How Founders Self-Destruct Under Pressure

In this article, we examine three categories of detrimental behaviors that are becoming more common among entrepreneurs as they face mounting stresses over their funding and the health of their businesses. These behaviors are “moving against,” “moving away,” and “moving toward,” all of which are coping mechanisms that attempt to regain control through manipulation, deflect reality and harsh criticism through avoidance, or avoid pain and fear through ingratiation. We will also highlight how self-awareness, paired with professional and personal support, can stave off self-destructive behaviors and promote more positive interactions and, importantly, results.

Over the past 10 years, and particularly through the bull market that lasted well into 2021, investors have chased the most promising startups and their founders. Among them was “John,” whose bravado, assuredness, and larger-than-life charisma were assets that spoke of his zeal and commitment. But now, in a sharply changing investment environment, these same personality traits have become a liability as investors ask him tough questions about performance and capital requirements for his business. Instead of engaging, John’s immediate response has been to shut down the conversation. “I’m not worried about getting funding,” he said, despite his latest pitch for additional capital being turned down a dozen times. “This isn’t my first startup. I’ve rung the bell three times before, and I will this time too.”

It’s a bad behavior, one of the classic “executive derailers” that have long fascinated psychologists and social scientists (Horney, Hogan & Kaiser, Dotlich & Cairo, etc.) who identified and cataloged behavior patterns that cause the mighty to fall. In this article, we examine three categories of detrimental behaviors that are becoming more common among entrepreneurs as they face mounting stresses over their funding and the health of their businesses. These behaviors are “moving against,” “moving away,” and “moving toward,” all of which are coping mechanisms that attempt to regain control through manipulation, deflect reality and harsh criticism through avoidance, or avoid pain and fear through ingratiation.

Becoming increasingly aware of their stress-related behaviors and self-destructive patterns is increasingly important for entrepreneurs today, especially those who have never lived through an economic downcycle before. Self-awareness, paired with professional and personal support, can stave off self-destructive behaviors and promote more positive interactions and, importantly, results. For many entrepreneurs, this is uncharted territory as venture capital funds have pulled back their investments, resulting in a 22% decrease in early stage, Series A and B rounds in the second-quarter of 2022 alone. Startup valuations are in decline, as well. Market volatility has cast a pall on initial public offerings (IPOs), with 72% fewer new listings in the first half of 2022 compared to a year earlier. In fact, institutional investors are telling many of the founder/CEOs we coach and advise not to expect any new infusions of capital for at least 18 to 24 months — and perhaps longer.

These combined pressures will increase leadership challenges for entrepreneurs and founder/CEOs, making it likely that their self-defeating behaviors will increase as market conditions erode and investors’ demands intensify. As a result, we anticipate founder/CEOs will have an even greater tendency to fall prey to their derailers.

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