by Ashwin Gulati, author of “Soul Venture: A True Life and Death Journey into the Startup Culture“
When Northvolt, one of the most promising battery industry startups in the world, filed for bankruptcy protection in Q4 2024, the news sent shockwaves through the European battery industry. The Swedish company went from raising $15 billion to Chapter 11 in 8 short years. Its cofounder and CEO resigned, having fallen tragically short of helping change to the world.
But was it really shocking? If you’ve been involved in startups for as long as I have, you’d know that this kind of failure is the norm.
You may suffer from the irresistible urge to start companies, and you may think you have what it takes. But the inescapable fact is that 97% of startups fail, no matter how brilliant or disruptive the concept. Running a startup is grueling, heartbreaking, and occasionally exhilarating. There are countless milestones that can make or break the whole operation, but if you’re going to survive, you need to start with five hard truths.
You’re not likely to find them in business books. They may seem unconventional, even counterintuitive. But from my experience in the entrepreneurial trenches, you need this kind of brutal honesty to beat the odds:
1. It’s not business. It’s personal.
You may have the groundbreaking product, the kick*ss pitch deck, your A-Team, and willing investors. But the success of the venture rests on a single question: Are you built for this? Not everyone is. The personal commitment and sacrifices required to start a business are hugely underplayed in our culture of success. At the point of startup, you are the biggest asset of your company — and potentially the biggest liability. You’ll need the mental fortitude and clear-eyed preparation for everything that happens next.
2. Hire employees with scrit.
A lot of things look great on a resume: A degree from a top university, experience at the last hot startup, a marketable skill you don’t have. All have their place in the team you assemble. But to succeed in the startup trenches, you need people with scrit — a combination of scrappiness and grit.
Scrappy employees have the ability to do more with less. Gritty employees will pursue long-term goals and refuse to give up in the face of hardship. They may be difficult to work with at times, but they have unwavering focus. Scrappy employees are also adept at working with minimal resources and constraints, can operate on tight budgets, and will negotiate every expense to extend the company’s runway. They think big but act small, and although they too can be challenging to deal with, their frugality makes them an asset to the team — particularly in the eyes of investors.
And one caveat: though many scrappy individuals possess grit, the reverse isn’t always true.
3. Steve Jobs was wrong.
Steve Jobs famously said, “If you’re not passionate enough from the start, you’ll never stick it out.”
I must respectfully disagree with him on this one. In my experience, passion — though undeniably important — isn’t always sufficient to see an entrepreneur through the relentless challenges and obstacles involved in building a successful venture. Passion is the initial spark that ignites our interest in a particular idea or pursuit. It’s the feeling you get when you’re first dating someone and everything is new and exciting. But that spark alone, or even the love that grows from it, isn’t enough to sustain a long-term partnership.
Purpose, on the other hand, plays a different role. It’s the profound why behind what we do, the deeper commitment we make to our business or the cause that propels us forward even when the initial euphoria has faded. It’s like the hard work and dedication required to make a marriage work in the long run. Passion has a definite shelf life; purpose does not.
4. OPM (other people’s money) is heavy sh*t.
Early-stage investors, in many ways, share the same entrepreneurial dreams as the founders themselves. They hope they are getting in early on a big opportunity, like investing in Amazon or Apple during their inception. They too, are entrepreneurs, living vicariously through the founders who handle the day-to-day heavy lifting while they provide the fuel — money. In many ways, their desires, emotions, and dreams become intertwined with those of the entrepreneurs, and their shadows become entangled with the entrepreneurs’ own. There is hope all around that the financial seeds entrusted by investors will grow into a flourishing tree, yielding future fruits through financial distributions, IPO, or an acquisition of some sort.
Recognizing the personal toll that startup ventures can take on an entrepreneur’s life, I often work with my clients as they explore the possibility of launching their ventures with other people’s money. In addition to their own savings, entrepreneurs rely on what Silicon Valley humorously refers to as the 3 Fs — family, friends, and fools. Nevertheless, it’s crucial to recognize that taking OPM from one of the FFFs carries a professional and personal price tag.
5. Timing Is everything.
Timing is a hard truth that everyone understands, even if they can’t control it. Across the board, it’s the most influential factor in determining success or failure. Companies whose business models initially drew skepticism from investors, such as Airbnb, Uber, Zoom and CarsDirect, ultimately achieved monumental success owing to their impeccable timing.
On the other hand, ventures like Webvan and Pets.com, armed with brilliant ideas, substantial funding, and dream teams guided by venture capitalists, seemed poised for triumph but met an early demise. Despite its ingenious concept, Z.com faltered due to the limited internet bandwidth that hindered online video streaming at the time. Just a year later, the advent of Adobe Flash led to the rise of YouTube, which though lacking a solid business model brought about a transformative shift in the digital landscape. So, as much as you might like to plan your timing, the truth is your venture may still hang on the mercurial whims of luck.
Startups are inherently risky. If you want to survive the journey, you need to have more than business strategies at hand — you need to address these key essential realities. Beyond that, you also need to value your own well-being and your life above all else.
And one more thing — an escape route is always a good idea.
Ashwin Gulati has launched international ventures, helped start-ups take off or land, and copiloted complex transitions for over 100 companies in various industries in the UK, US, Spain, and France. With 30 years in the trenches, he has identified the hidden pitfalls, unspoken truths, and personal twists that ultimately determine a venture’s success or failure.. His new book is “Soul Venture: A True Life and Death Journey into the Startup Culture“. Learn more at www.soulventurebook.com.