an over-zealous prosecution and the threat of jail was clearly a unique and significant factor. All of them struggled with mental health issues at different times. But I do know that as entrepreneurs we are all prone to driving ourselves to breaking point and that one of the hardest but most important things we must learn is how to be personally sustainable, how to take care of ourselves, in the midst of stress and uncertainty and repeated failure.

One of the hardest things about entrepreneurship is that you can become your venture in the eyes of many people. People would often say in introducing me “Tom is Vibewire” and I would cringe, knowing that wasn’t what we were going for at all, that it was in many ways a sign of failure to build the broad base of leadership we needed to be successful but also that it was such a narrowing of me as a person. And it’s also true that in entrepreneurship, unless you are truly gifted or lucky or more likely both, you’ll have as many bad days as good ones, as many set-backs as successes.

As Jess Lee, founder and CEO of Polyvore pointed out in a great recent blog post titled “Why are startup founders always unhappy?” even a successful growth pattern is wiggly, and as entrepreneurs tend to live mostly in the moment and also be very ambitious it’s easy to get depressed during a down phase even if you’ve experienced extraordinary success over the preceding period of time. And if you are your organisation, when the organisation is struggling you feel a failure personally.

Jess puts it this way:

Humans are terrible at understanding absolute values. We are best at understanding acceleration and deceleration, or rate of change. You are happiest when your growth is accelerating. When growth slows down, you start to become less happy. When you’re not growing, you are in unhappy territory.

This is why it’s so important to have a life outside your startup, to have an emotional floor that doesn’t undulate with your company’s fortunes. I am not trying to generalise the experiences of Ilya, Aaron and Jody. Each was unique. But I have been finding myself thinking about these issues repeatedly over the past few weeks as tragedy followed tragedy, about my own struggles and what it takes to survive as entrepreneurs and changemakers. Ultimately it comes down to balance, however you find that, to relationships, and community and love.

So please be good to yourself everyone, and give yourself what you need to be sustainable and happy and whole.

Entrepreneurs, markets and investment

money - davebarger on flickr A fascinating debate broke out yesterday, on Christmas Day in the US, between a number of prominent tech journalists, investors and founders, regarding the existence or otherwise of a “Series A crunch.”

Jason Calacanis, founder of Mahalo (soon to be Insider.com) and LAUNCH, led the contrarians, declaring that there was no such thing as a Series A shortage, that the available money for investment would expand to match the available investable opportunities and that with revenue you would always get investment. The fact that there was much less investment available than demand for that investment simply shows that there is a lack of companies worthy of investment. From his blog post yesterday:

Capacity increases along with opportunity.

VCs are a greedy lot (and us founders and GPs love you for it), and the world has mountains of money sitting in bonds, gold, corporate stockpiles and plain old devaluing C-Notes (aka cash).

If 10 companies with the metrics of Fab, Dropbox, Yammer, Uber or AirBnb were to walk into a VC firm with only the money to fund five, you know what they would do? Raise more money!

Capacity expands all the time, and it could turn on a dime.

I’m a huge fan of Jason and always find his views thought-provoking and often insightful. His point here, however, is ridiculous, or as Sarah Lacy put it in Pando Daily, “bullshit.” What fascinates me about this debate though is how classically American it is.

The view Jason is expressing is s classically neoliberal view of the world: capitalism is a perfect sorting machine, with supply (of investment-worthy startups) always meeting demand (for these opportunities by professional investors) thanks to the magic of the profit motive, the “invisible hand” that makes it all work.

This is not, of course, always the case. There are mismatches in supply and demand all the time and investment is particularly prone to herd behaviour and strongly influenced by social networks, pressures and fads. The fact there was a huge amount of money for Series A investment in 2000 didn’t mean that all (or even most) of the startups receiving that investment were investment-worthy by any conventional definition. If we can see the dotcom bubble as an example of the mismatch of investment availability and “good” startups then the reverse is clearly also true, and it’s perfectly conceivable that we could currently be in a time with the quality of startups genuinely exceeds the funds made available by Venture Capitalists.

Jason is absolutely right that great entrepreneurs can survive and thrive in any conditions, that visionary companies can create markets not simply be subject to them, but counter-examples exist for these as well: inventions which could have been (or later were) super-profitable but which no investor had the courage or foresight to back, or who had the misfortune to require re-capitalisation at the wrong moment, during  time of economic uncertainty, and failed to survive, when only a few months the task would have been easily completed.

And it is also true that some mediocre entrepreneurs become spectacularly successful by being in the right place at the right time, by being lucky, having the right connections, having the money to survive long enough.

Claiming that all the ‘good” companies get funding is like claiming that all “good” bands get record deals (back when you needed one) but this is clearly ridiculous. But we know the Beatles were rejected by every major record label in London before finding someone prepared to release their music, we know that many more deserving artists never made it through the gatekeepers and plenty of other made it without their help.

The idea that capitalism is meritocratic is at the heart of the American ideology, the idea that those who are successful create their success due to their own special characteristics: because they were smarter, harder-working, more entrepreneurial. But markets matter, timing matters, location matters. As Malcolm Gladwell explored in Outliers (my favourite of his works) being in the right place at the right time (such as attending one of the only High Schools in America with an advanced computer to learn programming on, or being given computer parts by a founder of HP as a teenager), the family and group culture you grow up in and market and legislative contexts have a huge influence on who becomes a success.

Gladwell’s point is not that you don’t have to be smart, hard-working and entrepreneurial – you generally do to be a big success – but that these qualities alone are insufficient. Simply put there is a greater supply of smart, hard-working and entrepreneurial people than there are available economic winners in our societies.

And so it is with startups, and this is why many “good” companies and talented entrepreneurs will fail to raise the additional funds they need to survive this year despite the soundness and potential profitability of their ideas.

Image by davebarger made available on a creative commons license via flickr.