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Ask HN: Founders whose startups failed, what happens to VC/angel relationships?
63 points by BIackSwan on Nov 9, 2014 | hide | past | web | favorite | 13 comments
Do they keep in touch with you? Are they open to new ideas? How do you keep your relationships going post failure?

The truth is, when you fail, your investors tend to have a bad taste in their mouths. Nobody likes to lose money. Nobody likes to be wrong. Nobody likes to sit in that space that isn’t so happy…and unfortunately for a founder, his person at the point of failure is an embodiment of many things that nobody likes. Now sure, an investor doesn’t dislike the founder himself. If the founder does right and doesn’t succeed, there is no “black ball”, or malevolent desires on behalf of an investor…but I’d be lying if I said there isn’t a slight tinge on that relationship…and unfortunately, in this world, a slight tinge is all the friction necessary to turn momentum into something less. Note: this tinge is not permanent, and it is not insurmountable…but coming off a failure…you are only as good as your next act…and weather we say it openly or not, clawing your way to the next act, you are starting not at neutral or positive, but with a headwind.

I’ll give the example of my own experience as a founder. My first company, I raised about $600K. I operated for a year, failed, and returned about 50% of the capital I raised. I felt terrible. Everyone said I did the right thing returning the capital, that I was a standup guy for doing it, but still I lost them money. Nobody turned their back on me, once the company wound down…but they just weren’t leaning into investing more time and energy on me. When I went to raise money for my second company, Hyperpublic, weather I asked them or not, not a single investor in my first company invested in my second. Just gives you a sense of the increased friction you face, coming off a failure. Sure I was able to raise money from new investors, but I had to answer the question “is so and so from your last company investing?” and so on. New investors call old investors and say “What do you think of Jordan?” Of course, again, investors who lose $ with you don’t “blackball” you, so they say “stand up guy, did the right thing, etc…” but still their signal of not reaching out to put $ into the next thing becomes something a founder has to overcome.


Thanks for sharing your story and being candid about it. You only hear of the uber success in the news and everybody feels good. But the reality is most VC funded companies fail or under perform expectations and the few winners hit homerun and make up for everyone else.

I think you meant whether?

I think you're going to get a range of answers simply due to the diversity of people and their personalities.

If you crash and burn miserably due to factors that you realistically could and should have known about and been able to control, your VC's probably won't be open to any new ideas from you - keeping in touch and a personal relationship would depend on the people in question and how much they like you as a person.

If you gave it your best and failed for reasons outside your control, or because of things realistically the VC couldn't expect you to predict, it's more likely they would be open to future endeavors.

At the same time though, you are going to have some VC's that if you fail, that's it, end of relationship - many probably have more tact than just deleting your phone number and ignoring you, but in their minds you will become a much lower priority.

Conversely, I've seen some people who just have a great personality that form a legitimate friendship with a VC that no matter how bad that person failed (this instance was quite bad) the VC still loved this person.

tl;dr: People have very different personalities - it's all dependent on the nature of the specific relationships in question.

I forgot who wrote about this publicly, but I remember reading that an investor whose money you've lost in the past is far more likely to fund you in the future than one you've never met. I thought that was kind of funny, and having succeeded once and failed twice, I can now say that it's true.

Also, as an entrepreneur when doing diligence on whether to accept an investment, I always lookup some of their failed investments and contact the founder. I want to know how the investor behaved when things were going poorly. It's a much better indicator of whether you want to work with them then the padded references they give you (especially when it's to companies that badly want the investor to follow-on in their next round).

Posted anonymously as losing someone's money is still something I prefer to not be associated with.

Posted anonymously as losing someone's money is still something I prefer to not be associated with.

I try not to post this on every thread, but this kind of thing is horrible. I am talking about the reason OP have to post anonymously.

Have you lost anybody's money?

an investor isn't just anybody, it's someone who has signed on for the risk inherently involved in investment for a chance at larger rewards.

There is (should be) less moral obligation since an investor should be more acutely aware of this risk than a regular old person off the street.

I would feel terrible losing someone's money who didn't realize it was an option to lose; an investor should not be capable of being that person.

Ron Conway had invested in this startup Ev Williams was doing before Twitter that did not work out. Ev Williams returned money to Ron Conway, and I believe the story goes Ron said he would invest in whatever startup Williams starts next. That happened to be Twitter in which Ron Conway invested.

I guess the moral of this story is to do the right thing. This may sound cliche', but sometimes doing the right thing may be the most courageous thing to do.

Maybe this is a dumb question, but do most failed startups still have enough capital to repay seed investors when the founder pulls the plug?

I wonder if there's a more subtle lesson in that story about knowing when to quit.

We did have about 1/5th of our angel money left when we decided to call it quits. There were a number of reasons for doing so at that time. Primarily, the remaining money would not have gotten us to where we wanted to be and we were not able to raise more money due to our inexperience (first time founders). We did return the remaining amount because that's the right thing to do. No need to burn bridges.

No - he'll probably have got a small proportion of his stake left.

If they were able to repay their seed capital, then it's a self sustaining business - there's a very thin line between success and failure here.

Thais is a very good question. As much as you need their cash, you also need their connections and friendship. I would love to see the answers for this question.

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