Let’s Not Go Mental — the VC role in changing the mental health of startup founders
In this very moment of 2020, the entire world is dealing with the mental, physical and social consequences of a pandemic — Consequences that many (at least in our over-privileged corner of the world) had probably never imagined, nor prepared for, which overnight became very real and omnipresent in our lives.
And while we discuss flattening the curve of the virus and the consequential financial crisis, there’s another curve that also calls for acute attention in startup community, not least from investors.
The statistics for founders’ mental health have been staggering for a while. Already in 2017, a study by Michael Freeman indicates that entrepreneurs are 50 percent more likely to report having a mental health condition compared to others. Moreover, KPMG reports that only 1 in 5 founders are satisfied with their mental wellbeing and stress levels.
The dramatic risk and uncertainty founders are facing right now, due to the sudden COVID-19 outbreak, is a dangerous cocktail that can potentially exacerbate a mental health crisis in the ecosystem.
A startup journey is deeply personal and founder-driven
For many good reasons, startup founders suffer from psychological strains much more acutely than others. This doesn’t only threaten to erode their personal wellbeing, but also compromise the endeavors they dedicated their life to build.
That makes it both morally imperative to address the mental health crisis in entrepreneurship as investors, but also critical to the success of the startups we support.
If there’s one thing we have learned from investing in more than 350 Danish startups, it is that the founder team sets the winners apart from the rest — especially in the early days, it’s the one thing that determines whether the company will go the distance. That’s why we’ve build much of the operations setup (platform, value add, you decide the name) at PreSeed Ventures around that. As our COO at PreSeed Ventures, Mads Klarskov Petersen explains:
“Time and time again I see two things;
1. That the founders who are most likely to succeed are the ones who have the stamina to keep going no matter what.
2. The founder who know when to ask for help have a greater chance of moving forward — no one can do it without help.
We spend a lot of time trying to understand our founders’ strengths and limitations as human beings both pre- and post-investment. This enables us to be smart about balancing the mix of our value add activities towards them and set in with our systematic and refined ‘people setup’ precisely where it’s needed. Building their emotional resilience and robustness is a vital part of that.”
It’s a common struggle for founders to separate their individual identity and self-worth from the business they’re creating. Business setbacks — which are unavoidable to occur at the same, if not higher frequency as successes — quickly feels like personal setbacks and can cause depression to take root.
As investors, we have to recognize that we’re a part of that equation — the very nature of the relationship puts a pressure on founders to succeed. Therefore, it comes with a responsibility, when we invest.
At PreSeed Ventures we decided a while back to make Mental Health a strategic focus in 2020. As part of that we have been working on different initiatives and in March we launched the first test run of a Founder Mental Health Circle led by aforementioned Mads Klarskov Petersen and Cecilie Willer, Business Psychologist and Coach from Today.
The Founder Mental Health Circle is a confidential peer-to-peer learning group, where founders can share and support each other on all mental health issues, such as stress, fear, doubt and leadership.
In the midst of launching this initiative and through general exploring the topic, we want to share our own thoughts and ideas on how investors can actively address the mental health of founders.
Support the people, not just the business
As already pointed out, the one determinant factor for whether a company is going to succeed lies with the founders, especially at the early stages — only they can grow the company. So, supporting them are acute. Anyone who has been close to a founder, or has been one themself, knows that founders always live to fight another day.
Let’s face it: The odds are stacked against the success of a startup and most end up failing, but even at days where things go south, founders need to keep a brave face to co-founders, employees, investors and even family, who’s economy might be at risk too. And since everybody then see each other keeping a brave face, it’s easy to feel like the only one who can’t cope.
The key to support founders, so they can succeed on their journey, is to actively invest in initiatives and resources that supports their mental resilience.
De-stigmatizing & Creating an Open and Safe Environment
The first step of creating an environment where mental health and well-being can be discussed is de-stigmatizing mental health challenges. By opening up and sharing your own vulnerability and challenges, investors show the founders that it’s not only ok, but rather a necessity to talk about hardship and seek support.
So, key is to support the founders personally and give them a space where they can safely share how they are coping with each other. That’s why we believe founder circles, support networks, therapy groups and what not is part of the solution.
Invest Directly in Well-being
Concrete actions from investors speak louder than words. One of the most direct ways of being “founder-centric” is to support portfolio companies in obtaining resources that facilitate the improvement of their mental well-being. Let’s face it: They won’t do it themselves as they’ll put the company’s well-being in front of their own any day.
The World Economic Forum identified emotional intelligence, people management and cognitive flexibility among the top skills needed to thrive in 2020.
Commonly founders often neglect to factor in mental health support, coaching, founder team workshops etc. in their budgets and tend to choose for example smaller insurance packages, that doesn’t include e.g. psychologist services. It’s our job as investors to both encourage, even demand founders to prioritise these things in their budgets and to give them access to the necessary support services in other ways. We need both directly and indirectly invest in the mental health of founders — especially at times like these where costs are being cut dramatically everywhere.
Awareness of the ruling discourse and mindset
It’s hard to come around that being a founder comes with a certain degree of risk-willingness and determination. Unfortunately, those entrepreneurial traits are also tied with predisposition to mental health conditions and substance abuse. So, maybe we need to build new nuances into the discourse of ‘moving fast and breaking things’, ‘grow-or-die’ and what other things we tend to say.
While getting fast from A to B is vital to succeed, the balance between speed and quality needs to be right. Going too slow will definitely kill a startup, but going too fast will compromise building a strong base for the company. Systematically helping to build the core engine of the company and allowing time for the process is how we as pre-seed investors can make a difference. In the right time, the startup will become a smooth machine running at the speed of light.
Maybe making this part of the startup DNA could ease the mental strain on founders. At least we hope that opening the conversation can create a more acute awareness and attention to the mental health of founders at all stages.
The way we see it at PreSeed Ventures, any investor who takes pride in being founder-centric has to put mental health on their agenda.
Especially at a time where founders’ fear of losing their company, thus failing as a person, is probably more present than ever. Moreover, having been isolated from their closest accomplices and colleagues for a while, the risks of anxiety, stress, loneliness, depression and generally bad mental health are extremely high as well.
If investors, founders and the ecosystem in general have reflections or experience to add, please share it with us, so we can, as we say these days, ‘flatten the curve’.
We look forward to share more of our own learnings as we gain new knowledge from our own activities in the field.
Hopefully, this can also add more knowledge and data on the state of founders’ mental health in Denmark and the Nordics. Where little to no efforts have been made in this field nor have much data been collected on a broad scale (at least in Denmark) even though we’re frequently applauded for our welfare systems and has been acknowledged as the happiest people in the world.