Mental health has rarely been discussed in the venture capital community but the issue has garnered more attention recently, particularly among startup founders finding themselves under increased pressure in the current downturn
PitchBook, September 7, 2023
The pressures of raising funds, meeting performance targets and coping with a stressful work-life balance are taking their toll on many entrepreneurs' mental well-being. According to a survey by data-sharing platform Startup Snapshot, some 72% of founders reported that launching their own business had a negative impact on their mental health.
As a result, more venture capitalists are putting resources towards supporting founders' mental health. But many in the industry believe more needs to be done.
"[Mental health concerns] are prevalent everywhere you look [in the startup community],” said Lisa Mikkelsen, head of global human capital at Flourish Ventures. "Being a founder, there are a lot of unknowns and it's like being in a huge pressure cooker. You have funders and employees that you're responsible to.”
Despite mental health pressures impacting a large majority of founders, few dare to be open about their stress or anxiety—less than 20%, according to the Startup Snapshot survey.
Only 10% of founders feel comfortable talking about their stress with investors, fearing that showing signs of vulnerability could endanger their chances of securing funding.
And when they do share, it's rarely with their investors. Only 10% of founders feel comfortable talking about their stress with investors, fearing that showing signs of vulnerability could endanger their chances of securing funding.
"If a founder or CEO doesn't take care of their well-being, then many times it can lead to burnout,” said Suranga Chandratillake, a general partner at London-based Balderton Capital. "Fast-growing startups tend to be on the edge already given their nature, so if something goes wrong then it can really damage not just the company but also [investor] returns.”
Burnout is one of the top reasons that startups fail, so tackling stress and anxiety among founders should be viewed as a component of good portfolio management.
Neglecting mental health can lead to bad decision-making or hinder an entrepreneur's ability to think creatively and solve problems, Chandratillake said. Burnout is one of the top reasons that startups fail, so tackling stress and anxiety among founders should be viewed as a component of good portfolio management.
Prioritizing mental well-being can also draw founders to VC firms, said Janos Barberis, co-founder of SuperCharger Ventures and Founders Taboo—an advocacy group for improving founder mental health.
"[Mental health support] is a big differentiator when it comes to deal flow, especially in terms of quality,” Barberis said. "I think founders who are more aware of their limitations are better founders and if you're saying that you can give support, you'll attract them.”
Being open about mental health as a VC can be an edge, particularly for founders struggling with mental health conditions. A study by Dr. Michael Freeman, a clinical professor of psychiatry at UC San Francisco, found that entrepreneurs were 10 times more likely to suffer from bipolar disorder and three times more likely to have ADHD than the general population. For founders with such conditions, knowing that a VC firm places importance on supporting their well-being could tip the scales in that VC's favor.
Many VC firms have launched programs in recent years specifically to address founder wellness, including mental health.
Last month, Balderton set up a well-being and performance platform to offer personalized courses for CEOs covering nutrition, fitness, sleep and mental health which are anonymous for those participating. In the US, Felicis and Starting Line are among the venture firms subsidizing coaching and therapy sessions for founders of their portfolio companies.
Normalizing discussions around mental health and removing the stigma can create safer environments for entrepreneurs.
Such efforts are likely to be out of reach for the majority of smaller VCs that have neither the capital nor time to commit to such programs. But simply having conversations with founders can make a difference. Normalizing discussions around mental health and removing the stigma can create safer environments for entrepreneurs.
Mikkelsen said the biggest thing that needs to change in order to alleviate the pressure on founders' mental health is the startup culture. The stereotype of the founder working all hours of the day and night, forgoing sleep or personal relationships, has been not only the accepted norm for many years but glorified by founders and investors. Mikkelsen believes that VCs need to lead by example in order to change the culture.
"Because of the inherent power dynamic of the VC and founder, VCs need to step up,” Mikkelsen said. "There's still a lot of stigma around mental health and there is a culture of glamorizing burnout. VCs need to care because healthy founders create awesome, healthy companies. And investing in [mental health] is investing in long-term outcomes.”
By Leah Hodgson
Featured image by Joey Schaffer/PitchBook News
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