How Entrepreneurs Can Learn to Overcome Setbacks and Failures

Joshua Davidson
Feb 6 · 9 min read

The following is an edited excerpt from The Entrepreneur’s Framework: How Businesses Are Adapting in the New Economy by Joshua H. Davidson.

Back in 2012, I was trying to figure out how to balance being a full-time college student, closing new work for Chop Dawg, and managing a team while trying to maintain my overall sanity. As you might expect, it was impossible to manage it all.

But how long would it take for me to admit that?

I decided after one and a half semesters that I needed to quit college for the good of the business.

At the time, going to college felt like the only decision — everyone else my age was doing it. I enrolled in school to learn business management and marketing. Then one day, I realized I was already doing just that. Moreover, none of my clients were asking for my college degree.

At the same time, a unique opportunity landed on our laps. A local client by the name of PartyHopp reached out to us with a new challenge. They wanted us to build them a website application, a project that would need much more functionality than the static websites we had been working on thus far.

The Ryan Carson concept of “naive optimism” hadn’t failed me yet. So I said, “Let’s do it.”

I figured if we could code websites, surely we could program a web app. However, the project pushed my team to the edge of its technical limits. I ended up being thousands of dollars over budget in labor costs, and we got the product out months later than anticipated.

Still, I can’t fully express the emotions I felt seeing the final product actually function. I couldn’t believe that we had built this. William Smallwood, the creator of PartyHopp, pulled me aside shortly after we finished the product and gave me the most gigantic hug I had ever received outside of grandparent hugs during my childhood. He then looked at me and said we helped make his dream happen, and he would forever be thankful.

That hit me hard in a good way, but it also ushered in a shred of doubt because it made me question all of what we had previously been doing. Were we right to stick with our current business model, or should we move over to building web applications like PartyHopp? It dawned on me that William couldn’t be the only person who needed this type of service. Web applications could be the next frontier for us and since our first app client was ecstatic (just as my first website client had been) could the snowball effect work in our favor once more?

It took us months to find a potential client that was interested in an app.

For the first time in our company history, our revenue began to reach a standstill in growth. Then came the dip. We had expected it — after all, we had pulled a complete 180, and we didn’t have the backlog of work like we did with the small business websites to prove our capabilities. Proving that we could build apps at scale was a whole new territory. It was basically back to square one for Chop Dawg.

After months of searching, we finally found someone on Twitter who wasn’t just interested, but pressing to move quickly. We were immediately in love.

We spent weeks going back and forth with this new potential client. We worked out favorable terms to make them happy. Everything was lined up and ready to go.

But one thing I’ve learned through experience is that until the dotted line is signed and the deposit has been received, nothing is a done deal.

Right at the time we agreed to sign the contract, the would-be client vanished without a trace.

Just like that, all of our months of work and preparation went down the drain with absolutely nothing to show for it. Our team shrunk drastically, as we didn’t have the same volume of work as we used to. If it wasn’t for the savings I had kept in place for the company, we would have dissolved totally right then and there.

I felt like a failure, and team morale was perilously low. The positive thoughts that had once played on a loop in my head turned into persistently negative ones. For the first time, I was becoming jealous of the success I saw in others. I kept thinking, we just had to do something different. But even through the negative feedback loop, sometimes an idea just pops into your head that makes you think that everything can be fixed.

Why wait for others when we could just build our own app?

Desperate for a paddle, I ran with this idea. This would be the fix. After all, we were constantly waiting for leads to come, to hear back on proposals, on contract edits… why wait any longer? We could show them all and make our own app.

And with that, Subtle was born.

Subtle, as I claimed, would become the one-stop spot for you to control everything you needed online as a small business owner. You could manage your website, your calendar, your emails, your files, your address book, your customer relationships, and your employees all from one central hub. It would be called Subtle because you wouldn’t think twice about the technology that would quietly run your business.

I looked at our company bank account: it had about $50,000. I decided this is what I would invest back into my team — it would be as though I was our client. I gave us an August 1, 2013 deadline, eight months from the start of the year. Also coincidentally, the four-year anniversary of Chop Dawg.

But Subtle never ended up launching. We never made a single dollar.

One problem that persisted throughout my first few years was my uncontrollable ego.

After my failure with Subtle, it took me awhile to deal with the personal devastation of losing $50,000 and not knowing where to go next. I can’t remember a time where I felt more self-loathing than when we pulled the cord on Subtle. I had a hard time dealing with the persistent feelings of self-doubt that plagued me. Previously, even when I had experienced setbacks, I had always believed in myself. Going door-to-door, being rejected by most store owners, I had always kept going because of my belief that eventually, I was going to arrive at a victory. But I no longer felt like that. I felt like there was no possible way to move forward. I truly believed that I was a failure.

To overcome that defeat, I had to do something that I had never done before: I learned about psychology. Perhaps I could figure out not just what was causing me to feel like I was in an inescapable mind ditch, but I could figure out the mental pains that hold so many others back in entrepreneurship as well.

My endeavor to learn more about psychology introduced me to the study of ego. We tend to use the word “ego” loosely to describe people that are selfish, or in it for themselves alone. I learned that I had created my own ego unconsciously to act as a barrier to insulate myself from the rest of the world. It is an unconscious defense mechanism many ambitious, driven individuals are probably prone to. It’s certainly easier to propel yourself forward in the face of major setbacks when nothing is ever your own fault. But in doing so, I was living in “duality” by separating myself and my business success from the reality of others and the world around me.

Living in duality creates a lot of pain for ourselves and those around us.

For me, it meant filtering my entire life through a lens of judgment. Things were “right or wrong,” “good or bad,” “pretty or ugly.” But these binary judgments only served to close me off to others. Through all of the decisions that I had made leading up to Subtle’s collapse, it had never really mattered what my team wanted.

I see a lot of people that go through this immutable pain today. When things aren’t going their way, their lives become centered around judging others, condemning alternatives, and fearing the unknown. Anything within that is perceived as “bad” or “wrong” is suppressed, repressed and denied. This will lead to burnouts, breakdowns, and alienation.

Struggling entrepreneurs are especially prone to becoming entrenched in this duality;

Going through anger, depression, paranoia, and anxiety all alone, sometimes succumbing to what is known as ‘Founder Depression.’

I recently had an insightful chat with my good friend Michael Gasiorek, who is the Co-Director of the San Francisco chapter of Startup Grind (which, as he puts it, builds communities that offer the “minimum viable dose of Silicon Valley thinking anywhere in the world”), on how Founder Depression needs to become more of a discussion in our society than we are presently comfortable with.

Michael told me,

“Founder depression should be talked about a lot more. The startup world needs to be encouraging with being open about your emotions the work culture focused on endless results and not taking care of oneself is unsustainable.”

Research suggests that entrepreneurs are 30% more likely to develop depression than their counterparts.

But why is that?

The obvious answer is, they’re simply succumbing to the mounting pressures and challenges the globalized economy presents in this day and age to any new startup. But startup stress isn’t the only reason so many founders deal with depression. In fact, many simply do not have the personality characteristics necessary to deal with the high stress, loneliness, rejection and other instances that would make any normal person question what they are doing.

If you are an entrepreneur reading this and dealing with depression, that doesn’t necessarily mean you’re not cut out for this game. I have dealt with my fair share of anxiety, stress, and even depression at some of my lowest points. I still battle with this today. A successful entrepreneur can experience all this adversity and still continue to fight for their crazy ideas. But that fire to keep pushing forward has to come from within. How you move forward from your most spectacular failures is what separates a failed startup from a successful one, and a failed entrepreneur, at that.

Have you accepted your part in your business’ failures? Are you able to accept failure at all? Are you mentally prepared to accept the daily obstacles and setbacks inherent to entrepreneurship?

If not, you’ll probably be treading water forever and maybe then this game isn’t meant for you. Because while continued innovations with technology have made creating a new startup venture easier than ever before, it’s also never been easier to fail. And how to fail is something that should be taught to us at a much younger age.

Michael believes that we should give high school students the opportunity to experience “safe failures,” so that it becomes easier to deal with real failure later on. He himself went through depression when things weren’t going well with his first business. He would sleep all of the time so he wouldn’t have to think about his business, or how lonely he felt in it.

Entrepreneurship is inherently lonely and depressing because you are indeed alone on a ledge with your “crazy ideas.”

So, how do we normalize this conversation?

Resources like Startup Grind offer support groups, and I think this should become a common resource offered to entrepreneurs around the world. Founder depression should simply be talked about more. The startup world needs to be encouraging about being open with one’s emotions and taking individual self care seriously, too — the work culture focused on endless growth in sacrifice of oneself is simply unsustainable in the long run.

When going through founder depression, it’s helpful to remember that ego is not the enemy, either.

I’ve read so many books and think pieces that say the ego is something that needs to be “destroyed.” But it was really my use of ego as a way to separate myself from reality that needed to be destroyed.

The framework would not have been possible at all without ego. I could not have created Chop Dawg and kept it in business for the past ten years without ego. All of the great businesses and products that you use today, wouldn’t exist without some form of ego found in their founding origins. But the difference is that before, I personally used my ego as a shield to protect myself from rejection. Now, I use it as a tool.

Ego is not negative or positive. Your thought patterns, positive or negative, will shape the world that your mind creates. A person who is rooted in a positive outlook has a “positive ego” and a person who is rooted in negativity has a “negative ego.”

Moving towards having a positive ego puts you in better alignment with reality, and ultimately in a better position to succeed in entrepreneurship.

To learn more about how to succeed as an entrepreneur in the New Economy, pick up The Entrepreneur’s Framework: How Businesses Are Adapting in the New Economy by Joshua H. Davidson.

Amazing content for Startup Founders, by Startup Founders.

Joshua Davidson

Written by

CEO of @ChopDawgStudios. A passionate student of entrepreneurship. 📚 Author of The Entrepreneur’s Framework. Speaker, radio & podcast host 📲 Philly sports fan

Amazing content for Startup Founders, by Startup Founders.

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