Since initially publishing this newsletter to subscribers two days ago there have been two additional touchpoints worth highlighting:
* firstly, a comprehensive piece has been published on TechCrunch, After the Gold Rush, which lists a number of views from other pundits that back up my prognosis;
* secondly, reports from New York City of a young startup founder who appears to have jumped to her death.
These two incidents may in no way be connected, but the point of this piece is that entrepreneurs should prepared themselves psychologically for the rigours of startup life, which may become a lot harder in coming months.
Here is the original piece I wrote:
I’ve never been much of a doomsday kind of person. I’ve been through two venture capital ice ages and definitely would not wish one on anyone. That said, the signs are there that we may well be heading into another one – it may be a gradual cooling rather than an overnight freeze, but entrepreneurs need to prepare.
The facts first:
In Q4 financing of startups fell by 6.6% to $17.13bn. This is still high, but it is the lowest in five quarters.
Venture capitalists in Silicon Valley are reigning in the throttle. New financing rounds are being done at lower valuations.
Startups are being urged to cut their cash burn even if they may not yet need to. 10% cuts are now becoming common place. Thanks to John Furrier of SiliconANGLE for this data.
Stats from WSJ/Dow Jones VentureSource point out that the number of US startups valued at $1bn or more for the first time has tentatively dropped by 50% for Q1 ’16 in contrast to Q4, which itself was over 50% down from the Q3 peak. They also point out that 35 of the 48 US tech venture-backed IPOs are trading below their IPO price.
We all know that most startups fail. In the currently cooling climate the number of failures may well skyrocket. Entrepreneurs should continue to listen carefully to their advisers and VC investors regarding trimming back on burn rate and shoring up resources. But what about their emotional side? The pressure of a cooling market can lead to significant psychological stress on founders.
I want to highlight 3 areas that may well help entrepreneurs psychologically prepare with excerpts from my upcoming book, Be Fierce: The Leaders Guide to Unleashing Your Potential:
– Dealing with Failure
– Dealing with Success
– Being Resilient
1. Dealing with Failure
For some people the fear of failure holds them back from doing things. At best such fear is self limiting, at worst it can be debilitating.
Mick Ebeling (of Not Impossible Labs) was able to progress beyond his fear of failure through learning to jump first and making the assumption that the net would appear. He believed things were going to work out even though when he leapt he had no idea how.
You can follow that belief, or you can follow the fear.
He puts it philosophically. We don’t know why we are here, on earth, but it’s not just to make money or have fun. He visualises us all on rickety little boats that are motoring across the narrow of expanse of time that is our lifespan. If we want to be successful then we’ve got to leave a way behind us. If we take life too slow and steady we don’t create a wake and then what’s the point.
The secret to success, for Mick, was the realisation that failure isn’t a big deal.
We tend to find ourselves entangled in what we should and shouldn’t do. When we unravel this we formulate constraints on what can and can’t be done.
They appear fact-like, but they are far from it. They only amount to conversations that we have in our heads, but so often they seem to crystallise into facts.
That’s not a bad thing, as long as the solidifying conversations are motivated by positive, motivating thoughts. It’s when we view fear-induced inner conversations as fact that we limit ourselves.
Without training and mindfully creating a different set of thoughts we can default to that negative conversation.
And so we need to do all we can to banish negative thoughts, banish fear and focus on having a positive conversation in our heads.
You can change reality through the power of what you say to yourself. As your positive thoughts and conversations crystallise into facts, you change reality by having these positive facts guide you, instead of the fearful ones.
By imagining a “Yes” when you’re expecting a “No”, by acting confident when you’re feeling nervous, you can become the person you want to be. Act like the person you want to be and success will triumph over failure.
Success and failure are far from random. They live within the very DNA of our character and personality. They are expressed through our thoughts and actions.
We choose which side of the fine line we find ourselves on – success or failure – by our courage in the face of both adversity and uncertainty and also how we choose to visualise ourselves. Do you see yourself as failing or succeeding?
2. Dealing with Success
Success can come with a dark side.
Loneliness and depression affect everyone in all walks of life. Successful people are more prone to it and entrepreneurs even more so.
Mark Suster, a venture capitalist at Upfront Ventures, believes that success breeds loneliness. It can be a depressogen and in some studies the rate of depression in successful people is higher than 1 in 3.
Mark identifies four reasons success can be a lonely place:
1) the expectations don’t stop – they get higher
2) there is so much more at stake and so many more livelihoods and legacies that you plan for
3) it is only a heartbeat away from failure and the press love a rise and fall story
4) you find yourself surrounded by a bubble and often a bubble with vested interests in your actions.
As leaders you can be thrust into the spotlight of success with far more impetus than other people and are therefore susceptible to the sudden onset of loneliness and depression, many times with no experience in how to identify or cope with it.
One moment Jim was a struggling entrepreneur. His mother kept yelling at him to get a real job. His friends told him that he was crazy. The next moment his company was valued at over a billion dollars and some guy he’d only ever previously seen on the cover of magazines was thrusting a very, very big check into his hands. He spent six months mastering golf and travelling the world. Deep down he began to feel more and more hollow inside. He was becoming detached from his former entrepreneurial self and didn’t know how to identify himself anymore.
What can you do to deal with the dark side of success? There are two avenues you can take.
Explore the dark
Your life exists as a narrative, a story arc with a past, present and future. In order to truly achieve well-being you need to delve into parts of your past and present that you may feel much trepidation about. There may be dark times when your arc dipped low and this darkness cannot be avoided. It must be explored as it leads to the next point.
Tackle the triggers
Loneliness is often exacerbated by triggers. Things happen in your life that for most people would be viewed as slightly negative, but you view them as off-the-charts negative. Having explored the dark you become aware why these things have such an effect on you. You can identify very early on, even before the trigger starts having an accentuated impact on you, that it is there and you can act.
3. Being Resilient
You want to achieve your best, you want to stand out from the pack. We all do.
And so you push yourself. Nothing wrong with being driven, it can help you attain your stretch goals. You equate stress with success. There is nothing wrong with this on the face of it.
Pushing yourself to overcome a challenge with the awareness that you may well have too few resources at hand to do so is the very definition of stress. And in many instances this stress is the very thing that drives you over the edge and empowers you to overcome that challenge. Cultivating short term stress can only lead to better performance, but it can also protect you through a boost to your immune system.
The issue, though, is that you don’t stop there. You push yourself continuously. You don’t give yourself time to decompress.
Isolated stress turns into chronic stress, and that is deadly.
And yet, as a society, we take pride in how hard we work, in how much stress we are under.
Have you ever asked someone how they are and they’ve replied, “Great, very relaxed, taking my time to complete a few projects.”
You are more likely to get the response, “I’m so stressed. I’ve been working like crazy and I’ve got so much to do.”
Take note of a person’s body language when they give you such a reply. They will puff out their chest with pride, their eyes will widen in excitement and they will smile at you. All is right in their world, this is how it ought to be.
And yet it isn’t ok. Annual stress-related healthcare costs have soared into the hundreds of billions of dollars. Chronic stress will weaken your energy reserves, it will reduce your ability to think and ultimately it can kill you.
Stress, like happiness, lives on a continuum. At one end stress is short-term, it is good. At the other it is chronic and bad. To cultivate stress and optimise your performance you need to determine what your stress limits are. Just the right amount and you are in the zone. Too much and you cross the point of marginal returns and the efficacy of stress in boosting your performance degrades.
The most reliable measure of your particular place on the stress continuum is your resilience: how quickly you recover from a stress event. It translates directly from Latin: “to jump or leap again”.
Resilience measures how long it takes you to revert to your restorative state in which you charge up your strength for your next challenge.
You may undergo a major stress and feel like you have recovered quickly. Feeling fine you take on another stress almost immediately. Again, you feel like you’ve made a quick recovery so you dive into a new challenge. However, each stress can build up a level of resistance to reverting to your restorative state. The end result is that you don’t ever fully restore your energy levels. And then one day you suffer a cataclysmic health issue.
When I was an analyst I saw the effect of this firsthand. My colleagues would step off the plane from a particularly gruelling few weeks travelling, only to literally turn around and do it again the next day. Meanwhile, they were pushing themselves to keep up their writing regime so that could meet their publishing deadlines and also working on keynote presentations for looming events. While they thrived on the stress of each one of these activities, it was their cumulative effect that wore them down.
Besides the constant barrage of challenges that we rise to, you may also be depleting your resilience simply by thinking or participating in routine events like reading a magazine or watching the news on TV. Our default though pattern is to think negatively and so the more we engage in activities that are open to being viewed in a negative light, such as emails and interactions with work colleagues, the more likely we are to stress over them and wear ourselves down. Similarly, marketers and the media are well aware of our how stress-inducing stimuli seize our attention and the daily deluge of ‘act now’ messages we receive have a similar affect.
How can you reduce the effect of stress and build up your resilience?
You come home from work after a busy day and decide to destress with a glass of wine. You try to drown out the thoughts that are stressing you by escaping into a reality program, the latest serial on Netflix or a novel.
But then you have to come back to reality. You do this day after day, night after night until the weekend arrives and you find that you are even more stressed.
This is because constant suppression of negativity leads to an increase in negativity. Not only does it cause you to have more negative emotions, but it can also reduce your self-esteem and lead to depression.
The most effective method to build up resilience is to breathe. By controlling your breathing patterns you alter your emotions and induce stress reduction.
When I was in the military I trained myself to take in a deep breath and let it out slowly. This would help to reduce my anxiety about a stressful situation and also increased my clarity of thought so that I could determine how to deal with the situation in the most effective way.
Taking in slow and deep breaths can stimulate your vagus nerve, which acts against your stress-induced fight or flight response to a stressful situation.
Extending your inhalation and exhalation for just 10 minutes a day can noticeably relax you. This in turn reduces your heart rate and lowers your blood pressure. It can also reduce inflammation, improve digestion and brain function.
Deep abdominal breathing involves expanding your diaphragm, the muscle that sits lengthways between your stomach and chest, and reducing your number of breaths by 50% per minute – long and slow, 4-5 seconds in and then 4-5 seconds out.
If you want an even quicker method to activate your vagus nerve, you can immerse you face into a basin of cold water. This method is best done after vigorous exercise. You mainly want to ensure that your eyeballs are completely submerged in the water as they are one of the key vagus nerve stimulation areas.
CEO Richard had a predominantly negative internal dialogue. “We are going to use up all our cash and have to shut down, what will you do then?” Such statements came in waves and at times it seemed like a constant barrage. He delved into one of these times, which has been triggered by a marketing campaign that his internal dialogue told him would fail. What Richard realised is that before the negative thought train left the station there was a primal feeling in the middle of his chest. Feeling always precedes thought. For Richard this was a sharp twisting, squeezing feeling that he best described as crippling anxiety.
He was able to work with this feeling through the practice of meditation. While sitting in his quiet place and meditating, one of these thoughts hit him. Instead of letting it take a hold he decided to explore the feeling itself rather than the accompanying thoughts. He asked himself, “What does it look like? If it were a real thing how would it feel to the touch? What would it smell like?”
These interstitial questions created a major shift in his thought processes. He was able to create a gap between the feeling and the thoughts. Ordinarily, he would notice the feeling and ask himself what was causing him to be anxious. Reasons would flood in. Over a period of months he worked in that gap and strengthened his ability to notice and separate it out.
This enabled him to realise that his anxiety did not stem from any one thing. Instead he had an overarching sense of dread, a feeling that many people experience purely as a result of being conscious.
The act of trying to push that feeling out of his mind had been heightening his anxiety. He decided to accept that it was there, it was a part of him and this acceptance helped ease its affect on him.
By doing so he was accessing his deep well of resiliency, which was as much a part of him as his struggle with anxiety. He did so by essentially standing still, feeling the feeling and not pushing it away with a justification for its existence. From this position of strength he could then return to focus on his purpose, what was driving him to build his company. Coming back to that purpose and holding to it increased his resiliency to the negative barrage.
Remember these three areas, Dealing with Failure, Dealing with Success and Being Resilient, when things get tough for you in your leadership role. Apply them regularly and they will help you deal with the pressure.
At EXOscalr we work with our clients to unleash their potential and make a difference. We draw on decades of experience, including insights gained in venture capital, corporate innovation, building high growth organizations and advising the Fortune 1000 on transformation.
As a professional coach and adviser I constantly focus on the trends in achieving exponential growth and how you can make more difference.
I read all my email at firstname.lastname@example.org and I’m also at +1-650-529-4181 and +1-646-480-0205. Feel free to reach out.
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